T - Ministère de l`Energie

By
Chakib Khelil
Minister of Energy
and Mines
The challenge
of communication
«F
or the first time, the executives representing the
different segments and members of the Energy
and Mines sector have got together to debate on
the issue of information and communication at the time of
globalisation, the internet and nanotechnologies.
The first objective we targeted through this brainstorming
session was that the managing executives of the sector, and
initially those in charge of information and communication
tasks, learn to communicate with each other, exchange their
ideas and face up to their experiences in this domain.
This has been done and the objective sought after was largely achieved. Through the wealth of ideas and opinion
exchanged, the intensity of the debates and the extent of the
ideas issued, I am convinced that this meeting, which was a
first, will leave traces and it is important to periodically
repeat such initiatives. For the time being this means using
what has been learnt by endeavouring to carefully prepare the
1st Symposium dedicated to communication in our sector.
This meeting's task will be to formulate the recommendations
on the basis of the ideas expressed during the brainstorming
session and those which might emerge in the mean time. We
are counting on this.
We hope that these recommendations, which must take the
form of proposals of solid measures, will be ambitious, brave,
but also in line with our realities.
In this respect, we need to take up a major challenge as, in
the era of the planetary village, communication has become
a real detonator. In itself, we feel that the communication
problem should boil down to a simple truth: communicating
means making others know that we exist and, hence, recognising them as living beings, humans who we understand as ☞
☞ such. Such a definition also assumes that we talk to people who
express a symmetric need. But what have changed since the start are
the rhythms, the speeds and therefore the perception that the human
being today has spaces and temporalities. Today, the human being
is confronted with urgent issues, pressing enigmas and menacing
questions from a new world to be built.
The appearance of audiovisual and the incredible development of
the new information and communication technologies have transformed the individual's relationship with itself, its relations with society
and with the world.
Becoming embedded in our daily lives, creeping into our private
lives, these new instruments no longer leave any respite for man and
particularly those who are destined to inform and communicate. With
"live" attacks, they are summoned to retort in "real time" but, above
all, they are required to anticipate and warn. They are no longer able
to be restricted in the dangerous position of the passive receiver. They
are summoned to impose themselves as issuing, active, credible and
therefore respected agents.
But faced with the frantic rush of events and facts, how can we
remain ourselves in the midst of progress ? How can we resolutely join
together whilst keeping our own integrity ? How can we safeguard
our authenticity by offering it humbly, but with aplomb, to the universality ?
If the Old World is coming undone, the changes occurring under
our eyes must not therefore be considered as a threat or an attack. We
need to see in them the chances and opportunities offered, which
imply that we demonstrate clear voluntarism and give ourselves a duty
of producing results.
So, this means assessing our actions and our products with the
public, motivating the collectives of our companies and mobilising
them, making our partners committed to our projects and hence
optimising our performances.
Who does not see that the most deserving efforts, the most brilliant
results, the best designed products, the best intended projects are only
of worth if brought in an appropriate manner to the knowledge of the
public, clarified in their competence, their virtues and their aim? As
the value of an action does not suffice in itself; it is condemned to use
the paths of notoriety to receive public acceptance of the recompense
or be blacklisted.
Such an approach naturally implies a breakaway from the
traditional frameworks of management and governance. It transgresses the old conventions and shakes up old reflexes. It is something
that cannot be ignored.
So, it is felt necessary to get out of the ruts of the past, to get away
from empiricism and, specifically with regards advertising, move
away from the "virtual" to go in search of a rigorous analysis of the
public's expectations using solid approach bases. It is therefore important to consult people on their aspirations and to test their reactions
to our initiatives.
This should lead us to reflect on the terms and conditions of an
update in terms of opinion polls and motivation studies. We have the
means for such an ambition and the implementation of projects in
this domain might provide the opportunity to mobilise the immense
synergies of the sector. But we also need to awaken the citizen to the
awareness of what is real, the new problems of sustainable development, ecology, preservation of the environment and new and renewable energy savings.
Finally, we have the duty of making them aware of the constraints
of the financial operator in a market economy system – an operator
bound to balance the accounts of the company it is responsible for
managing, triggering profits in order to ensure its development and
thus contributing to national wealth. In this complex and sensitive
field of communication, significant progress has been made over the
last five years by our sector, and the accomplishments made are
obvious, whether in terms of the abundance of new publications, new
reflexes that are emerging, in line with the requirements of time, or
innovative approaches which aim to boost communication to the rank
of a managerial function in itself.
The time has therefore come to address and place down new milestones for the future, as although a lot has been done, there is still a
lot of grain to grind. It is in fact legitimate that, in this domain, we
want to present ourselves in a laboratory and in the shop window."
C. K.
Table of Contents
Performances
■ 5 new hydrocarbon discoveries
■ 7 petrochemical projects launched
■ Tassili Airlines takes off
■ Mines: an immense deposit
■ Energy : Sonelgaz is using all its energy
■ FDI: Algeria, the no. 3 Arab receiving country
Reforms
8
40
57
Engineering - the key to
development
Partnership
No. 6 - November 2006
Overseas
182
Markets
191
Sustainable development
199
Industrial safety
209
Human resources
214
Communication
221
Books
223
■ Chakib Khelil : “We want have talks with the LNG
distributors”
■ World growth is not flagging
■ The APN adopts the amendments related
to the hydrocarbons law
■ New law on investment
■ New law on industrial land
■ The UGTA backs the social and economic pact
Case study
Energie & Mines
■ Chakib Khelil : Long term supply contracts
■ The surprising return of raw materials
■ Algeria, the world's capital for the environment
■ Algeria's appeal to the UN
■ Biofuel in Brazil
■ A circular from the Ministry of Energy and Mines
■ Seminar on nuclear safety
142
■ Algeria-USA : Mohamed Bedjaoui launches an
appeal to American investors
■ Algeria-USA : Putting in place of an export
mechanism
■ Algeria-Russia : President Putin in Algiers
■ Algeria-Italy : Acceleration of the Galsi project
■ Algeria-Spain : Catalan entrepreneurs in Algiers
■ Algeria-France : Coface sets up in Algeria
■ Algeria-United Kingdom : President Bouteflika
in London
■ Algeria-Turkey : A strategic partnership
■ African partnership : The Nigal project is on track
■ Algeria-Korea : A strategic partnership
■ Chakib Khelil : “The IAP-CU, a place of capitalisation”
■ 1st “communication” brainstorming session of the Energy
and Mines sector
■ La Nouvelle Attractivité de l'économie algérienne
by Abdellatif Benachenhou
■ Les Fondements théoriques du libéralisme
by Hamid Temmar
Energie & Mines
Review of the Energy and Mines sector ISSN 1112-4873 Legal deposit : 1094-2004
No. 6 - November 2006
Head of publication Sid Ali Hattabi
Assistants Halima Chehri (Secretariat), Lila Rahma (Documentation), Karima Oumaouche (Technical Coordination), Riad Fernani (Brochure)
The following have been involved in this edition A. Aïdel, Youcef Aouissi, M. Bencharif, Hachemi Benyahia, Omar Boukhadimi, Samia-Kahina Bouzid, Paul Chaplin, Sliman
Dakar, Taoufik Ferhat, Réda Fettah, Ian Forsyth, Djamal Gharnati, R.G. Gonzalez, Alan Greenspan, Karima Hayati, Nasser Iguestira, Pierre Judet, Mohamed-Sofiane Kasbadji,
Amel Kasdi Kheddach, Martin Kilmurry, Salim Korsan, Nedjoua Latif, Amine Maher, Sebastian Mallaby, Tarek Mokrane, Nazim & Chris, Abdelmoumen Ould Kaddour,
Namhee Park, Jean-Marie Pinel, Abdelkrim Ramtani, Ahmed Tobbeche
Editing Ministry of Energy and Mines, Val d’Hydra, Alger Tel. : 021 48 82 56 Fax : 021 48 81 84 website : www.mem-algeria.org email : [email protected]
Subscription and advertising department Tel. : 021 36 92 36 / 021 36 92 22 Fax : 021 36 07 97
Circulation, advertising department Sarl Baosem
Design and production Alpha Design Photo-engraving Espace numérique Printing En-Nakhla Photo credits : Sonatrach, Naphtal, Sonelgaz, Alpha Design, APS
The manuscripts, photographs as well as any other document sent to or issued for editing are not returned and cannot be the subject of any claim.
