Algeria’s energy minister Chakib Khelil recently urged gas-consuming nations to rethink their tax policies if they are to remove barriers and encourage imports (OGJ, Mar. 2, 2009).
Khelil gave a broad hint concerning his intended target, saying: “If it is recognized that the gas is cleaner energy than coal, it must be given a tax advantage.”
The Algerian energy minister was perhaps referring to possible changes in Europe’s taxation of energy that could emerge when the European Commission (EC) early next month tables a proposal to revise the 2003 EU energy tax directive.
While such a proposal is only being mooted at the moment and may never be tabled, Khelil is leaving nothing to chance as he sees an opportunity to change a law that could be viewed as hindering his country’s natural gas exports.
Gas lumped with coal
In 2003, when revising its tax laws on energy, the EC welcomed the unanimous adoption of a directive by the EU’s council of ministers widening the scope of the minimum rate system—previously limited to mineral oils—to all energy products including coal, natural gas, and electricity.
“This important directive provides for a more realistic system of minimum tax levels on all competing sources of energy,” said European Commissioner for Taxation Frits Bolkestein.
“The directive will improve the functioning of the internal market and help to meet the environmental objectives of the community and the Kyoto Protocol,” Bolkestein said.
But Khelil clearly does not think that natural gas should, uh, be lumped together with coal, and he wants the Europeans to amend the energy tax laws to ensure that his country’s natural gas gets a break.
He’s right on that, and the Europeans should pay him greater heed, especially given the wrangles they have had—and the deep worries they still have—regarding Russia as a reliable supplier of natural gas.
Khelil a willing ally
In Khelil, the Europeans have not only an able supplier of natural gas but one who has shown himself more than willing to work with them politically to provide it.
Remember destination clauses that restricted where the buyer of the gas could resell it, something the EC believed broke EU competition law?
Well, about 2 years ago, the Algerians—led by Khelil—decided to drop destination clauses in the interests of seeing state-owned Sonatrach as “an active player in an open, transparent, and competitive EU gas market.”
At the time, EU Competition Commissioner Neelie Kroes recognized the importance of the Algerian gesture, describing it as “a major breakthrough in our relations with one of Europe’s most important suppliers for gas and eliminates an important obstacle for creating a single EU-wide market in gas.”
Back then, Algeria clearly played ball with Europe. Now, as Khelil suggests regarding the possible upcoming changes in the taxation of energy, the ball is assuredly back in Europe’s court.
