Khelil's `Long Overdue' Dismissal May Boost Algerian Oil, Gas Production

Last week’s dismissal of Algerian Energy Minister Chakib Khelil may give Africa’s biggest natural- gas exporter a fresh start after its national oil company lost its senior executives in a corruption scandal, analysts said.

President Abdelaziz Bouteflika appointed Youcef Yousfi, 68, a former oil minister, to replace the 70-year-old Khelil in a May 28 cabinet reshuffle. Khelil himself took over from Yousfi in 1999, after Bouteflika became president.

Analysts say that Khelil’s stewardship of the Ministry for Energy and Mines was marred by the failure of his efforts to open the hydrocarbons industry to foreign investment. He also was unable to persuade fellow gas exporters to shore up prices by cutting supply or to clamp down on illegal activities by senior officials at national oil company Sonatrach, they say.

“When allegations of corruption emerged at Sonatrach, Khelil’s position became untenable for President Bouteflika,” said Wolfram Lacher, head of Middle East and North Africa at Control Risks Group, a London-based political risk consulting firm. “Foreign investors in the energy sector have been concerned about the blockages the Sonatrach investigation has had over the past few months, and will be hoping these will be eased with the new appointment.”

International oil producers operating in the North African country include BP Plc, Total SA and Repsol YPF SA.

‘Long Overdue’

Yousfi will be responsible for stabilizing Algeria’s oil and gas industry after senior Sonatrach officials were suspended early this year amid allegations of illegal activity. Mohamed Meziane, Sonatrach’s former chief executive officer, was suspended along with the vice presidents for marketing, upstream and pipeline transportation, Khelil said Jan. 18.

Khelil’s dismissal “was long overdue,” said Nordine Ait- Laoussine, a former Algerian energy minister, by e-mail yesterday. Among the changes Ait-Laoussine would like Yousfi to make are easier entry terms in exploration and production activities for international oil companies and more flexible prices of gas exports.

Under Khelil’s leadership, Algeria began exporting liquefied natural gas to the U.K.’s Isle of Grain in 2005, the first such shipment in 40 years. He also oversaw construction of the Medgaz venture, a sub-sea pipeline that will transport 8 billion cubic meters of gas a year from Algeria to Spain starting in September.

Khelil was also one of the more vocal ministers among members of the 12-nation Organization of Petroleum Exporting Countries, constantly briefing reporters about his outlook for oil and gas prices. Prices should return to $80 or $85 a barrel this year as the European Union intervenes to solve the continent’s debt crisis, he said in a May 9 interview.

Hydrocarbons Law

He faced difficulties at home. The hydrocarbons law, conceived upon his return to Algeria in 1999 after two decades at the World Bank, was an attempt to make the country’s energy industry more attractive to foreign companies by limiting Sonatrach’s share in domestic upstream ventures. It was passed and then overturned as the country pursued a policy of resource nationalism.

Khelil also failed to convince his peers in the Gas Exporting Countries Forum to jointly cut production during its most recent meeting in April, as global oversupply hurt contract sales and prices.

Along with Meziane’s replacement, Nordine Cherouati, Yousfi may re-instill confidence in the country’s energy industry, according to Jon Marks, director of Hastings, U.K.-based research company Cross-border Information. Algeria has a production capacity of 1.4 million barrels a day of oil and exports about 60 billion cubic meters a year of natural gas.

‘Steady Hands’

“The reshuffle is being seen as a steady pair of hands to stabilize the ship,” Marks said by phone yesterday. “When his hydrocarbons law was overturned, Khelil stayed in office, and his micro-managing became increasingly resented in Sonatrach. Now Sonatrach will be able to get on with its work and the ministry can focus on strategy.”

The president also replaced the ministers of commerce and telecommunications, Bouteflika’s office said in a May 28 statement. Algeria relies on oil and gas for the majority of its foreign-currency revenue. It is the fourth-largest oil producer in Africa and the third-largest supplier of gas to Europe, after Russia and Norway.

Yousfi graduated from the Ecole Nationale Supérieure des Industries Chimiques in France, according to his CV received by e-mail yesterday from Algeria’s energy ministry. He became chief executive officer of Sonatrach in 1985 and energy minister in 1997, and he served as OPEC President in 1998 and 1999. He most recently served as Algeria’s ambassador to Tunisia.

“He is very capable, very professional,” Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah said of Yousfi, who served as an adviser to him for three years. “I am very happy because it is very rare to see a former oil minister come back to the same position.”

Khelil declined to be interviewed when contacted by e-mail.

For Related News and Information: Today’s top oil, gas stories: OTOP, TGAS <GO> To see U.K. gas prices: UGAS <GO> Algerian news: TNI ALG BN <GO> News on Oil Markets: NI OILMARKET <GO> Natural Gas Prices: NG1 <Commodity> GP <GO>

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