Algeria - Sonatrach Background.

The 1994 reorganisation programme, "Promos", came after several attempts were made to restructure Sonatrach, a huge conglomerate created in late 1963. The group was built up in the 1970s to become a "state within the state", employing more than 110,000 people and being by far the biggest company in Algeria. The first attempt to restructure Sonatrach was launched in the early 1980s, when it was decided to break the company into 14 entities with each to be in charge of one line of operations. The programme was opposed by powerful members of the management and their allies in the political leadership, and by the union of Sonatrach workers. Only a small part of the plan was executed. The next programme was prepared in the first half of 1992, under then prime minister Sid Ahmed Ghozali, the man who built up Sonatrach in the early 1970s and later became energy minister. It was suspended after the July 1992 change of government. The premiership was assumed by Ghozali's former boss, Belaid Abdessalam, a staunch socialist pillar of the then ruling National Liberation Front (FLN) party. Abdessalam believed in centralisation and state control. As soon as he became prime minister, he imposed tough terms on foreign oil companies bidding for E&P deals or offering partnerships in downstream projects. He tried, but failed, to reverse some of the changes in Sonatrach as the company's CEO Abdelhak Bouhafs resisted. Abdessalam was removed from the premiership in 1993. Now Abdessalam is among the many candidates running for the presidency of the republic, with the election set for April 15, 1999 (see following pages). Bouhafs and his close aides, including Zouioueche, took up the programme in a revised form and called it "Promos". This was to involve a "provisional reorganisation" aimed at making Sonatrach and its subsidiaries more efficient, competitive and international. Some of the subsidiaries had to be separated from Sonatrach's holding company and become leaner by shedding a big number of their personnel. Work on this was to begin in late November 1994. But the Sonatrach oil and gas workers' union moved against the plan and called for a three-day general strike from Nov. 27. It threatened that further strikes would be staged until the government intervened to stop the restructuring plan. Hours before the Nov. 27 deadline, agreement was reached between the union and the energy ministry. Thus the subsidiaries in question were to be regrouped around Sonatrach. All strategic operations were to be reintegrated into the holding company and modernised. They included exploration, production, transport, oil refining, gas processing and marketing. The "provisional reorganisation" plan was to be executed in three phases. Bouhafs was in charge of the whole process, aided by Ali Boutalbi, then the deputy managing director. Apart from Bouhafs' "inner cabinet" which included Zouioueche, co-ordination was done by Djamel Eddine Lakehal, then director of Sonatrach's Legal and Tax Division. Below the "inner cabinet" was the General Administration, with Mohammed Chemloul as director. The changes up to 1995 covered the reintegration of the group's upstream and downstream sectors and related strategic industries. Work on this phase included the establishment of a marketing entity under Ali Hashed, as Sonatrach vice president for marketing. The changes up to 2000 were to integrate Sonatrach's strategic subsidiaries, including the chemical industry and associated logistics and services. By 2000, Sonatrach should have become the operator throughout the energy chain in Algeria and would have consolidated its overseas operations. Beyond 2000, Sonatrach should become a diversified and integrated energy and industrial group operating as a trans- national. Its industries would include mining, agro-industries, food production, and related services ranging from transportation to storage within Algeria and overseas (see OMT of this week).