Posted by: Petroleum Economist 

Head of Algerian firm aims to reorganise it from the ground up

Abdelmoumen Ould Kaddour is intently relating the internal reforms he’s launched since taking charge of Algerian national oil company Sonatrach last year, but even after explaining multi-billion-dollar initiatives, an even more focused gaze is apparent when he’s discussing the impact on employee morale.

“I am so excited about our workers’ morale, because I know they are feeling more motivated than ever by the changes,” he says. “This is the most important result for me.”

The glint in the unassuming US-trained engineer’s eye when discussing the mood among his 40,000 employees recalls more the trailblazing spirit Sonatrach’s founders exhibited when forging its post-colonial emergence, than the opaque workings detractors say saw the empire evolve into a bureaucratic behemoth.

“We are shaking the trees all day long. Some good fruit is starting to fall. Even if it sometimes also falls on our head,” he jokes. “There is momentum. Everything is moving.”

Ould Kaddour has only been CEO of Sonatrach since last July, but he’s made it a priority to resolve long-running disputesand restart stalled negotiations, as part of an apparent strategy to address a past reputation for inflexibility and poor communication.​

Within just a few months he and his team have pushed forward initiatives from domestic shale exploration deals to buying a refinery in Sicily, while also starting talks with Total on constructing a petrochemical plant in Algeria.

He’s keenly aware that rapid expansion has its risks. Even among the high-pressured world of oil major executives, Ould Kaddour has some quite unique stakeholder responsibilities. The firm funds 60% of Algeria’s state budget, so besides the typical demands of shareholders, directors and politicians—he also has a population’s needs on his conscience.

“We are the economic locomotive of Algeria, its main economic arm,” he said at the sidelines of the World Gas Conference in Washington DC. “Developing business ties with international partners is critical in bringing access to new technologies and creating paths towards faster growth.”

Discussing the example of the August refinery acquisition in Sicily earlier this year, he notes that Algeria had imported over $15bn of refined products over the past 10 years, and that building a refinery can take four years.

“Problems like this can be overcome in a simpler and faster way by just buying a refinery. The saving of over $2bn per year is not insignificant”. The Augusta refinery on the Italian island is capable of processing 175,000 barrels of oil equivalent a day of Sahara blend.

He’s also bullish on the potential for shale gas in Algeria, calling it “one of the most important future factors in the country’s development”.

“Research has show that we have the largest reserves after the US and China, we are definitely working towards developing the ways to firstly reach the local market, which is growing at 5-6% per year. But also there is the need for export.”

Currently, the country has three international export pipelines and two LNG terminals, and is the third largest gas supplier to the European Union after Russia and Norway.

But growth also depends on security, a fact underlined by the rocket attack on a BP gas plant in 2016 , and after the infamous In Amenas hostage crisis at the Tigantourine gas facility in 2013.

“Security is of course a critical issue and our president is focused on this, and this comes into focus considering that we are such an unexplored country. There is plenty of space with potential.”

“If we are stable and secure, most of our partners are excited about coming to Algeria.”

Turning a tanker

Algeria is a well established location for players including BP, Shell, Total, Eni and Anadarko, and he points out that talks with Exxon-Mobil are underway. But its reputation as an investment destination has also taken some dents over recent years.

The firm has been closely connected to the fate of Algeria as an independent state since it was created following the 1954-1962 war of independence, and the politicisation that this involves complicates decision-making in the upper echelons—often to the frustration of international oil companies.

Turbulence has led to the appointment of five CEOs in five years, amid stalled foreign oil interest in energy bids and a corruption case in February 2016 that saw six people jailed, including a former vice president of upstream and an ex-state bank chief.

But Ould Kaddour’s focus is squarely on the future, and his next target is reforming the country’s hydrocarbons law, which he acknowledges is “tough”.

“We have asked all our partners what they’d like to see in the new law, and hopefully by the start of 2019 we will have a new, more attractive law for foreign investors.”

The current Hydrocarbons law has been widely criticised by IOCs over conditions such as the requirement that Sonatrach has at least 51% in any upstream project, and many say new tax incentives and administrative procedures are needed. However, hardliners in government insist the law protects its natural resource interests.

While vocally pressing the government for change in that law, Ould Kaddour has also signaled his readiness for change through over-seeing the development of a wide-ranging new mission statement, SH 2030.

SH 2030 lays out a strategy to create $67bn in additional revenue by 2030, of which 50 percent will be reinvested. “We want to be the fifth biggest energy company in the world”, as a result of the plan, he said.

The document’s focus on “digitization for efficiency” and diversifying into solar energy would be likely be unrecognizable if being read by the founders of the company, but the determination and ambition that’s apparent between the lines would be familiar.