ALGERIA - The Gas & Power Markets.

About two-thirds of the country's gas consumption go to power generation. For the local gas and power markets, the state-owned gas/power utility Societe Nationale de l'Electricite et du Gaz (Sonelgaz) and the state petroleum concern Sonatrach are to be de-monopolised under a new gas and power law which came into effect in January 2002. Sonelgaz will be partly privatised.

Under the law, the two companies were given a three-year respite during which an independent Electricity & Gas Regulatory Commission (CREG) was set up. This ensures competition, transparency and free access to the power and gas networks, and enforce technical and environmental standards. Foreign and local companies are being invited to build independent water and power producing ventures (IWPPs) and distribution systems. Algeria is acutely short of both water and power. There will also be independent gas marketing ventures in Algeria during this decade.

The law ensures transparent and non-discriminatory third party access to the transmission grid, with rules of access and pricing set by CREG. Distribution will be opened to franchises, to be licenced by the state. Their commitments will include a number of public service obligations. Rural areas are already well served, with Sonelgaz claiming 98% electrification. But only 33% of Algeria is connected to the gas supply network (see DT's Vol. 64, No. 5 in down5AlgEnBasJan31-05).

The Ministry of Energy and Mines in May 2002 adopted a plan to 2004 for development of the public gas supply system, in order to improve its efficiency and increase transparency. At the same time, it changed the terms of finance for public gas distribution. Finance for the propane transport network and related service stations was to be borne by the state. Finance of up to 50% for the distribution networks was to be provided by the government and Sonelgaz. Households receiving gas from the network were to pay 10,000 dinars ($130) per household. Under the previous legislation, households had been required to pay up to 20% of the costs in the north of Algeria and 10% in the south. The financing changes were to speed up completion of the public gas distribution programme.

Of domestic gas sales, about 85% go to Sonelgaz. In late 1995, Sonelgaz signed a 30-year contract with Sonatrach to supply the utility with all its gas requirements at prices subsidised by the state and reviewed periodically.

To curb domestic oil consumption, long-term measures were initiated in 1984. To increase the share of gas in the consumption mix, the government introduced a new system of tariffs, distribution networks, and more gas consuming industries. In the transportation sector, for example, it launched a programme to encourage use of propane and compressed natural gas (CNG) by heavy transport. In April 1995, it increased the price of petrol for car users by 8-10% in another move to cut back on oil consumption. Further price rises were effected in the subsequent years.

In an interview with Petroleum Argus published on Feb. 5, 2001, Algeria's Energy and Mines Minister Chakib Khalil said this on the timing of deregulation: "We forecast five years for the hydrocarbon and (oil) products markets, and 10 years for the domestic gas market. We will open up gasline and pipeline building too because the present law doesn't allow this. Under the new law it will be allowed, but it will be regulated since these are monopoly activities, what we call 'natural monopolies'. We will continue to regulate them, and we'll regulate Sonatrach activities in transport and new activities from private companies in transport. Just as we do with electricity".