Sonatrach CEO Toufik Hakkar on a two day inspection visit to the
Hassi Messaoud and Hassi Bahamou gas fields last week [photo credit: aps.dz/]
Recent agreements
have confirmed ENI’s role as a key partner of Algeria’s state-owned oil
and gas company Sonatrach which employs 100,000 people. Both companies
are looking into the possibility of exporting hydrogen from North Africa
to Italy through the TransMed pipeline
which, for the past forty years has carried Algerian gas from Algeria
to the Italian mainland via Tunisia and Sicily. The Italian firm Saipem
(Snamprogetti) built the underwater pipeline, the first of its kind in
the world.
Since the Russian invasion of Ukraine, Italy has become the
Mediterranean’s new gas hub. Three pipelines, from Azerbaijan, Libya and
Algeria, bring gas to its southern shores. Floating storage will allow
more gas to be brought from Israel and Egypt. On the geopolitical front
Italy has for the past few years expressed its interest in seeing
Algeria help stabilise Mali and other Sahel countries, a role US policy
makers fully share. As France loses influence in the Sahel, Algerian stands to gain if it plays its cards right.
On the face of it, Algeria’s leaders should be keen to invest in
Italian industry – they certainly have the cash necessary to do so.
Their apparent lack of interest however points to the weakness, not to
say total absence, of economic policy let alone strategic thinking in
Algeria today. The economic adviser to President Abdelmejid Tebboune is a
journalist Yacine Ould Moussa who since his appointment in March 2022
has sunk virtually without trace. Tebboune himself is given to grand
pronouncements about gas which seldom reflect the reality of the
industry.
The critically important oil and gas sector suffers from two other
handicaps beyond the lack of coherent economic policy and the refusal to
allow the private sector in Algeria to play a more independent role.
Those in charge of the economic and industrial portfolios are mediocre
men; most of the managers and civil servants of talent haven retired,
emigrated or been eviscerated by the twenty years of corrupt rule of the
late president Abdelaziz Bouteflika (1999-2019). Senior military and
security officers have no economic culture to speak of nor real
understanding of the fast changing world of economics and finance.
Keeping tight control of Algeria’s hydrocarbon wealth is the only thing
that interests them.
Sonatrach itself was hostage to its former CEO, Chakib Khelil who was minister of energy from 1999 to 2010. He was very close
to US Vice President Dick Cheney and to the company the latter had
founded, Halliburton. As he sought to liberalise the energy sector, the
draft bill he produced in the early 2000s provoked the anger of the
Saudi leadership and the Russian president Vladimir Putin. Both
intervened to stop what they and many in the Algerian establishment, not
least the powerful head of security General Tewfik Mediene, saw as a
“sell out” to US interests.
Corruption in Sonatrach grew spectacularly under Khelil’s stewardship
and forced many good managers to leave. The reputation of a company
which could be proud of a track record built up over several decades was
hugely damaged. Under Khelil a culture of fear was installed in the
broader energy sector which prevails to this day and explains why
decisions get pushed upstairs, thus clogging the decision making
process. So long as strong managers are not allowed to run the company
Sonatrach will not be in a position to gain from the huge opportunities
offered, not simply by Europe turning away from Russian gas, but from
the myriad opportunities presented by the world’s switch to clean
energy. Algeria has large reserves of untapped gas but also the
potential to develop solar energy, something its western neighbour Morocco has done with alacrity.
In the energy sector, a strong political hand is needed to back up
strategic decisions. Under presidents Houari Boumediene (1976-1978) and
Chadli Bendjedid (1979-1992), Algeria’s political leadership understood
the stakes – and they often had brilliant engineers and strategists such
as Nordine Ait Laousssine, Sadek Boussena and Abdelhaq Bouhafs. Today,
Algerians of this calibre are working in the Gulf, notably Abu Dhabi and
in North America. President Tebboune is not even a shadow of his
predecessors of the 1970s and 1980s. Nicknamed “the liar” (kedhab) he is
the laughing stock of his fellow countrymen.
Algeria missed a unique opportunity to set up a wealth fund after the
financial crisis of 2008-2009 when it could have invested in Western
companies which were working in Algeria and were desperate for fresh
capital, such as Peugeot. Such a policy would have earned the country
immense good will, notably in Europe. Instead President Bouteflika chose
to squander the tens of billions of dollars which had accumulated in a
special fund in order to subsidise petrol and electricity – prices in
Algeria are some of the lowest in the world and in the latter case do
not even cover the costs of production.
The absence of strategic thinking suggests Algerian leaders will, yet
again, miss a golden opportunity to deepen their industrial and
economic links by investing in Meloni’s “Made in Italy” fund. Their
country’s position remains, by the simple virtue of geography, strategic
in North West Africa; the army is strong and well equipped. Algeria is
treated with respect by the US, Russia, China and African giants such as
South Africa and Nigeria but it leaders are incapable of thinking
strategically in a world which is changing faster than at any time since
1962. The sad irony of history repeating itself is not lost on
Algerians.