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ALGERIA - Profile - Chakib Khelil.

The Minister of Energy and Mines since Dec. 24, 1999, and acting CEO of Sonatrach since early March 2001. Khelil is the man in charge of the petroleum and mining sectors. But the decisions for the petroleum sector are taken at cabinet level; and any major move concerning this sector must be approved by parliament, in which the dominant block is influenced by old guard socialists who are determined to preserve Sonatrach's status as a "state within the state".

One of the main objectives of Khelil's appointment as minister by President Bouteflika was to change the legal and regulatory framework for both the petroleum and minerals sectors and privatisation. Thus, in mid-July 2000 he presented to the cabinet draft laws for gas distribution and power generation.

He was hoping that, once passed by parliament, the new laws will allow private and foreign investment in the gas transmission and marketing businesses and in power generation. The state-owned Sonelgaz utility will cease being a power monopoly, with local and foreign companies to invest in IPPs (see DT No. 5).

Khelil also presented a draft hydrocarbon law which he hoped that, once passed by parliament "in late 2001 or early 2002", will end Sonatrach's monopoly in the petroleum business. With Sonatrach to become a "truly commercial company" and a trans-national, to operate locally in competition with foreign companies, the energy and mines ministry was to establish a state agency called Alnaft. This was to take from Sonatrach the role of offering new E&P blocks as well as drafting and signing PSAs or service contracts and monitoring foreign companies' upstream operations. Another state unit was to take from Sonatrach the role of ensuring companies' compliance with regulations on pricing, transport and the environment, and enforcing safety standards.

On Aug. 10, 2000, the cabinet approved Khelil's draft law opening up the mining sector to private and foreign investors. This also called for the establishment of three state agencies charged with drawing up Algeria's minerals map, granting licences and technical assistance to potential investors, and ensuring companies' compliance with laws governing mining operations. The new law, like the draft hydrocarbon law, was to eliminate discrimination between local and foreign investors in the mining sector. By then Khelil's ministry had granted 24 exploitation licences to local companies in 48 small and medium-sized deposits sold in a public auction which yielded $171,000.

Khelil was also working on a deregulation of the energy market in Algeria. In an interview with Petroleum Argus published on Feb. 5, 2001, he said of the timing on deregulation: "We forecast five years for the hydrocarbon and 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". However, things did not progress the way Khelil had hoped. Backed by the FLN, the unions of petroleum workers turned against him and Sonatrach's management was on their side.

Virtually all the ministers and top bureaucrats with portfolios related to the economy, from the prime minister to the central bank governor, are involved in various aspects of the petroleum sector. In parallel comes the powerful National Federation of Workers of Oil, Gas and Chemicals (FNTPGC)

In mid-2002 FNTPGC, strongly backed in the ruling party, had suspended talks with the government over the draft-law. Mohammed Lakhdar Badredine, its secretary general then said: "The changes we have demanded to be introduced in the draft law were not taken into consideration and...we are in a deadlock". (The FNTPGC groups workers from all the state-owned energy companies, including Sonatrach and Sonelgaz). He added: "I call on Chakib Khelil to review all the articles on which we have reservations in the interest of the country and Sonatrach; otherwise it would be up to the workers to decide" - hinting at the possibility of nationwide strikes like those that crippled Venezuela for two months since Dec. 2.

President Bouteflika had put his weight behind Khelil and the draft-law. Both had not realised the extent of the combined power of the FLN Party and the FNTPGC. But since early 2003, while Khelil has kept pursuing the proposed law, Bouteflika has distanced himself as he has been busy travel-ling and trying to secure effective French mediation between him and King Mohammed VI of Morocco over the Western Sahara dispute.

Khelil on Dec. 24, 1999, took over the energy and mines ministry from Youcef Yousfi who then was made foreign minister. Yousfi had been energy and mines minister since June 25, 1997 and years earlier had headed Sonatrach. But he lost the foreign affairs portfolio in September 2000, when President Bouteflika made Ali Benflis prime minister and Abdulaziz Belkhadem foreign minister (see Gas Market Trends).

Khelil was until mid-1999 a high-ranking economist at the World Bank in Washington. His friendship with Bouteflika goes back to the late 1960s, when Khelil was working for Sonatrach. In mid-1999 Bouteflika made him adviser on petroleum affairs at the presidency, while the presidential office had ex-Sonatrach CEO Abdelhak Bouhafs as a parallel adviser with a focus on natural gas. In December 1999, while he made Khelil energy and minis minister, Bouteflika appointed Bouhafs as Sonatrach CEO (see below).

In his early 1960s, Khelil worked for the World Bank in Latin American countries for many years. Fluent in Spanish, French, English and Arabic, he played a key role in the restructuring of Latin American economies under World Bank financed programmes. He had a role in the Latin American countries' energy sector as well. Thus he worked with governments and energy decision makers from Mexico down to Argentina, notably including Peru, Chile, Venezuela, etc.

