SONATRACH FINE TUNES STRATEGY FOR EXPANSION

Algeria's Sonatrach is reorganizing and changing objectives to better fit growing global petroleum industry interdependence.

The company is seeking to become a diversified, vertically integrated, international oil and industrial group, constantly expanding its activities, upgrading its performance, and consistently generating profits.

"Sonatrach has great ambitions for its own sake and for companies choosing to work along with us," Sonatrach Director Gen. Abdelhak Bouhafs told a conference in Houston.

Chief among the factors prompting Sonatrach to set a new strategic course is increasing domination of global oil and gas competition by the most efficient international companies, more often private than state owned firms. The modernization campaign is designed to assure that Sonatrach will continue to be able to carry out its fundamental responsibilities:

* As a state owned oil company, to sustain Algeria's domestic oil and gas supplies by replacing depleted reserves on its own and through joint ventures with privately owned companies.

* As a commercial company seeking profits, to build and implement profitable upstream and downstream domestic and international projects, mostly with partners.

Sonatrach plans a $17 billion investment program to expand gas production and export capacities enough to hike gas exports to more than 2.1 tcf/year. Algeria in 1992 exported an average 1.25 trillion cfd of gas from gross production of about 4.27 trillion cfd (OGJ, Dec. 6, 1993, p. 46).

STRATEGIC IMPERATIVES

Upstream elements of Sonatrach's new strategy include intensifying domestic oil and gas exploration, developing fields not yet exploited, and improving recovery in oil and gas fields already on stream.

The company intends to expand its international presence by increasing its mid and long term foreign reserve base, investing in downstream facilities and service activities, and expanding international marketing and trading.

With only about 15% of Algeria's 1.5 million sq km of prospective oil and gas regions explored to date, Sonatrach intends to continue encouraging foreign companies to play ever greater roles in the search for domestic oil and gas. Of particular interest are large unexplored sedimentary basins in the western Sahara Desert and Atlas Mountains.

The accent will be on development of discoveries south of Hassi Messaoud and Hassi R'mel fields, particularly gas discoveries in the In Salah region and gas/condensate discoveries in the South East region.

Included in Sonatrach's spending plans are revamping Algeria's gas liquefaction plants, increasing the country's liquid petroleum gas separating capacity, doubling pipeline capacity between Algeria and Italy, and completing the Maghreb Europe gas pipeline.

Sonatrach also is studying new forms of financing for joint upstream developments, the solvency of which is "guaranteed by the results and performances of the project itself, without requiring shareholder guarantees," Bouhafs said.

DECENTRALIZATION

Sonatrach's modernization focuses on reinforcing its management, streamlining its organizational structure, and developing technology.

The company is decentralizing around profit centers based on autonomous basic operating units (BOUs).

Several BOUs are being combined to form autonomous operating branches, each in charge of a strategic activity. Combines of operating branches are being formed into groups, each guided by a coordination directorate and general manager.

The modernization is to occur in three phases, the first two of which Sonatrach began implementing in 1993. Bouhafs said each step of the process is to progressively stimulate Algeria's development and position Sonatrach as a vehicle for opening Algeria's economy to the world.

In stage one, Sonatrach by 1995 aims to consolidate its role as a leading domestic Algerian public upstream and downstream petroleum and industrial group.

By 2000, the company wants to evolve into a group of international oil and industrial companies with activities spread across the breadth of energy and chemicals operations and related services.

In the third stage of its strategic redeployment-after 2000 Sonatrach is to supplement energy and chemical activities with new businesses that use similar know how.