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Sonatrach
An International Competitor
Already one of the world‘s biggest petroleum companies, Sonatrach
is not only the driving force of the Algerian economy, it is also set
to become a major player in the international energy market
Sonatrach is Algeria‘s oil and gas company. An acronym for the National Enterprise of Research, Production, Transport, Transformation, and Commercialization of Hydrocarbons,
Sonatrach is the sole company in Algeria responsible for the exploitation and sale of Algeria‘s enormous oil and gas resources.
Although it has yet to enjoy the international brand recognition of the world‘s largest oil companies such as Exxon, Shell, and BP,
Sonatrach is without a doubt a major international player.
With a 1999 turnover of approximately $14 billion and over $12 billion in exports,
Sonatrach is by far Africa‘s largest company. It is the 12th-largest petroleum company in the world, the world‘s second-largest exporter of liquid petroleum gas (LPG) and the third-largest exporter of natural gas. Its sales represent approximately 95% of Algeria‘s total exports and its activities make up 25% to 30% of the country‘s annual GDP, while it employs over 48,000 people in the mother company and over 120,000 throughout the group.
In 2000, Sonatrach is on the cusp of a new period of operations and business opportunities. Its chairman and CEO, Mr. Abdelhak Bouhafs, is overseeing a series of changes and strategies designed to fundamentally transform the company‘s internal organization and prepare it for increasingly fierce competition in the world‘s energy markets. “Our objective,” he says, “is to turn
Sonatrach into a high-performance, competitive oil and gas company.”
In one of the most fundamental changes in its history, the Ministry of Energy and Mines and
Sonatrach are putting in place an exhaustive series of reforms that will separate the role of
Sonatrach from that of the state. In short, the changes mean that Sonatrach will be required to compete for state contracts and be subject to state taxation, putting it on equal footing with other oil companies operating in Algeria and eliminating potential conflicts of interest. The reforms will also ensure that the company adopts international standards of management, cuts costs, and maximizes profits. And although the state still intends to maintain a majority share in the company
(Sonatrach is government owned), the company will also be able to list shares on the international equity markets, giving it all the financial instruments of a modern corporation and liberating its billions of dollars of capital to raise funds for its ventures locally and abroad.
Supported by these internal reforms, Mr. Bouhafs will focus on Sonatrach‘s partnership strategy to expand and improve its operations. “We have been practicing this approach for more than a decade,” he says, “with convincing success.”
Sonatrach has signed more than 40 joint-venture agreements with foreign oil companies in its upstream activities since 1991. Partnering with foreign firms resulted not only in a significant transfer of international technological and management expertise but, more importantly, in a spectacular increase in the number of oil and gas discoveries.
Sonatrach estimates that these partnerships will increase production 35%, from 181 toe (ton oil equivalent) to 150 toe in 2002. One premier example of
Sonatrach‘s strategy is its partnership with BP-Amoco to develop the gas resources of Algeria‘s In Salah region. Worth $2.5 billion, the partnership stands to increase the country‘s gas production by 9 billion cubic meters annually.
Given its success, Sonatrach is eager to pursue partnerships in its downstream and upstream activities abroad. Mr. Bouhafs points to its activities in Yemen, where the company has joined forces with Italy‘s Agip in a production-sharing contract and with Germany‘s BASF in Spain for the production of propylene.
Sonatrach is also currently negotiating concessions in Peru and Iraq.
With Sonatrach‘s new corporate structure and its eagerness for partnership agreements, the company is confident that in 2000 and beyond it will be able to surpass its production and sales increases made since its inception in 1963. Already one of Europe‘s most important suppliers of oil and gas,
Sonatrach is awaiting the liberalization of the EU‘s energy market with keen interest and is looking even further abroad for opportunities elsewhere around the globe. So if you had not heard of the name of
Sonatrach before today, you will hear it more often in the future.
Sonatrach is set to become a commanding presence in the world‘s energy market.
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