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ALGERIA - The Security Issue.

MEED on Jan. 12, 2007, quoted a "senior international businessman in Algiers" as saying: "There has been a noticeable difference in the security situation in the last five or six years". But two car bombs were detonated at the end of October 2006 in front of police stations in Dergana and Reghaia, near Algiers. And in early December, an Algerian driver was killed and nine passengers - including eight foreigners - were injured in a bomb attack on a bus carrying employees of US/Algerian construction company Brown Root Condor.

The Salafist Group for Preaching & Combat (GSPC) claimed responsibility for the attack. Some commentators fear the recent attacks are a sign of the resurgence of terrorism in Algeria. The GSPC warned Muslims to avoid places popular with foreigners, because more attacks were planned. Locals and foreigners alike, however, regarded the incidents as isolated rather than signs of a deteriorating security situation.

MEED quoted Sarah Meyers, senior analyst at risk consultant Control Risks, as saying: "GSPC is losing support in the country. Most people are completely fed up with terrorist groups. The average Algerian wants foreign investment; they want the country to develop. There are still Islamic extremists in the country, and they will carry out these kind of attacks from time to time. But they are not capable of a sustained attack. There is no prospect of the country returning to the state of civil war of the 1990s".

IOCs still take precautions. One major US firm divides Algiers into areas that can be visited alone at any time, those that are safe only with a driver and those that are unsafe at night under any circumstances. But foreigners in Algiers are becoming increasingly integrated. Over the past year, BP has moved its offices from a secure compound in the diplomatic quarter to a building in the city centre. In December, British ambassadorial staff moved out of the Hilton hotel and back into a dedicated embassy building.

While many foreign states still advise citizens that remote parts of Algeria are unsafe, the consensus is that as long as proper caution is exercised and night-time journeys are avoided, it is safe to travel anywhere. But there remains a wariness on the part of the government about foreigners travelling in the country: movement around Algeria is carefully monitored, and obtaining visas is not always straightforward. Some five-star hotels still have difficulties accepting payment with major international credit cards, and the standard of service often does not approach that expected in a more developed market.

Sid Ali Betata, head of the new Agence Nationale pour la Valorisation des Ressources en Hydrocarbures (Alnaft), in December 2006 said the new law governing the award and regulation of oil and gas E&P contracts was to become fully effective in early 2007. With Alnaft is under Khelil's ministry. Betata says: "Many of the application texts have been finalised and others are with the government secretary-general to be finalised. Staffing is almost complete and recruitment is under way for the remaining positions.

2007 will be the year Alnaft effectively takes over the public power prerogatives targeted by the new law". Alnaft is one of two new agencies established under the law to assume Sonatrach's public responsibilities. The other agency is CREG.

Nadjib Otmane, head of Algeria's new regulator Commission de Regulation de l'Electricite et du Gaz (CREG), in late November said: "We are in the process of promulgating application texts that will enable large consumers to contract directly from suppliers. Initially, competition will be limited to industrial rather than domestic consumers. But our aim is to gradually increase the proportion of the market that is open to competition". Steps have already been taken towards the opening of the power retail and distribution markets.

In 2004, the state gas and power utility Sonelgaz went through an unbundling process which saw the company broken into its constituent business units, with the newly created subsidiaries granted sufficient autonomy to open up their capital to private investment and enter into strategic partnerships.

In early 2005, the new regulator assumed its responsibilities. Work is under way to establish a market operator to drive the market liberalisation process, with a team of Cap Gemini and RTE providing consultancy services. As an interim measure, distribution concessions have been awarded to the four regional Sonelgaz subsidiaries, but once further enabling legislation is promulgated later in 2007, these concessions will also be open to foreign competition.

Otmane said: "The concessions have been formalised by CREG and we have imposed an obligation for performance levels to be improved". Once legislation is in place for the liberalisation of the retail electricity market, its success or failure will rest on the extent to which Algeria can attract international interest in new generation capacity.

Nourredine Boutarfa, CEO of Sonelgaz, told the Oran conference: "In 2002 we had to adopt a strategy that would ensure growth in the medium and long term. We have to optimally manage our electricity networks and ensure there is a transparent system that allows easy access to those networks by third parties. There has been a fundamental cultural shift since 2002, but we are ready to face the challenge ahead". Enabling legislation is set to be introduced by April 2007 which will open up 30% of the retail power market to competition. Algeria's power sector is slowly changing from a completely nationalised industry dominated by Sonelgaz to one open to foreign participation.
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Publication:APS Review Downstream Trends
Date:Feb 19, 2007
Previous Article:ALGERIA - Abdelaziz Bouteflika.
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