The articles published in Energy and Mines only commit their authors. Reproduction authorised provided the source is indicated.
PERFORMANCES
performances
17 discoveries in 2006 - a record
Five new hydrocarbon discoveries
Discovery of crude oil and
gas in the Berkine basin
A discovery of crude oil and gas has been
made by Sonatrach alone in the Berkine
basin further to the drilling of FDF
(Feidjet Fares - 1) wells made in block
402d.
This drilling reached a depth of 324 m
after covering all planned objectives. The
formation test carried out on the lower
Trias clay-gravel reservoir (Tagi), in the
3,019-3,027 m drilled interval, delivered
under a choke of 32/64 output of
3
3
11,167.8 m /h of gas and 6.76 m /h of
oil with surface pressure of 2,010 psi.
This result confirms the potential large
amount of hydrocarbons in this part of
the Berkine basin which will continue to
be the subject of an intense exploration
and delineation activity in the course of
2006. This discovery is the sixth one
made this year by Sonatrach alone after
HGAS-1 in the Amguid Messaoud basin,
AHMN-1 and WEMN-1 in the Berkine
basin and GLSW-1 in the Oued Mya
basin. It brings the total number of discoveries in Algeria to 12, with Sonatrach
having brought to light, since the start of
the year through its partnerships, the discoveries of TEN-1 and ISRS-1 in the
Illizi basin, Sali-1 and KL-2 in the
Reggane basin, LES-3 in the Berkine
basin and MJB-3 in the Timimoun basin.
Discovery of crude oil and
gas in the Reggane basin
The Sonatrach association along with the
consortium Repsol-RWE and Edison
Gas announces the new discovery of gas
in the Reganne basin further to the
drilling of the Kahlouche-2 (KL-2) wells
in the North Reggane acreage (Blocks
351 C-325-C).
Several formation tests have been carried
out on these wells and have given the following results under choke 32/64 :
Siegenian reservoir :
Depth : 3,983m
3
– Gas output : 763,000 m /d
– Surface pressure : 4,081 Psi
Tournalsian reservoir :
Depth : 2,360 m
3
– Gas output : 438,000 m /d
– Surface pressure : 2,649 Psi
Energie & Mines
8
November 2006
This new discovery is added to the success of the previous ones on this North
Reggane acreage and confirms the major
potential of this basin which sees
Tournalsian being produced for the first
time.
For this purpose, an intense exploration
and delineation activity is planned which
will be continued in the course of the
next two years. It brings the total number
of discoveries in Algeria, since the start of
the year, to 11. Sonatrach has brought to
light 5 discoveries further to its own
works and 6 through partnerships.
Discovery of crude oil
and gas in the Reggane basin
A discovery of condensate gas has been
made in the Berkine basin further to the
drilling of the AHMSW-1 well (Aït
Hamouda-South-West-1) in block 405a
by Sonatrach on its own. This drilling
reached a depth of 4,325m in the
Gedinnian after covering all planned
objectives.
Formation tests have been carried out on
these reservoirs and have given the following results under choke 32/64:
Siegnian reservoir F6-drilled interval:
4,014 - 4,116m:
- Gas output: 12,093m3/h
- Condensate output: 13.09m3/h
- Surface pressure: 3,550 Psi
Strunian reservoir F2-B-drilled interval:
3,448 - 3,452m:
- Gas output: 3,719m3/h
- Condensate output: 1.16m3/h
- Surface pressure: 575Psi.
This result confirms the major hydrocarbons potential in this part of the Berkine
basin, which will continue to be the subject of an intense exploration and delineation activity in the course of 2006.
This discovery is the seventh one made
this year by Sonatrach after those of
HGAS, AHMN, GLSW, WEMN and
FDF It brings the total number of discoveries made in Algeria to 13, with
Sonatrach having made, since the start of
the year through its partnerships, the discoveries of TEN, SL1, KL-2, LES-3,
MJB-3 and ISRS.
Discovery of oil
in the Berkine basin
The national hydrocarbons company
Sonatrach has announced that, in partnership with the American AnadarkoAlgeria, it has made a new discovery of
oil in the Berkine basin, in the Algerian
eastern erg. "The Sonatrach association
and Anadarko Algeria Company
LLC/ENI/Maersk, working on the
Berkine El Haiad acreage, announces a
discovery of oil in the Berkine basin
(block 404a) further to the drilling of the
Bir Berking Sud-1 (BBKS) well which
has reached a final depth of 3,489m in
the Devonian", states Sonatrach in a
press release. The output has been evaluated as 4m3/h with surface pressure of
230psi, further states the press release.
This is the fourteenth discovery made in
Algeria since the start of the current year,
7 of which have been made by Sonatrach
alone and the 7 others in association with
its partners.