As a result, Khelil developed good friendships in Latin America and these have helped him direct Sonatrach investment to Peru, where his contacts include top-ranking decision makers. There will be investments by Sonatrach in other Latin American countries and in the US, where Khelil has top-ranking friends in the petroleum business.

Thanks to his lobbying, in mid-2001 Algeria became a member of the Latin American Energy Organisation (Olade). Khelil then said this was to enable Sonatrach to take part more easily in that area's energy projects, as well as taking advantage of the training programmes which Olade offers to its member-countries. He said Algeria was intending to "create a link between Olade and the future African Energy Commission" (AEC). That was because he wanted Sonatrach to invest both in Latin America and Africa, apart from its investments in Europe and the Arab world (see OMT of this week).

Khelil now is also proposing acquisition of equity by Sonatrach in Peru's E&P an LNG project to export the gas to Mexico and the US West Coast. In late 2000, he was also promoting an expensive project to transport Venezuelan natural gas to the US market, to be built across the Caribbean and to supply other markets on the way. Since December 2002 and at the request of Venezuelan President Hugo Ch vez, Khelil has got Sonatrach to help Petroleos de Venezuela resume oil production and exports.

Hardliners in the Sonatrach management, however, have not been impressed by Khelil's ideas and Latin American links, although President Bouteflika appreciates his Spanish connections. They are particularly opposed to his plans to de-monopolise the state company and make it more international. That was one of the reasons why Bouhafs resigned as Sonatrach CEO in late February 2001.

In early 2000, shortly after becoming a minister, Khelil made statements which the press took to mean that Sonatrach would be privatised. Oil workers' unions backed by FLN hardliners and Sonatrach's top management, alarmed that a big change could affect them, expressed dismay at these statements.

Then Khelil explained in an interview with the London-based Arabic daily Al Hayat (owned by Saudi Prince Khalid Ibn Sultan Ibn Abdel Aziz), published on March 28, 2000, that his statements should not imply Sonatrach will be privatised. He has had to make more such statements since then.

As a presidential adviser, Khelil headed a Sonatrach delegation to a Tehran petroleum conference in November 1999 and, through efforts by APS Energy Group President Pierre Shammas, established a good rapport with the Iranian government which he followed up after becoming minister. That led to a resumption of diplomatic relations between Algeria and Iran in September 2000.

The move came a few days after President Bouteflika met with Iranian President Mohammed Khatami in New York, as both were there for the Millennium Summit.

(Diplomatic relations between Tehran and Algiers were severed in the mid-1990s, after Algeria accused Iran of actively supporting attempts by the Islamic militants to overthrow Zeroual's government).Relations between Bouteflika and Khatami developed into a friendship during OPEC's summit meeting in Caracas in late September 2000, thanks to Khelil's efforts. The idea was that, for the sake of OPEC unity to keep defending oil prices, Algeria should develop and maintain close ties with all the OPEC members and with the non-OPEC oil exporting states.

Soon after Khelil became energy minister, he and Iranian Oil Minister Bijan Namdar Zanganeh developed a close co-operative relationship. Now Khelil's ministry and Sonatrach are assisting the Iranian oil ministry and NIOC in the natural gas business, particularly in the field of LNG as Iran intends to embark on a major LNG venture for export.

Through his World Bank connections, Khelil has also developed close ties with the other African petroleum exporting countries, particularly Nigeria. In mid-2000 he proposed to Dr. Rilwanu Lukman, the top petroleum adviser to Nigerian President Abasanjo, that the Algiers and Abuja governments examine the feasibility of a gas pipeline linking the two states. The pipeline, as Khelil proposed, would then link up with a direct marine gasline to Spain so that Nigerian gas can reach the European markets (see OMT of this week and Gas Market Trends No. 7).

A study on the proposed Nigerian link with Algeria's gas export system is being conducted jointly by Sonatrach and NNPC. If the study is favourable, the Nigerian link will boost the profitability of the marine pipeline from Algeria to Spain, promoted jointly by Sonatrach and Cepsa.

Unlike previous energy ministers, Khelil is a hands-on man and advocate of full transparency. Empowered by Bouteflika, he assumes direct control over the petroleum sector. He undertook the promotion of six E&P blocks offered to foreign firms in 2000 in the first public auction of its kind in Algeria. All subsequent offerings have been made in the same way.

Khelil's ministry in 2000 launched a website - - providing investors with information about the blocks on offer as well as updated information on Algeria's petroleum and minerals sectors. The site provides an overview of power generation, gas distribution, oil refining and investment opportunities for foreign companies, and outlines the legal and regulatory framework.

The freezing of the draft hydrocarbon law in early 2003, however, was a severe blow to Khelil and vindicated Bouhafs (see Bouhafs' profile in Vol. 56, DT No. 8).
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Publication:APS Review Downstream Trends
Geographic Code:6ALGE
Date:Feb 24, 2003
Previous Article:ALGERIA - Profile - Abdel Aziz Bouteflika.
Next Article:INDONESIA - The Energy Base.

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