Upstream Hydrocarbon Investor Guide

May invest in the activities of prospecting, research and exploitation of hydrocarbons: any legal person under foreign law, as well as any Algerian private or public legal person, including the national company SONATRACH - SPA, with financial and / or techniques required by Law No. 19-13 of April 28, 2005, governing hydrocarbon activities and by the regulatory texts adopted for its application.

The person indicated above may invest as an Operator-investor or an Investor-non-operator or an upstream Operator.

Definitions:

Person: is understood here as defined in Article 2 of Law No. 19-13 of December 11, 2019, governing hydrocarbon activities.

Operator-investor: a person with the technical qualifications and experience necessary to conduct upstream operations and with the required financial capacity.

Investor-non-operator: a person with the required financial capacity, but not necessarily the technical qualifications or experience required to operate.

Upstream operator: person with technical capacities, responsible for leading and carrying out upstream operations in the name, for the account and under the responsibility of the party which appointed him under a hydrocarbons contract or an upstream concession.

Contracting Party: One or more legal persons and the national company having concluded a hydrocarbon contract.

National company: The national company SONATRACH-SPA or any subsidiary under Algerian law wholly owned, directly or indirectly, by SONATRACH-SPA.

By virtue the legal and regulatory provisions in force, the exercise of research and exploitation activities is subject to obtaining a prequalification certificate issued by ALNAFT.

Indeed, no one can undertake hydrocarbon activities if he does not have the technical and / or financial capacities necessary to carry them out, and if he has not been previously authorized, in accordance with the provisions of Law no. ° 19-13 dated on December 11, 2019, governing hydrocarbon activities.

Thus, companies wishing to conduct prospecting operations must also have a valid prequalification certificate, in accordance with the provisions of the procedure and conditions for granting the hydrocarbon prospecting authorization.

Pre-qualified companies can thus have one of the following qualities:

- Onshore and offshore operator-investor;

- Onshore operator-investor;

- Non-operator investor;

- Upstream operator.

The prequalification criteria and conditions are detailed in the Rubric  (of the site) entitled “How to be prequalified”.

Anyone wishing to exercise upstream activities including prospecting, research and exploitation of hydrocarbons, in application of the provisions of law n ° 19-13 dated on December 11, 2019 must submit a request for prequalification to The National Agency for the Development of Hydrocarbon Resources - ALNAFT.

1. Required Documents and information

- The Request for prequalification consists of the Letter of expression of interest and legal, technical and financial documents and information. The form and content of the request are specified in Annexes A, B and C attached.

- Letter of interest expression

- Legal aspects: Annex A

- Technical aspects: Annex B

- Financial aspects: Annex C

- The letter of expression of interest for the prequalification must be written in French and signed by a duly authorized representative of the candidate.

- Certified copies of the original of the articles of association provided in the original language with a sworn translation into the national or French language, unless the original is in French or Arabic.

- Copies of certified financial statements and annual reports for the three (3) fiscal years preceding the date of the prequalification request; presented in their original language with translations into French, unless the original is in French or English.

- Any other document or information, particularly technical, required must be presented in French or English.

2. Procedures for submitting the request for prequalification

The request for prequalification is sent, by mail, to the attention of the Chairman of the ALNAFT Management Committee or submitted by hand, against acknowledgment of receipt, to the ALNAFT order office, located at the following address:

Lot N°G8, Chemin Kaddous,

Haut site Hydra, Alger.

In the event that a prequalification request is submitted by email (Contact-PVDMH@alnaft.dz), it is taken into consideration immediately and will only be submitted to the Management Committee once the original has been sent. this request transmitted, accompanied by the complete file.

3. Types of prequalification

ALNAFT will issue a prequalification certificate which will indicate the capacity under which the person is prequalified as:

- Operator - Investor in Onshore only;

- Operator - Investor in Onshore and Offshore;

- Investor - non Operator;

- Upstream operator.

Is considered as :

Operator - Investor: a person with the technical qualifications and experience necessary to conduct upstream operations and with the required financial capacity.

Investor - non-Operator: a person with the required financial capacity, but not necessarily the technical qualifications or experience required to operate.