Two discoveries in Berkine
The national hydrocarbons company
Sonatrach has announced that, on its
own, it has made two new discoveries of
oil in the Berkine basin (oriental erg),
bringing the total number of discoveries
since the start of the year to 17, i.e. a
national record for a period of less than 1
year. The first was made in the Menzel
Ledjmat (block 405a) acreage, and the
second in the Rhourde Louh Sif Fatima
(block 402b) acreage, stated Sonatrach
in a press release. The output from the
first, with a depth of 4,874 m, has been
3
evaluated as 11.20 m /h of gas. As for the
output from the second drilling, with a
depth of 3,312 m, this has been evaluated
3
3
at 21.27 m /h of oil and 3,549 m /h of
gas. These two new discoveries bring the
total number of discoveries made this
year to 17, i.e. a brand new record in
Algeria, we note. Out of these discoveries, 9 have been made by Sonatrach
alone and 8 in association with its
partners.
performances
Hydrocarbons' prospecting developing
programme in the north of the country
Oil upstream
The Minister of Energy and Mines, Mr Chakib Khelil, has announced
that a hydrocarbons' prospecting and exploration development
programme in seven wilayas of the north of the country has been
decreed for the period 2006-2010.
A
To a question on Sonatrach
abandoning prospecting in
the Sour El Ghozlane
(Bouira) region, Mr Khelil
indicated that the plan, which is part of
the government's complementary programme for the development of the
Hauts Plateaux, encompasses the
wilayas of El Bayadh, Laghouat, Tiaret,
Djelfa, Saïda, Khenchela and Tébessa.
In this framework, he added, the national company Sonatrach will, both alone
and in partnership, carry out a seismological survey and the drilling of
16 deposits in these regions in the same
period, confirming that there is another
programme within the framework of
the regional studies related to the
drilling of 47 shallow-depth wells.
However, he stated, this programme
does not concern the region of Dirah
(Sour El Ghozlane). Sonatrach had
carried out, alone then in partnership
with the British company British
Petroleum, a seismological survey, but
had to abandon this because, according
to the Minister, the results obtained
were not encouraging. The Minister
has not however excluded the possibility of resuming the prospecting and
exploration activities in this region after
examining the results and data recorded within the framework of the 20062010 programme.
He furthermore emphasised that the
Agence nationale de valorisation des
ressources en hydrocarbures (oil) will,
before the end of the year, launch an
international appeal for tenders for the
prospecting of oil regions with the possibility of choosing acreages in the
wilaya of Bouira. Mr Khelil indicated
that Sonatrach operates the majority of
its oil fields, with the exception of three
deposits as they are not profitable, in
accordance with the hydrocarbons law
which forces Sonatrach to select what
Inauguration
of a
Sonatrach
office in
Niger
deposits to operate. Mr Khelil said, in
response to a question on the pricing of
electricity in the South, that the State
has taken measures to reduce the electricity bill for all citizens and support
the financial activities. In this respect,
he pointed out that the government is
currently carrying out a study to make
a list of citizens who need the State's
aid, which will enable it to reduce “the
electricity bill for a limited number of
beneficiaries”.
The opening ceremony of a Sipex
Niger Branch office took place in the
presence of the senior Niger authorities, led by Mr Mohamed Abdulahi,
Minister of Mines and Energy of the
Republic of Niger, accompanied by his
last two predecessors and representatives of the Ministries of Defence, the
Interior, Foreign Affairs, Trade,
Finance and the Prefect/governor of
the city of Niamey.
The Algerian delegation was represented by the managing director of hydrocarbons from the Ministry of Energy
and Mine, the executive director of
overseas activities from the Sonatrach
Group and His Excellency the
Ambassador of Algeria to Niger and
members of the Sonatrach delegation.
During this opening ceremony, both
respective delegations made the official inauguration and visited the Sipex
Niger Branch office, followed by a
snack offered in their honour in the
office of the managing director of
Sipex and the handing over of gifts as
a sign of friendship and recognition to
the Minister of Mines and Energy of
the Republic of Niger and to his two
predecessors.
Energie & Mines
9
November 2006
PERFORMANCES
performances
Sonatrach has initiated the first
stage of the Gassi Touil project
O
One of a kind
The oil company has signed, along with its partners Repsol and Gas Natural,
the agreement on the creation of a liquefaction company.
■ The project, of a value ranging between 2 to 3 billion dollars, will enable the factory
to be handed over in November 2009.
■
ne of the most important
stages in the accomplishment of the integrated Hassi
Touil project, the establishment of the gas liquefaction company
in Arzew, has just seen the signature of
documents related to its creation. In
fact, this large scale project that is "one
of a kind”, as described by the Minister
of Energy and Mines, Mr Chakib
Khelil, who co-presided over the
signing ceremony which took place in
the head office of the oil company
Sonatrach, in Hydra, also includes the
Upstream, Downstream, Liquefaction
and even Marketing branches.
It is, however, the partners and no less
associates of Sonatrach, the Spanish
companies Repsol YPF and Gas
Natural, who will build 80% of the new
factory, whereas Sonatrach will cover
the remaining 20%. The new company
will be entrusted with ensuring the
monitoring of the construction, in the
Arzew industrial zone, ex-GNL3 site,
of a LNG factory comprised of a string
of drill pipes in partnership, with a 2nd
string of drill pipes, as an option, for
the liquefaction of natural gas coming
from the Gassi Touil and Rhourde
Ennous fields.
With a completion timeframe of 54
months and nominal capacity of 4
million tonnes per annum, this factory
will use tried and tested technology
processes, particularly the thermo-chemical process with extractions of LPG,
ethane and enriched gas and helium for
recycling. The commissioning of this
new structure has a fixed completion
amount that varies between 2 and
3 billion dollars, according to the
Chairmen of Repsol YPF and Gas
Natural, respectively Mr Bruffau
Antonio and Salvador Gabarro, present
during the signing ceremony. It will be
Energie & Mines
10
November 2006
handed over in October 2009 and will
be commissioned from the start of the
month of November. Highly satisfied
with the conclusion of the agreement,
Sonatrach's Chairman, Mr Mohamed
Meziane, stated that this was part of “a
dynamic of boosting, as much as possible, the value of our hydrocarbon
resources, whose increase in liquefaction capacities, the doubling of the refining capacities, the large petrochemical
projects are, with the enlargement of
our base of reserves and our presence
abroad, an essential strategic focus".
