Countries of the World/COUNTRYS.BIN/dp/0009/00091.txt

Text File | 1991-06-24 | 26KB | 421 lines

$Unique_ID{COW00091}
$Pretitle{244}
$Title{Algeria
Chapter 3D.   Industry}
$Subtitle{}
$Author{Fadia Elia Estefan}
$Affiliation{HQ, Department of the Army}
$Subject{production
algeria
gas
tons
million
oil
percent
natural
hydrocarbons
industry}
$Date{1985}
$Log{Furniture Factory*0009103.scf
}
Country:     Algeria
Book:        Algeria, A Country Study
Author:      Fadia Elia Estefan
Affiliation: HQ, Department of the Army
Date:        1985

Chapter 3D.   Industry

     As defined by Algerian statistical breakdowns, the industrial sector
comprises the production, transportation, and transformation of minerals,
including hydrocarbons (petroleum and natural gas); the production of energy
(electricity and industrial and household use of oil and gas); manufacturing;
and construction. In 1984 the industrial sector made up almost two-thirds of
GDP. The hydrocarbons subsector alone contributed 30 percent of the total;
construction, 15 percent; manufacturing, 13 percent; and energy production,
around 2 percent. Together they employed only about 8 percent of the total
labor force.

     The industrial sector has long embodied the hopes of Algerian economic
independence and growth. For two decades, aided by foreign borrowing and
restrictions on consumption, industry has received the largest shares of
national investment. The major beneficiaries have been the hydrocarbons and
heavy manufacturing subsectors. In the 1970s, as a result of increased world
demand, hydrocarbons had become the mainstay of the economy. Heavy industrial
manufacturing included the production of iron and steel, capital goods, and
mechanical, electrical, and construction equipment. The light industrial
category included the manufacture of foodstuffs, beverages, tobacco products,
textiles, pharmaceuticals, and household and light durable goods.

Hydrocarbons

     At the advent of independence most of the hydrocarbons subsector, from
exploration to exportation, had been developed and financed by French private
interests with assistance from the government and was designed to be geared
into the French economy. When the French population fled Algeria after
independence, the hydrocarbons subsector, like other aspects of the economy,
faced a difficult transition period. The difficulties were heightened by the
industry's highly mechanized nature; they were somewhat relieved, however, by
the magnitude and importance of the fixed investment, the extent to which the
French government was directly or indirectly involved in that investment, and
the dependence of the new Algerian government on revenues from the sale and
taxation of hydrocarbons exports. Therefore, it was found practicable by the
two governments to reach a temporary modus vivendi that protected the existing
vested interests while underlining the need for sizable future changes in new
operations as people other than the French were allowed to enter the field.

     The new situation was further pointed up in the last days of 1963 by the
creation of SONATRACH. The government entity's initial purpose was to focus
government interest on the hydrocarbons subsector and to build a
government-owned pipeline from Haoud el Hamra to Arzew, thereby breaking the
French de facto monopoly of petroleum transport.

     In July 1965, immediately after the coup d'etat by Boumediene and his
colleagues, the relationship between SONATRACH and the private
interests-mostly foreign-was redefined. The new agreement confirmed
concessions granted in 1958 and 1964 and was to be valid for 15 years but
subject to review and revision at the end of each five-year period. There was
an added proviso that natural gas would be sold to SONATRACH at the cost of
production.

     In April 1966 SONATRACH's area of jurisdiction was extended to include,
in addition to the transport and marketing of hydrocarbons, their refinement,
liquefaction, and industrial transformation (petrochemical industry), as well
as the activities associated with their exploration, research, and
development. SONATRACH's sizable capitalization and significant power of
intervention in all aspects of the subsector were expanded accordingly.

     As the first five-year review period of the 1965 agreement approached,
two developments assumed increasing significance. The first was the growing
pressure of the Organization of Petroleum Exporting Countries (OPEC) on the
major concessionary companies throughout the Middle East for higher prices and
greater participation in policy decisions about the quantity and timing of oil
production. The other development was the growing pressure of the Boumediene
government's socialist orientation for change in the hydrocarbons subsector.
In February and April 1971, after protracted negotiations and buoyed by the
strong bargaining position of the OPEC countries vis-a-vis the producing
companies, the Algerian government nationalized the industry by acquiring at
least 51 percent of every petroleum exploration and production facility in the
country and 100 percent of all natural gas concessions, gas and oil pipelines,
and other transport facilities. Since 1971 the entire hydrocarbons subsector
has been controlled by SONATRACH.

     In the early 1980s SONATRACH was restructured into 13 companies, nine of
which were already in operation in 1984. SONATRACH remained the parent company
and was the ultimate decisionmaker. The government controlled the hydrocarbons
industry accordingly, but private domestic or foreign investment was invited
to participate after adoption in 1982 of the new investment code. SONATRACH
had joint exploration activities with the world's major oil companies and had
implicitly encouraged them to do their own explorations by charging US$3 per
barrel if SONATRACH did the fieldwork.

     The first oil field was discovered in 1910, but large-scale deposits were
only found in 1956 in an area of Hassi Messaoud-Haoud el Hamra in the
northeastern part of the Sahara and along the Libyan border at Zarzaitine and
Edjeleh in the Polignac Basin. Other smaller fields were subsequently
discovered at Nezla, Houad Berkaoui, Ouargla, Messdar, El Borma, Hassi
Keskessa, and Guellala. In early 1985 three new fields were located at Touat
in Adrar, Moukhag El Kebach in El Hadjira, and at Rhourd Chegga, northeast of
the Hassi Messaoud field. Although the extent of actual petroleum reserves
could not be accurately measured, reported reserves totaled a modest 8 to 10
billion barrels and were declining. Algerian crude, having a low sulfur
content, is superior in quality to most other countries' petroleum. Most
Algerian oil is found at deep levels, and a number of the older oil fields
have required high-pressure water or gas reinjection units to extract the oil,
both of which are costly operations. The high international prices for crude
oil during the 1970s offset the increased costs of exploration and
exploitation.

     Production has been deliberately decreased in the 1980s to follow the
demand in the international market. From a record of 54 million tons in 1978,
it fell to 40 million tons in 1980, 34 million tons in 1982, and 31 million
tons in 1984. Algerian production was low in comparison with other major
oil-producing countries, accounting for about 3 to 5 percent of OPEC's total
output, but Algeria was Africa's third largest producer of oil.

     In the mid-1980s Algeria had a total refining capacity of around 19
million tons per year. The most important facilities were, in descending
order, at Skikda, Arzew, Hassi Messaoud, and I-N-Amenas. There were seven main
oil pipelines; four of them-Hassi Messaoud to Bejaia, Hassi Messaoud to Arzew,
Beni Mansour to Algiers, and the eastern fields to As Sukhayrah in
Tunisia-linked the well heads to the coast.

     Faced with a sluggish world demand for crude oil, increasingly difficult
exploitation (the Hassi Messaoud field requires extensive water and gas
injection to maintain the rate of output), and rising demand for energy at
home, Algeria has adopted an economizing polic