The National Agency for the Valorization of Hydrocarbon Resources "ALNAFT"

Evolution of laws governing hydrocarbons

Evolution of laws governing hydrocarbons in Algeria since independence

JULY 05th, 1962: following its independence, Algeria becomes the owner of the country's hydrocarbon resources, but France continues to have the real power to manage this wealth, through the French Society for Research and Exploitation of Petroleum in Algeria (SN REPAL). French legislation (the Saharan Petroleum Code of 1958) is thus maintained, in application of the Evian agreements.

December 31st, 1963: creation of the National Society for Research, Production, Transport, Processing and Marketing of Hydrocarbons "SONATRACH", which will later be the tool of national hydrocarbons policy.

Originally created to take charge of the transport and marketing of hydrocarbons, SONATRACH has gradually been deployed in other segments of the petroleum activity.

July 29th,  1965: signing of the Algiers agreement which maintains the concession regime but stipulates that French companies (Total and Elf) must pay part of their profits to the Algerian state.

August 24, 1967: Algeria decides to nationalize the American refining-distribution activities of Mobil and Esso.

October 19th, 1968: SONATRACH signs an agreement with the American oil group "Getty Oil" which restores to the national company 51% of its interests in Algeria. This agreement made it possible to strengthen the Algerian position regarding the French side.

February 24th, 1971: Algeria recovers its total sovereignty over the hydrocarbon resources. As a result of this nationalization, foreign companies are required to associate with SONATRACH in order to be able to invest in research and production activities. They must also create a company incorporated under Algerian law in order to benefit from these advantages.

April 12th, 1971: promulgation of Ordinance 71-22, defining the framework within which international companies can carry out hydrocarbon research and production activities in Algeria.

February 27th,  1975: promulgation of Ordinance 75-13 which increases royalties and taxes to 20% on liquid hydrocarbons, 5% for gaseous hydrocarbons and 85% for the direct petroleum tax rate on SONATRACH profits .

August 19th, 1986: promulgation of the law 86-14, marked by an opening in the oil upstream sector, in a context of "oil shock" which led the country to a serious financial crisis. This "liberal" law, which essentially aims to boost investment, introduced a novelty in contracts: "the production sharing contract".

Within the framework of this law, the activities of prospecting, research and exploitation of hydrocarbon deposits, the pipeline transport , the liquefaction of natural gas (NG), and the treatment and separation of gas from liquefied petroleum (LPG) are subject to a royalty and income tax.

December 04th,  1991: amendment of Law 86-14 to be extended to the prospection activities and discovery of natural gas. The amendment also made it possible to bring the settlement of disputes between foreign investors to SONATRACH within the framework of association contracts. This allowed the revival of prospecting and exploration activities, leading to important discoveries.

April 28th, 2005: promulgation of Law 05-07 relating to hydrocarbons, with the aim of modernizing the tax system and attracting foreign investors. These changes are part of the pursuit of economic reforms focusing on the opening up to competition of different sectors of activity and as a result of the membership of Algeria to the  World Trade Organization WTO.

Thus, by this law, some of the prerogatives of the National Oil Company have been assigned to two new agencies, namely National Agency for the Valorization of Hydrocarbon Resources (ALNAFT) and Regulation of Hydrocarbon Authority (ARH).

July 29th, 2006: promulgation of Ordinance 06-10, in particular, to impose the compulsory participation of SONATRACH at a minimum of 51% in any contract and to introduce the tax on exceptional profits (TPE).

February 20th, 2013: promulgation of Law 13-01 amending and supplementing Law 05-07, by introducing new incentive measures that improve the attractiveness of the national mining sector, including offshore, and geological deposits complex, to intensify the exploration effort and to reveal new unconventional hydrocarbon reserves

This law also introduces a system of skimming of super profits applicable to beneficiaries of the reduced rate of additional income tax (ICR).       

December 11th, 2019: promulgation of Law 19-13 governing hydrocarbon activities. This law aims to develop the institutional framework and introduce a simplified and competitive tax regime in order to encourage the participation of foreign partners. This flexibility will allow acceptable economic results for both the foreign partner and the national oil company while guaranteeing appreciable revenues for the state.

The new law also relates to the promotion of economic and social development through specific provisions relating to the priority use of goods and services produced in Algeria.

These new measures aim, among other things, to promote the certain, sustainable and optimal development and exploitation of hydrocarbon resources, to satisfy the needs of the national market of energy and to promote the preservation and protection of the environment.