For their part, the directors of the two
Information on Gassi
Touil
As a reminder, the integrated Gassi Touil
project was awarded to the Spanish
consortium comprised of Repsol YPF
and Gas Natural further to the public
opening of the tenders on 17 November
2004. With a duration of 30 years and a
development period of 54 months, the
contract signed between the two groups
includes, in addition to the construction
of the liquefaction factory, the drilling of
52 development wells, the renovation of
the 15 existing wells, the construction of
surface facilities for the processing
(extraction of condensate and LPG,
decarbonisation), of 22 million cubic
metres a day of raw gas as well as the
construction of transport capacities of
around 6.5 million cubic metres a year
of natural gas. It is also planned that the
three partners will also be responsible
for the marketing of these quantities of
gas; additional quantities which are part
of Sonatrach's objective to finally export
some 85 million cubic metres a year of
NG and LNG by 2010, whereas currently this figure is some 65 million cubic
metres annually. The construction of the
liquefaction factory there presents the
first milestone in the sealing of the ambitious integrated Gassi Touil project.
Spanish companies made praiseworthy
speeches on their partnership with
Sonatrach. Whilst the chairman of
Repsol YPF focussed on the considerable financial and strategic aspect, the
chairman of Gas Natural was more
political, particularly making reference
to the fact that this agreement “enables
us to reinforce and improve even more
the excellent relations which have
always characterised the collaboration
of Repsol YPF and Gas Natural with
the Algerian government and with
Sonatrach”; a collaboration which will,
among other things, enable the consortium, according to Mr Gabarro, to have
in the long term a large percentage of
clean gas “with which we will improve
the coverage in upwards scenarios, and
will increase the guarantees to provide
a flexible and efficient gas supply to our
large customer base".
Hence, the integrated Gassi Touil project, as well as the project concerning
the hydrocarbons exploration block in
the zone of Gassi Chergui West, both
with Repsol YPF, assume, for these
Spanish companies “direct access, for
the first time, to the natural gas reserves to cover the increasing demand of
the energy markets where we operate",
also stated Mr Gabarro who indicated,
finally, that, a posteriori, the construction of the Maghreb-Europe gas pipeline, also driven by his group of shareholders, and the permit allocations for
Gassi Chergui and more particularly
the integrated Gassi Touil project "reinforce our relations of cooperation and
friendship with the Algerian government".
performances
“We have the capacities to export
2 million barrels / day by 2010”
Chakib Khelil :
Mr Chakib Khelil, Minister of Energy and Mines, stated in
Biskra that "given the oil deposits currently being refurbished, we will be able to ensure the exporting objective of 2
million barrels/day of crude oil by 2010".
Mr Khelil made a working visit to the wilaya of Biskra where
he particularly placed down the first stone of the pumping
station in the region of Selka (Biskra).
On this site, he emphasised that "this infrastructure of the
national company Sonatrach will enable it to achieve this
level of production (2 millions b/d) and reinforce the transportation to the Skikda refinery of 5 million tonnes of gas a year
in view of exporting it to Italy". The Minister of Energy and
Mines also revealed the extension and renovation of five
Haoud El Hamra stations, in Hassi Messaoud, wilaya of
Ouargla, passing through the station of Djamaâ, wilaya of El
Oued, Selka in the wilaya of Biskra and Barika, wilaya of
Batna, up to Skikda.
Mr Khelil started his visit in the wilaya of Biskra by given the
“starting signal” to the natural gas supply of 3,698 households in the centre of the commune of Tolga.
Chakib Khelil inaugurates
the SP2 pumping station in Laghouat
The Minister of Energy and Mines, Mr
Chakib Khelil commissioned the SP2
pumping station located 25km to the
north-west of the city of Laghouat
which should increase the LPG
transportation capacity of the IZI oil
pipeline from 6 to 9MTA.
The works, which are of major importance in the LPG chain, support the new
national strategy for marketing hydrocarbons aiming to achieve the objective
of increasing LPG exports to 3 million
tonnes a year. This equipment, with an
output of over 1,010m3/h, has been
realised by the subsidiary of the
Sonatrach Group “Eterki, Batijic,
Batiko” within a period of 30 months
with a cost of over 1.5 million dinars,
whilst taking account of protecting the
environment. The station "is the first
plant in Algeria which releases no pollution and recovers the oils and over polluted products”, stated the Minister,
adding that the entire station is fitted
with a remote surveillance system that
can determine all anomalies.
Taking advantage of this inauguration,
the Minister, accompanied by the
Chairman of Sonatrach and executives
from the energy sector, inquired about
the operating of the station using multimedia support before looking at the
pumping stages with his own eyes. It
should be noted that this project has
enabled the creation of 350 jobs.
Seven petrochemical projects launched
Public opening of the technical tenders of seven petrochemical projects
The days of 16, 17 and 18 April 2006 saw the holding of two sessions, in parallel, to open the technical tenders of seven petrochemical projects falling under the Downstream Activity. These relate to the following projects :
1. Ethane steam cracking plant project
2. Methanol production plant project
3. Fuel oil and linear alkyl benzene recycling plant in Skikda
4. Crude oil refinery project in Tiaret
4. Naphtha steam cracking project in Skikda (Skikda olefins)
6. Purified terephthalic acid and terephthalic polyethylene plant project (PTA/PET) in Skikda
7. Propane and polypropylene dehydrogenation project in Arzew.
The tender opening commissions (COP1 and COP2 Downstream), after evaluating the conformity of the tenders presented, deemed
the technical tenders proposed by the tenderers admissible in accordance with the regulations in force. These tenders relate to:
1. The ethane steam cracking plant project - tenders proposed by Basell Plyolifine GMBH (in consortium with Zamil, Shaw-Stone
and Webster), Itochu Sabic, Total Petrochimicals, LG Petrochemicals, Exxon Mobil.
2. The methanol production plant project - tenders proposed by Basf, Sabic, Man Ferrostaal and the Consortiums lot and Vitol, Zamil
Group and Sojitz, Almet SPA/QPIC/Sotraco/Mitsui/Lurgi/PPSI.
The opening of the technical tenders for the Tiaret new crude oil refinery project has been the subject of a four-week report. The
appeal for tenders report on the purified terephthalic acid and terephthalic polyethylene plant project (PTA/PET) was declared
unfruitful. The report for the technical tenders' opening days, which tool place from 16 to 18 April 2006, is summarised as follows:
• Ethane steam cracking project : 6 tenders received
• Methanol project: 6 tenders received
• Fuel oil recycling project (with LAB) : 2 tenders received
• Naphtha steam cracking project : 2 tenders received
• PTA/PET project : no tenders received
• New refinery project : opening of tenders postponed
Energie & Mines
11
November 2006
PERFORMANCES
performances
Chakib Khelil visits the Skikda
industrial zone
The Minister of
Energy and Mines,
Mr Chakib Khelil,
made an inspection
visit to several projects that have been
completed or are still
underway in the
Skikda industrial zone.
The first stage of this visit was the project to construct a condensate plant with
a capacity of 5 million tonnes and an
investment of 28.06 billion dinars,
19.55 billion of which in foreign currencies. The first stone of this infrastructure built over a 45ha site was put in place
in August 2005 by the President of the
Republic, Mr Abdelaziz Bouteflika,
during his visit to the wilaya.
