Algeria Inks Upstream MoUs

Algeria's national oil company Sonatrach has signed memoranda of understanding (MoUs) with Russia's Zarubezhneft and Turkey's TPAO on possible joint upstream projects.

"These agreements will make it possible to initiate joint discussions on the opportunities concerning the exploration, development and exploitation of hydrocarbons in Algeria," Sonatrach said in a statement on April 16, without divulging project details.

The state firm signed a similar deal with Chevron in mid-March. The latest deals highlight the attractiveness of Algeria's upstream sector following its introduction of a new hydrocarbon law, Sonatrach said.

The new law came into force in January and is designed to reverse a decline in foreign upstream investment and bolster flagging output by offering international players more attractive terms. It has introduced lower taxes for producers and cut red tape, in order to make it easier for operators to move projects from the exploration to the production phase. 

With oil trading at a near two-decade low, Algeria will struggle to convert the latest MoUs into firm investments. Many oil and gas producers have cut most, if not all discretionary capital spending to weather the industry's crisis.  Chevron, for one, has slashed its capex budget for this year by 20%, or $4bn.

Algeria relies on oil and gas for around 60% of its state budget revenues, and has had to make steep cuts to public spending to balance the books.