Algeria, which was a member of the Organisation of the Petroleum Exporting Countries (Opec), has slapped a windfall tax on surplus profits as well as curtailed the role of foreign investors in oil production in a set of new amendments for the sector.
The new provisions require that state-owned Sonatrach, Africa’s largest company by revenue, take a mandatory minimum 51 percent stake in all exploration and production ventures. Any surplus profits by foreign firms would also be taxed between 5 and 50 percent.
The amendments said: "A non-deductible tax on surplus profits made by foreign associates and applicable over the share of production they own when the monthly average of the Brent oil price is above $30 a barrel."
The tax would be implemented from August 1 2006.
The sharp change in policy for Algeria was surprising given the country’s previous investor friendly reforms in the energy sector. These reforms were, however, conceived in 2000, when oil was trading far lower than today and the North African country was probably trying to maximise revenue. With oil trading at all-time highs, the need to attract investment through liberal reforms might have waned somewhat.
However, should oil drop sharply, Algeria could find itself begging for investors.
Algeria, a major supplier of gas to Europe, produces about 1.5 million barrels of oil per day and 62 billion m3 of gas a year
Sonatrach earned about $41bn in 2005, while its partners earned a little less than $4bn from their involvement in oil and gas.
Algeria: Government 'nationalises' oil sector
Algiers – High international oil prices have emboldened Algeria to make a u-turn on earlier attempts at liberalising the sector.