Carried out by the Chinese company,
the works started in December 2005
and were completed in July 2008.
Mr Khelil also inspected the project to
construct a condensate storage plant
3
with a capacity of 300,000 m of naph3
tha and 9,000 m of natural gas.
Another project inspected was the seawater desalination station which, once
3
commissioned, will provide 10,000 m
of drinking water daily to the population
3
of the wilaya, 75,000 m of which to the
3
city of Skikda and 25,000 m to the
industrial zone. Of a total cost of over
100 million dollars, this project will enable the creation of 500 permanent jobs.
Upon his arrival at the Polymed plant,
which annually produces 130,000 tonnes of high density polythene and
employs 161 workers, the Minister was
given explanations on the production
process which started in May 2005
thanks to an investment of 268.7 million
dollars. This plant is faced with difficulties, particularly financial ones, he was
told on the site.
In the crowd, Mr Khelil inspected the
helium gas plant and the electric station
which are in operating phase. The commissioning of the helium gas plant started on 25 May 2006, with a capacity of
Energie & Mines
12
November 2006
600 million cubic feet of helium gas, as
well as 40 tonnes/day of nitrogen gas
and 100 tonnes of liquid gas.
This plant was constructed as part of the
Algerian-German partnership with 51 %
owned by the foreign partner and 49 %
owned by Algeria (Sonatrach). The
Minister was also given explanations on
the management of this plant.
In the electric power plant, Mr Khelil
was given an overview of this plant's
operating process, aiming to reinforce
the electric network at the national level,
whose production capacity is estimated
at 825 megawatts and whose actual
commissioning date was 17 July 2006
On the other hand, the Minister, when
in the industrial zone, inquired about the
status of the natural gas liquefaction
plant and inspected the plant of the
national
petrochemical
company
(ENIP) before going to the commune of
Felfla, where he inaugurated the educational block of the Institut algérien du
pétrole (IAP - Algerian Oil Institute)
and placed down the first stone of its
administrative building and student
area.
The Minister also inquired about different equipment in oil technique resouces
made available to the IAP students
which, from 1981 to the end of July, has
had 567 graduates. “Several projects
which are currently being studied will be
announced before the end of the current
year”, confirmed Mr Khelil in a short
statement to the press, at the end of his
visit, specifying that “the realisation of
the other five projects, in the industrial
zone, is being done in accordance with
the programme outlined” and will be
“ready in 2007-2008”.
performances
Satellites - an invaluable tool for surveillance,
research and exploration
Sonatrach and the Algerian Space Agency
sign a cooperation agreement
A master cooperation agreement in terms of using and applying
spatial technologies in the oil and gas activity has been signed in
Algiers between the national hydrocarbons company Sonatrach
and the Algerian Space Agency (Asal).
This agreement, signed by the Chairman of Sonatrach, Mr
Mohamed Meziane, and the managing director of the Asal, Mr
Azzedine Oussedik, must enable the national company to use
spatial technologies in the surveillance of its facilities as well as
for its oil exploration projects.
The agreement covers several domains, particularly oil research
and exploration, the cartography of the facilities, the preservation
of the environment as well as the training of the
people in these jobs. "With regards the geographic cartography,
we particularly need satellite images for our exploration works in
Algeria and abroad”, said Mr Meziane, adding that the needs
also related to “the high resolution data for processing and interpreting seismic data”.
Congratulating the progress made by Algeria in the domain of
spatial technologies, Sonatrach's chairman emphasised that his
company will endeavour to “carefully use these technologies to
increase the level of Sonatrach's performances”. Asal manages
the Algerian satellite Alsat 1 whilst awaiting Alsat 2 and Alsat 3.
For his part, Mr Oussedik was delighted with the technical support and equipment provided by Sonatrach to the agency since
its creation, which has enabled the Asal to draw up “with
discernment and optimism” an "ambitious and scientifically coherent” 15-year draft programme (2006-2020).
Designed with the users, particularly the Energy and Mines
sector, this draft programme, which will shortly be examined by
the Government Council, combines financial objectives and
environment concerns, he added.
New contract between
Sonatrach and Trapsa
Transportation of liquid hydrocarbons between
Algeria and Tunisia
Sonatrach and the Tunisian company
Trapsa have signed a new contract, in
Tunis, related to the transportation,
from the Algerian-Tunisian border, of
Algerian crude mainly coming from the
Illizi basin (Zarzaitine) to the port of
Skhira, in Tunisia. The contract in
question is concluded for a one year
period and will take effect as of 1
January 2007. It will be tacitly and
annually renewed, unless one of the
parties demonstrates in writing, two
months at least before its expiry date,
its intention to end the contract or
modify it with a rider. Within the framework of this contract, Trapsa will
cover, on Sonatrach's behalf, all operations related to the use of its pipeline,
namely :
• The transportation of crude oil from
the intake point to the maritime terminal of Skhira;
• Its storage before loading onto tankers;
• The pumping operations required for
its loading on the tankers;
• The drawing up of the tankers' loading documents;
It should be reminded that the first
Algerian crude oil transportation
contract was concluded between
Sonatrach and Trapsa on 15 December
1991.
Energie & Mines
13
November 2006
PERFORMANCES
performances
Sonatrach and Shell will shortly
start the works
Aerial survey campaign in Timimoun and Reggane
The company Shell Algeria
Reggane and Shell Algeria
Zerafa will, in association
with Sonatrach, shortly
start the works on the
Zerafa blocks (Timimoun)
and Djebel Hirane
(Reggane) in the Algerian
South, indicated the national hydrocarbons company
in a press release.
These works consist, stated Sonatrach,
of an aerial survey campaign for measuring the magnetic and gravimetric fields
from the El Goléa airport.
At the end of these works, the AngloDutch company Shell will have surveyed
some 70,000 km over the Zerafa block
and 35,000 km over the Djebel Hirane
block.
Shell also plans to acquire, this year,
two-dimensional seismic data on
1,430km over the Zerafa block, added
the press release, specifying that the
drilling works are planned for the year
2007.
These two blocks were awarded to Shell
for an amount of 61.6 million dollars, at
the end of the 6th appeal for tenders in
April 2005 after stiff competition with
world oil competitors which coveted
these acreages on which discoveries are
made.
According to Sonatrach, "this project
marks the start of an important exploration programme in partnership between
Sonatrach and Shell which hope to
work together to highlight and increase
the value of new hydrocarbon reserves
in Algeria".
Other than these two blocks, Shell is
also on course for the integrated GTL
(Gas to liquid - conversion of gas into
liquid for the production of clean fuel)
project in Tinerhert (far south) whose
investment cost is estimated at more
than 3 billion dollars.
