Algerian oil, gas output 'unaffected' by corruption probe

Algeria’s oil and gas production is unaffected by allegations of corruption among officials at state-owned Sonatrach, according to Oil Minister Chakib Khelil.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Jan. 20 -- Algeria’s oil and gas production is unaffected by allegations of corruption among officials at state-owned Sonatrach, according to Oil Minister Chakib Khelil.

“Algeria's hydrocarbons output has not been affected,” he said. “There are capable people within the national company and 120 projects, some of which worth over billions of dollars, are underway.”

“All the charges against Sonatrach's executives are [being] reported by the press,” Khelil said, adding that these managers are “presumed innocent until the court's decision.”

The corruption probe involves alleged violations of laws on awarding public contracts, embezzlement, corruption, and criminal conspiracy at Sonatrach. It has resulted in the dismissal of the firm’s key leadership.

Chief Executive Mohamed Meziane was dismissed, along with vice-presidents in charge of upstream exploration and production, including Boumediene Belkacem, Benamar Zenasni, and Chawki Rahal.

Algeria’s daily El-Watan newspaper, which helped to break the story, reported that another 12 senior officials at the company have been implicated.

El-Watan said most of the 15 officials were either arrested or put under severe travel restrictions, having to report to the court on a weekly basis.

The probe also named the former chief executive of Algeria's Credit Populaire d'Algerie (CPA) bank Hachemi Meghaoui; his son, who heads a research and consulting firm; another unnamed private Algerian businessman; and two of Meziane's children, who also have not been named.

According to El Watan, “No information has been released by the oil company, which thus finds itself decapitated since its entire management team is being prosecuted for embezzlement, violation of laws on awarding public contracts, corruption, and above all criminal conspiracy.”

The investigation is being handled by the Direction de renseignements et de sécurité (DRS), the military intelligence service, headed by General Mohammed Mediene, regarded as one of the most powerful figures in the Algerian political system.

According to El Watan, Algeria’s president Abdelaziz Bouteflika called on the DRS after personally learning of possible irregularities in Sonatrach.

Reports suggested that Khelil himself could suffer political damage since Meziane, who became head of Sonatrach in 2003, is regarded as a close confidant of the oil minister.

News of the scandal coincided with an announcement that Algeria signed contracts with consortiums led by Total, Repsol and CNOOC on the weekend to develop three oil and gas permits out of 10 offered:

No. of permits on offer: 1
Winning bidder: Total consortium
Area: 17,358 sq km

Hassi Bir Rekaiz
Winning bidder: CNOOC consortium
Area: Hassi Bir Rekaiz is part of the Berkine basin with a total area of 20,943 sq km

Southeast Illizi
Winning bidder: Repsol consortium
Area: The permit lies in the Illizi basin that stretches over an area of 15,208 sq km

However, analyst IHS Global Insight said “dramatic turmoil” at the top of Sonatrach as a result of the probe and a “meager outcome” from its latest late-December upstream licensing round, indicate that the fortunes for the Algerian oil and gas industry are not about to improve in the near term.

“Algeria’s eighth licensing round—completed in late December—proved to be another disappointment with only 3 out of 10 offered upstream licenses taken. The overall low interest from foreign investors has also meant that a lesser number of projects will go ahead then Algeria had planned for,” the analyst said.

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