ALGERIA: FIRST APPLICATION TEXTS OF THE NEW LAW ON HYDROCARBONS
February 2021

Law No. 19-13 of 11 December 2019 governing hydrocarbon activities was published on 22 December 2019 (the “Law 19-13”). This new law aims to promote investment in the hydrocarbons sector in Algeria by providing for a more flexible contractual regime and a tax regime more favorable to foreign investors.
The first application texts of Law 19-13 were published in the Official Gazette on 17 February 2021.

Please find below a summary of these texts prepared by Rym LOUCIF.

1. Decree No. 21-65 dated 11th February 2021

Article 12:

“The hardships decided by the State in application of this law shall give rise to compensation, at its expense, the terms and conditions of which shall be defined by regulation”.

Article 12

Summary:

The purpose of the decree is to set the conditions and modalities for granting compensation for hardships decided by the State for the prices of gas and petroleum products.

The decree is applicable to the following products sold on the national market:

• natural gas sold to electricity producers and gas distributors;
• certain petroleum products (fuels and liquefied petroleum gases as defined in Decree 21-65).

The amount of compensation for the hardship decided by the State for the sale price of natural gas to gas producers and distributors, or, where applicable, for the price of petroleum products, is calculated on the basis of
(i) the forecast quantities to be sold and
(ii) the amount of the unitary compensation for the hardship decided by the State equal to the difference between the price calculated by the Hydrocarbons Regulatory Authority (ARH) and the price decided by the State.

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2. Decree No. 21-66 dated 11th February 2021

Article 25:

“Each hydrocarbon agency has a supervisory board and a management committee”.

Article 26:
“The supervisory board is composed of five (5) members, appointed among individuals selected for their skills in the technical, economic and legal fields relating to hydrocarbons. The members of the supervisory board, including the chairman, are appointed by presidential decree on the proposal of the Prime Minister, for a term of three (3) years, renewable once (1).
In the event of a vacancy due to death, resignation or any other impediment of a member of the supervisory board, he / she shall be replaced, for the remainder of the term of office, in the same manner as when he / she was appointed.
The functioning of the supervisory board as well as the compensation of its members shall be determined by regulation”.

Article 25

Summary:

The purpose of the decree is to determine the functioning of the supervisory board of each hydrocarbon agency: ARH and ALNAFT (convening rules, frequency of meetings, quorum and majority rules).

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3. Decree No. 21-67 dated 11th February 2021

Article 62:

“The selection and delimitation procedures shall be determined by regulation:

– areas subject to the application of Article 64 below;
– exploitation perimeters;
– returned areas”.

Article 62

Summary:

The purpose of the decree is to set out the procedures for selecting and delimiting the areas subject to a request for retention, the exploitation perimeters and the returned areas.

Exploitation perimeters:

• Sonatrach and its co-contractors submit to ALNAFT, as part of the application for approval of the development plan, a proposal for the delimitation of the surface areas of the deposits to be exploited.
• If the development plan deals with clay and / or shale geological formations, the exploitation surface may include one or more reservoirs that Sonatrach and its co-contractors propose to exploit.
• ALNAFT notifies the final delimitation of the exploitation perimeter with the approval of the development plan.

Returned areas:

• The returned areas shall be of such size and shape that it is possible to allow another operator to carry out upstream activities on them.
• The proposed delimitation of the areas to be returned shall meet specific conditions, particularly regarding grouping plots.
• ALNAFT notifies of the final delimitation of the areas returned and of the remaining perimeter.

Decree No. 07-183 of 9 June 2007 is repealed.

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4. Decree No. 21-68 dated 11th February 2021

Article 173 de la Loi 19-13:

“The value of the production of hydrocarbons from the exploitation perimeter is equal to the product of the quantities subject to the hydrocarbon royalty, provided for in Articles 167 and 168 above, and the prices defined in Articles 206 and 207 below, minus, where applicable:
—the cost of transport by pipeline calculated by applying the tariff for transport by pipeline;
— the cost of liquefying natural gas and calculated by applying the natural gas liquefaction tariff;
— the cost of liquefied petroleum gas separation is calculated by applying the liquefied petroleum gas separation tariff.
The methodology for determining the natural gas liquefaction tariff and the liquefied petroleum gas separation tariff is provided for by regulation”.

Article 173 de la Loi 19-13:

Summary:

The purpose of the decree is to define the methodology for determining the natural gas liquefaction tariff and the liquefied petroleum gas separation tariff used to determine the value of hydrocarbons production.

The tariffs for natural gas liquefaction and LPG separation in Algeria, not including consumption taxes, are calculated by ARH and notified to producers by 30 June each year at the latest.

The natural gas liquefaction tariff and the LPG separation tariff are calculated according to certain critera listed in the decree, and on the basis of formulas provided for in the decree.

By Rym Loucif