The two companies are also bound by a
memorandum of understanding on the
cooperation in the domains, particularly
the oil and gas exploration and production, training in the upstream and
downstream (petrochemistry, refining,
etc.), the transportation of hydrocarbons and the marketing of liquefied
natural gas (LNG).
Tassili Airlines takes off
The company Bombardier will supply the company with 4, 70 seat planes
Tassili Airlines, a subsidiary of the Sonatrach Group,
and the Canadian manufacturer Bombardier signed,
in Algiers, in the presence of Mr Chakib Khelil,
Minister of Energy and Mines, and Mr Meziane,
Chairman and CEO of Sonatrach, a contract for the
supply of 4 Q 400-type, 70 seat planes.
The operation was concluded after an opening session of
the tenders from the international appeal for tenders launched by Tassili Airlines in January 2006. This took place
on 10 June in the presence of Mr Mohamed Meziane,
Chairman and CEO of the Sonatrach Group. The acquisition of these planes is part of the development strategy of
the subsidiary Tassili Airlines providing for a programme
to purchase a diversified fleet of planes. In an initial
phase, this means 70 seat planes which will be handed
over during the third quarter of 2007 and initially assigned
for transporting para-petroleum oil personnel and then,
later on, public transport.
In accordance with the rules and procedures in force
within the Sonatrach Group, the first so-called technical
phase, enabled three potential suppliers to be retained,
fulfilling the technical conditions of the brief, namely
Airbus (France), Bombardier (Canada) and ATR (France).
Energie & Mines
14
November 2006
The opening of the tenders at the end of the second socalled financial phase was organised at Sonatrach's' head
office in Algiers.
The company Bombardier was therefore selected to deliver the four planes. Whilst awaiting their receipt, the
Canadian manufacturer has committed to make available
equivalent capacities to the company Tassili Airlines in
very short timeframes.
performances
An economic situation favourable
to mining investment
The constraints linked to the investment examined by a workshop
brought together by the MEM
The workshop devoted
to examining the
constraints linked to
the investment in the
mines sector in
Algeria has seen a
large participation of
representatives from
the mining authority
and mining operators
from the public and
private sector, (nationals and foreigners).
The participants were keen to point out
the current economic situation that is
favourable for the investment in the
mining sector in the world. This favourable period, marked by the increase in
the prices of metal, must be profitable
to the Algerian mining sector to develop its mining potential and increase
the investment, particularly in mining
exploration. The debate on the subject
revealed a number of constraints including :
1. Slowness in the administrative procedures and particularly those related
to :
• the payment of foreign currencies for
purchasing equipment, services, etc.
• the granting of mining permits,
• the issuing of consumption authorisations upon receipt of explosive substances.
2. Insufficiency of qualified human
resources in the director and executive
category of mining jobs.
3. Constraints linked to the bank financing system and to access to credit.
4. Direct access to mining exploration,
particularly for young companies.
5. Access to the geological documentation particularly for the sites put up for
tender.
6. Lack of information on the business
climate in Algeria for the foreign inves-
tors and persistence in the false image
of the country's situation, particularly
in terms of safety.
7. Lack of knowledge of the mining
legislation by the decentralised administrative structures (tax services, environment, forests, agriculture, etc.)
8. Constraints linked to the usage
requirement upon receipt of explosive
substances which have negative environmental and financial effects, particularly for the large operations.
9. Overlapping of mining control prerogatives between the DMI engineers
and the mining authority.
10. The populations' growing opposition to the mining activity which deserves being looked into.
11. The addition costs of inputs (diesel
and explosives) for the plants located in
the south of the country.
Recommendations were also formulated by the participants, including :
• Organisation of study days on the
subject of the constraints linked to the
mining investment with all the players
and parties concerned.
• Assistance to mining investors, by
the mining authority, from other
authorities.
• Development of training courses in
mining jobs.
• Opening the direct access to mining
exploration particularly for the substances other than the industrial substances by encouraging young exploration companies.
• Updating of the regulation on the use
of explosive substances, particularly for
the large mining operations.
• Encouragement of certain areas of
the mining activity such as the one
designed for the production of marble
and decorative stone.
• Establishment of a system for sharing
the costs of the inputs for the mines
located in remote areas, particularly
those in the south of the country.
• Bringing closer together the ANPM
departments of the mining operators
through receiving applications for
mining permits at the regional branch
level.
Energie & Mines
15
November 2006
PERFORMANCES
performances
Mines : an immense deposit
of opportunities
Reports and prospects for mining activities
Due to the persistent constraints in the domain of importing specialised
equipment, qualified personnel and bureaucratic slowness, it is not yet
possible to give the Algerian mining sector its full capacities.
I
t is from this finding that the
experts set about trying to find
the best options to overcome
these obstacles during a day
devoted to the development prospects
of the mining and quarry sector in
Algeria. This initial meeting, which was
held in the hotel El Aurassi, brought
together operators from various backgrounds and with private individual
statuses, as well as foreign partners,
such as the Australian GMA, the
Egyptian Orascom and the Indian steel
company Mittal Steel, which enabled
them to become fully aware of the
constraints encountered by the investors.
The Minister of Energy and Mines,
who attended this meeting, will call
upon these operators to group together
into a professional association to
“contribute to developing the sector”,
as happens in most parts of the world.
Indeed, for Mr Chakib Khelil, the
mines sector is a particular sector, with
its specific investment and mineral
resources' exploitation rules “which
are, by definition, non renewable and
aggressive for the immediate environment”. For this reason, in his opinion,
all mining operations have a limited life
cycle, regardless of extraction techniques and methods used.
At the end of the 1990s, this life cycle
meant that Algeria, who has always
been considered as a mining country,
suffered a chronic deficit of main
mining operations, anarchic operating
of mines and quarries in the absence of
a reliable mining register and inadequate regulation, as well as a lack of
specialised labour and the lack of
investments in this sector.
The situation has greatly changed
Energie & Mines
16
November 2006
since, and the Minister pointed out that
the improvement that has taken place
in the mine and quarry sector is not of
a short term nature due to the increase
in the price of metals, “it is rather the
direct consequence of a new concept
whose key words are transparency and
competition”. This concept has rightly
entailed the putting in place of a new
legislative and regulatory framework
put in place in 2001 - the date on
which the mining law was promulgated.
Furthermore, the mining development
and exploration activity has resumed
with the participation of foreign partners.
