A discourse of truth from the CEO on turnover of SONATRACH 2015; contraction by 43% compared to 2014 . . .
- I am pleased to say that my forecasts published in the recent past in several national and international contributions were verified by the Talk of the CEO of SONATRACH, yesterday; in a discourse of truth in the same way as the recent speech of the Minister of Energy on the necessary revision of prices through a calm debate on subsidies which must be targeted and not generalised. This contradicts the euphoric speeches that have misled the highest authorities of the country. I quote the CEO of SONATRACH in its official statement on 26 June 2016, “with average oil prices which fell back from $99,41 in 2014 to $52.13 in 2015 and SONATRACH export turnover fell to $33.19 billion in 2015 from $58.45 billion in 2014 (drop of 43%)». I recalled here in these same columns that the end of 2015, sales would be about $34 billion; the CEO gives $33.19 billion. But remember, this is the turnover. It shall take away 20% of costs and that gives us $27 billion of net profit whilst knowing that the decrease of $1 in average annual would cause a loss to Algeria of about $600 billion. The price of gas is indexed on the oil and breakeven based on the known large and small, old and new deposits, lays between $10 to 20 per barrel. At $40, as an annual average, net profit of SONATRACH would be $21 billion.
- Anyway at $40 to 50 a barrel, Algeria should most certainly be enduring important budgetary tensions; and the diversified economy, if deep structural reforms are initiated in 2016, will not see the day at best before 2020. At this stage, truth talking is required away from any pessimism. One must make these reforms if one wants to avoid the dreaded trip back to the IMF in 2018 or 2019. Moreover, it is that Algeria could be facing the prospect of depletion of its reserves, hence the necessary energy transition. The release of the Council of Ministers, dated October 6th, 2015, gave an idea of the State. The production of hydrocarbons, which had capped, in 2007, with 233 million tons equivalent petroleum (TEP), has, subsequently, experienced a continuous regression to reach 187 million in 2012, just before an upturn in the following year. Furthermore, the national consumption of energy products has nearly doubled between 2000 and 2014 (it reached 51 million TEP), and hydrocarbon reserves amounted to 4.533 million TEP (44% of the initial recoverable reserves), including 1.387 million tonnes of oil and 2,745 billion m³ of natural gas. Provided the level of reserves is calculated with reference to the cost, the international price vector and competition of substitutable energy that can discover thousands but unprofitable deposits.
- How to mobilize the financial resources following these different scenarios (here also arises the problem of the future viability of projected investments), the Ministry of Energy has just declared that investment programmes would be approximately $73 billion between 2015 and 2020 not counting more than $20 billion for the same period for SONELGAZ. The debt or drawing off the SONATRACH’s revenues would mean falling foreign exchange reserves, and what will be left for the other sectors? In recalling that any strategic decision falls within the National Council of Energy chaired by the head of State, a new model of energy consumption, linked to a different vision of industrial policy (at what cost of transfer of energy to the installed plants), infrastructure/habitat, and new behaviours of consumers, is needed urgently. This must be based on a mix taking into account new global energy changes between 2020 and 2030, certainly far from the linear model of the past, the current one in Algeria is only accelerating the depletion of oil and conventional gas reserves, at the pace of the present domestic consumption (by year 2030, the population could be at 50 million).
Dr. Abderrahmane MEBTOUL, Expert International, University Professor, email@example.com
Further reading is at http://www.mena-forum.com/algerias-future-challenge/ and at http://www.mena-forum.com/facing-fourth-industrial-revolution/ here in MENA-Forum .
NB – Professor Abderrahmane Mebtoul, International Expert, has been Director of studies at the Ministry of Energy and Industry in 1974/2007, has published many international contributions on energy strategies and is currently member of several international institutions.