Upstream operator: a person with technical capacities, responsible for leading and carrying out upstream operations in the name, on behalf of and under the responsibility of the party that appointed him under a hydrocarbons contract or 'an upstream concession.

The person pre-qualified as Operator-investor, Investor-non-operator or upstream Operator, may be party to a hydrocarbons contract.

However, the Investor-non-operator cannot claim to be the sole party to a hydrocarbon contract.

The national company holding an upstream concession can delegate the conduct of upstream operations to a third party having a prequalification certificate issued by ALNAFT to act in its name, on its behalf and under its responsibility.

As part of a hydrocarbon contract, the role of upstream operator, prequalified by ALNAFT, can be performed by one of the contracting parties, a joint body or a third party designated by the contracting parties.

Companies already pre-qualified by ALNAFT, set up as a joint body or in a consortium can be pre-qualified as an upstream operator on request from ALNAFT.

A person pre-qualified as Operator-Investor is systematically pre-qualified as an upstream Operator.

Anyone wishing to carry out prospecting activities, within the framework of a prospecting authorization, must first be pre-qualified by ALNAFT as: Operator-investor, Investor- non-operator or upstream Operator.

However, the person pre-qualified as an Investor- non-Operator requesting a prospecting authorization must be accompanied by an upstream Operator pre-qualified by ALNAFT.

These people will be able to conduct prospecting activities, on behalf of ALNAFT, within the framework of prospecting service contracts (art. 46 of Law 19-13 governing hydrocarbon activities).

In the context of projects requiring specific technical expertise not available or not mastered by most oil companies, any pre-qualified person can be called by ALNAFT for additional prequalification as part of an initial phase of the call for competition for this type of project.

Work allowing the detection of hydrocarbons, in particular by the use of geological and geophysical methods, including the realization of stratigraphic drilling. Stratigraphic drilling is the drilling of wells whose purpose is the geological reconnaissance of the sedimentary layers or other layers crossed by this drilling in order to determine the characteristics related to the hydrocarbon potential of the perimeter concerned, in particular in terms of bedrock, reservoir, vertical extensions. layers, and nature of fluids.

The prospecting authorization is issued by The National Agency for the Development of Hydrocarbon Resources , ALNAFT; to any person requesting to carry out hydrocarbon prospecting work on one or more perimeters, for a period of two (2) years, renewable once for a maximum period of two (2) years.

The prospecting authorization on the same perimeter can be granted to a single person or jointly to several people.

Anyone wishing to carry out prospecting, research and / or exploitation activities for hydrocarbons must first submit a prequalification request to ALNAFT.

To benefit from a prospecting authorization, the applicant must subscribe to the commitment to carry out a work program.

The applicant must justify proven technical and financial capacities, necessary to carry out the prospecting work.

- The prospecting authorization allows its holder to carry out, at his own expense and risk, within a defined perimeter, hydrocarbon prospecting work, in particular through the use of geological, geophysical and geochemical methods; including the realization of stratigraphic drilling.

- The prospecting authorization gives the prospector a non-exclusive right to carry out prospecting work. It is not divisible, leasable, assignable or transferable and it is not subject to guarantees or sureties.

- The prospecting authorization does not confer on its holder any right to conclude an exploration and exploitation contract or an exploitation contract, or to dispose of the products extracted, in the event of the discovery of hydrocarbons at the opportunity for prospecting work.

- ALNAFT may, at any time, withdraw a prospecting authorization for the reasons and under the conditions provided for in said authorization.

- However, in the event that a perimeter or part of this perimeter covered by a valid prospecting authorization is the subject of a call for competition for the conclusion of a hydrocarbons contract, the prospectors who have carried out prospecting work on this perimeter or part of this perimeter benefit from a preferential right under the conditions set in the call for competition. These provisions also apply to prospectors whose prospecting authorizations have expired a maximum of one (1) year before the date of launch of the call for competition relating to the concerned perimeter.

- The prospecting expenses, previously approved, will be considered as research investments, if the prospector who has carried out prospecting work obtains a hydrocarbon contract on the concerned perimeter.

The prospecting authorization request is submitted to The National Agency for the Development of Hydrocarbon Resources, ALNAFT and must include:

- Description of geological, geophysical, geochemical work and, where applicable, stratigraphic drilling as well as the projected budget that the person requesting a prospecting authorization undertakes to carry out.