Currently, five projects of this type are
underway, in association with foreign
partners, confirmed Mr Chakib Khelil
Seventeen mining companies
created in El Oued
Mines, a booming sector
Since the promulgation of the law on mines in
2001, which approves the opening of this sector to private investments, 17 mining companies and 13 other mining exploration companies have been created in the wilaya of El
Oued, indicated the Direction de l'industrie et
des mines (DIM). This authority issued 17
mine operating permits in 2005 throughout
the wilaya, indicate its managers.
These permits have concerned the mining of
11 salt deposits, located in several sites in the
communes of El Meghaier and Oum Tiour, 4
sand mines in the communes of Stil, Djamaâ
and Hamraya and 2 permits for clay and gypsum in the communes of Sidi Amrane and
Oued El Alenda. Furthermore, the same
departments of the DIM granted, in the year
2005, 13 mining exploration permits throughout the wilaya.
In 2005, according to the same source, over
72,000 tonnes of salt and over 20 tonnes of
clay, some 73,000m3 of sand and 200,000m3
of gypsum were produced, according to the
reports of the operators in this domain. It
should be noted that the wilaya of El Oued
has a large mining variety, particularly salt
which, in addition, presents the particularity of
being renewable, located in the two large
Chotts de Marouane and Melghigh, located in
the north of the wilaya, sand for the construction and gypsum as well as clay.
The DIM managers emphasise that “the whip
lash” provided by the law of 2001 to this sector in the wilaya has particularly enabled the
wilaya to become self-sufficient in certain products and master the production process, in
accordance with international standards.
Hence, the production of salt in El Oued can
reach over 1.5 million tonnes, which is sufficient to cover the domestic market's requirements for nutrient salt and industrial salt and
produce a surplus for exporting.
The same applies for the other products
whose local production can also cover the
construction and public works' requirements.
This can all create positive impacts on the
local economy and create jobs, add the same
sources.
performances
who pointed out that the development of
the Ghara Djebilet iron deposit "was
started up in the framework of a recent
call for expressions of interest".
And, for the first time in Algeria, it is a
question of carrying out a geophysical
aerial survey which will be financed by a
mining company within the framework
of its mining exploration activities,
announced Mr Khelil, emphasising here
that this all demonstrates an economic
recovery in the sector. “It is also an indicator of confidence from foreign investors in the system and instruments put
in place”.
Mr Khelil also talked about the chapter
of the creation of two agencies to regulate and promote the sector's activities,
specifying that these agencies have
developed modern instruments to
manage and control our resources;
agencies which have been able to develop, to date, a geological and mining
database, a reliable mining register and
managed, in a modern way, the control
and monitoring instruments in the environmental domain and in the domain of
a rational use of the resources.
Hence, there are plenty of new opportunities offered to this sector, although
still far behind the energy sector; a sector which must therefore "be shaken up”
- hence the usefulness of this day
through which the Minister also called
upon the foreign investors to come “as
long as they act in compliance with the
regulations and within the framework of
transparency and competition”, he finally stated.
We should finally point out that the sector, whose investment is deemed highly
capitalistic, is nevertheless highly performing; we only have to look at the
current boom in the prices of metals and
raw materials, such as gold, copper,
iron, lead, etc. on the international markets to realise this.
The Minister calls
for the mining
professionals to group
together in an
association
The Minister of Energy and Mines, Mr Chakib Khelil, has
called upon the operators working in the mine and quarry sector to organise themselves into a professional
association to contribute to developing this sector
which has experienced a “significant economic recovery” thanks to the law of July 2001 on mines.
"I ask all operators working in the mine and quarry sector, regardless of
their status, to organise themselves, just like similar institutions known in
the world, into professional associations in view of providing the contribution to the development of this sector”, said the Minister during the works
of a day on the situation of the sector in 2005 and its outlooks.
Mr Khelil reminded the operators of the efforts made by his department to
boost this specific sector through its specific rules on investing in and
using mining resources which are non renewable and aggressive for the
immediate environment. He also reminded them of the “difficult situation”
this sector is in, characterised particularly by a “chronic deficit of the main
mining operations, anarchic operating of mines and quarries, non-specialised and ageing labour, as well as the cease in investment”.
Mentioning the positive impact of the mining law of 2001, which provided
for the opening up of this sector to national and foreign private investment, Mr Khelil confirmed that “this opening up has enabled the sector to
report some 2.5 billion dinars to the State within the framework of awarding of mining permits, to create 17,000 jobs by the private sector, the
investment of 50 million dollars by foreign partners and the creation of the
Al Abed Ecole des mines for training in mining jobs”. He also mentioned
a boost in the development of the Ghar Djbilet iron deposit (Béchar) and
a pick in mining and exploration with 5 projects underway with foreign
partners.
"This shows an economic recovery of the sector and is also an indicator
of confidence from foreign investors in the system and instruments put in
place", confirmed the Minister who announced that the sector was currently "on the right track" and that new opportunities for its development
were being put in place. In this respect, he added that "foreign investors
are welcome in the mining sector, as long as they act in compliance with
the regulations and within the framework of transparency and competition
which we have put in place”.
Nevertheless, the Minister regretted the persistence, in spite of the efforts
made, of "exogenous or endogenous constraints which are proving to be
barriers to more investment in this sector", calling upon the participants to
“identify them and debate them to produce useful recommendations”.
Energie & Mines
17
November 2006
PERFORMANCES
performances
An investment
of 1,200 million dinars
Upcoming reopening of the El Abed zinc-lead mine (Tlemcen)
Signature of a master agreement between the Ministry of Energy and Mines
and the mineral and geological resources exploration and operation office
of the province of Henan (China).
■ Sonatrach has a 10% share in the capital of the new company.
■ The modernisation of the école des mines in El Abed is also part of this programme.
■ A production capacity of 1,000 tonnes/day in an initial stage.
■
C
losed since 2002 and
transformed into a school
shortly after this date, the
El Abed zinc-lead mine
will soon see its activity resumed
better than before and its school
become a real training centre for
jobs in mining. Indeed, a master
agreement was signed between the
Ministry of Energy and Mines and
the mineral and geological resources
exploration and operation office
(BEERMG) of the province of
Henan, in the People's Republic of
China.
The signing ceremony was boosted
by the presence of Mr Chakib Khelil,
Minister of Energy and Mines,
accompanied by numerous executives from the sector and Mr Li
Baoquun, the BEERMG representative. Highly profitable, the investments assigned for the mine renovation project are estimated at over
800 million dinars, whereas the cost
of the geological exploration programme, which will be carried out
over three years, amounts to 400
million dinars, which gives a total
investment of 1,200 million dinars
within the framework of this operation. This project also provides for
the Sonatrach Group to have a 10%
share in the capital of the new company of Algerian law. The Minister
and the BEERMG representative,
after emphasising the project's
strong contribution to the reinforcement of relations of friendship and
cooperation between the two countries, focussed on the socio-economic importance of the project,
Energie & Mines
18
November 2006
whose first consequences will be
palpable in terms of employment.