- The request must be accompanied by a summary report, justifying the limits of the requested perimeter (s), taking into account, in particular, the geological constitution of the region, as well as the subject of the prospecting and the general work program proposed.

- The request must also include a commitment to restore the premises according to a schedule not exceeding three (3) months following the end of the work.

- Every person must, before undertaking any activity to prepare and submit, for the approval of the Hydrocarbons Regulatory Authority, ARH, an environmental impact study and an environmental management plan including the mandatory description measures to prevent and manage the environmental risks associated with said activities in accordance with applicable environmental legislation and regulations.

The activity of exploration and exploitation of hydrocarbons is governed by the provisions of Law 19-13 dated on December 11, 2019, governing hydrocarbon activities.

To carry out hydrocarbon research and exploitation activities, any person must be pre-qualified by The National Agency for the Development of Hydrocarbon Resources.

To carry out hydrocarbon exploration and exploitation activities, any pre-qualified person can participate in the call for competition organized by ALNAFT, for the conclusion of a hydrocarbon contract with the national company.

In addition, the national company may enter into a hydrocarbon contract by direct negotiation, after consultation with ALNAFT, which issues, for this purpose, an award deed.

Prequalification

Under the legal and regulatory provisions in force, the exercise of research and exploitation activities is subject to obtaining a valid prequalification certificate issued by The National Agency for the Development of Hydrocarbon Resources ALNAFT .

Invitations to tender

The National Agency for the Development of Hydrocarbon Resources, in its mission of promoting and developing the national mining sector, organizes invitation to tenders for upstream activities, with a view to the allocation of research and exploitation perimeters. Hydrocarbons and the conclusion of corresponding contracts.

ALNAFT organizes data rooms to present technical data, on the perimeters covered by the invitation to tenders, to pre-qualified oil companies wishing to carry out hydrocarbon research and exploitation activities.

The hydrocarbon agreement

The activity of research and exploitation of hydrocarbons is carried out within the framework of: an upstream concession for the national company alone or a hydrocarbon contract concluded between the national company and one or more co-contractors.

Hydrocarbon agreements take one of the following forms:

- A participation contract;

- A production sharing agreement;

- A risky service agreement.

The hydrocarbon exploration and exploitation agreement gives the contractor the exclusive right:

- to carry out research activities on the contractual perimeter;

- to carry out hydrocarbon exploitation activities in the event of a discovery and after approval by ALNAFT of the development plan relating to the discovery.

(agreed on 12/31/2020)

Total surface area of the hydrocarbon mining domain: 1,754,563.26 km²,

whose :

- Surface area of the Onshore mining domain: 1,623,397.82 km²

- Surface area of the Offshore mining domain: 131,165.44 km²

Exploration wells carried out by Sonatrach in its own effort and in partnership, having been monitored by the PVDMH Division, as part of the fulfillment of contractual commitments, break down as follows: (state agreed on 12/31/2020)

- Number of wells in progress: 4

- Number of wells completed: 42

The research effort made during 2020 by SONATRACH alone and in partnership, made it possible to make eighteen (18) hydrocarbon discoveries.

Concerning the geographical location of these discoveries, made on different sedimentary basins of the national mining domain, as well as the nature of the fluids in place.

These discoveries break down as follows:

- One (1) discovery in the South East Constantine basin;

- Seven (7) discoveries in the Berkine basin;

- Two (2) finds in the Illizi Basin;

- Two (2) discoveries in the Amguid Messaoud basin;

- Three (3) discoveries in the Oued Mya basin;

- One (1) find in the Ahnet Gourara basin;

- Two (2) discoveries in the TRS basins.

That is success rate of 45% (compared to 40 wells, carried out by Sonatrach alone)

The evaluation of the reserves in place of the eighteen (18) discoveries resulted in a 2P in place volume of 144.1 million TOE, broken down as follows:

- 75 million m3 of oil, of which 27.82 million m3 is recoverable

- 95 billion 3 of gas, of which 40.56 billion m3 are recoverable

- 8 million m3 of condensate, of which 7.9 million m 3 are recoverable.