The sealing of this operation will
certainly have significant results
particularly in this border region.
That's not all as, according to the
Managing Director of mines in the
Ministry, Mr Bouarroudj, the training, which will be given on site in
the El Abed school, is of major
importance as it will enable knowhow in the domain of mines to be
passed on.
As a reminder, a subsidiary of
BEERMG already has two mining
permits in Béchar, namely the
Boukaïs deposit and the second permit within the framework of
contracts awarded is the manganese
deposit in Guettara.
Beforehand, the visit of several
Chinese delegates in situ and the
specialists, having travelled in this
framework, confirmed the interest
and appreciated the potential and
the possibility of discovering new
resources in the El Abed region.
Now that the legal framework is in
place, the next stage relates to the
creation of the association with
Sonatrach (10%) and the materialisation of the fixed objectives, particularly a production of 1,000 tonnes/day in the second phase.
Finally, it should be noted that the
operating of this mine will overcome
the zinc deficit, by putting new
quantities on the market. The deficit
is mainly due to the closing of the
Chaâbet El Hamra zinc mine in the
wilaya of Sétif.
Domestic gold market
85% of gold sold
without a hallmark
In a domestic market that consumes 12 to 14
tonnes of gold annually, 85% of this important
quantity escapes control. This means that the
black market has never lost ground and that
the points of sale of no less known “dellalat”
are full of customers - often customers looking
for good opportunities, ignoring the “golden”
rule of having a hallmark. Given this state of
play, the national operator of this precious
metal, Enor (Entreprise nationale de traitement and extraction de l'or) finds itself
confronted with the imposed world price and
fluctuations of the black market hence fixing
its rules. The production of this national company, which currently supplies 700kg of gold a
year from the Tirek mine and 3t from
Amesmessa, remains, unfortunately, far from
covering the national demand and, hence, the
market is more focussed on importing, particularly coming from the Middle East - unfortunately illegally. The national production is, furthermore, important in the Arab world with
173.6 tonnes. The mining ensured by Enor
has opened up to partnership thanks to the
mining law of 2001. Hence, a Lebanese company has already invested in the market with
two mines and a second one recently authorised. Furthermore, Enor intends to reinforce its
area of operation.
With regards the Amesmessa mine
(Tamanrasset), the first gold bullion will be
produced in the second quarter of 2007. This
mine, run with the Australian company Gold
Mines of Algeria, has an annual production
capacity of 3.2 tonnes.
Mining exploration
Four foreign companies
enter the lists
Gold, lead and zinc mining
acreages concerned by the appeals
for tenders.
■
Four foreign companies, two of which Chinese, have submitted tenders for the exploration and upgrading of gold, lead
and zinc mining acreages (prospects) at the end of the opening of the international and national tenders. These appeals
for tenders, launched in July by the Office national de recherche géologique et minière (ORGM) and its subsidiary Goldim,
concerned “looking for partners interested in the exploration
and upgrading of mining prospects”. Two of these appeals for
tenders concern three lead-zinc prospects in the Guergour
massif in the wilaya of Sétif including the Boukhdema, Kef
Semmah and Aïn Sedjra deposits and the Isselfen gold prospect in Hoggar (Tamanrasset) which combines the Isselfene
south 1 and 2, Seldrar and Iderekssi deposits. The third
appeal for tenders concerns the copper and gold prospect of
Tifraouine in the wilaya of Aïn Témouchent. For the three lead
and zinc prospects, four companies, namely the Chinese
hydraulic works company Shaolin and China Non Ferrous
Metal, the Moroccan company Managem and the British company Maghreb Minerals have been selected out of the nine
companies which submitted tenders. For the Isselfene gold
prospect, two companies are in competition. These are the
Chinese company Shaolin and the British company Maghreb
Minerals. The copper and gold acreage of Tifraouin has not
received any tenders and has, consequently, been declared
“unfruitful” by the tenders' commission. The opening of the
financial tenders must be done in a month's time.
Speaking at the opening of the ceremony, which took place
in the presence of the secretary general of the Ministry of
Energy and Mines, Mr Fayçal Abbas, the managing director
of the ORGM, M. Semiani, indicated that this operation is the
fourth of its kind launched by his organisation. He reminded
the participants, in this respect, that the ORGM has already
contracted three partnerships with Algerian and foreign companies around the Tiririne gold deposits, with a Lebanese
partner (Zakhem) and In Abegui, with the subsidiary GHR of
the Taures group and the copper-gold deposit of Tan Chaffao
with the subsidiary MTC of Maghreb Minerals. The exploration works of these projects "are already at an advanced
stage” specified Mr Semiani.
performances
Having obtained the necessary
authorisations
Enor starts the first
exporting operation
of Algerian gold
At the end of long administrative formalities, the Entreprise
d'exploitation des mines d'or (Enor) has obtained the authorisation from the Customs authorities to proceed with the
first exporting operation of gold extracted and processed in
Algeria.
Having been faced with difficulties of its production of gold
leaking on the Algerian market, Enor had to turn towards
the foreign markets where it has just placed a quantity of
92kg of this precious metal.
The spectacular increase in the price of gold, which has permanently increased above the threshold of US$500 since
the start of 2006, has reduced demand; on the other hand,
the severe measures taken by the guarantee and tax authorities have ensured that there is a return of the local clientele to the informal market.
The time for the leaking of production has moved to almost
3 months on average, which has a very harmful effect on the
cash flow of the Tirek production plant. The financial risk
has become a reality.
Given this state of play, Enor initiated approaches with the
Bank of Algeria and the Customs authorities to obtain the
authorisation to export and sell gold on the international
market. This is a marketing alternative for Enor, enabling it
to mitigate the financial risk.
These approaches, after many actions, finally ended and
after several months and Enor obtained the authorisation
from the Customs authorities for exporting the gold. The
first operation consisting of exporting 92kg of gold was carried out on 8 September.
Energie & Mines
19
November 2006
Gold in the wake
of oil
CHRONICLE
CHRONICLE
By
Mohamed Sofiane Kasbadji
In the last few weeks,
gold has appeared as
a collateral victim of
the downturn in oil prices. Having fallen to
its lowest levels for
some months, the
price of oil has had an
impact on the gold
price. Last spring, the
ounce reached historic
heights on the London
market, flirting with
715 dollars, which
then represented a
spectacular leap of
200 dollars compared
to its price at the start
of the year.
J
ust like oil, nothing then
On the other hand, a new upsurge
its ascent.
price per ounce. Some experts are,
seemed to be able to stop
Adding to an upwards
speculation movement on all raw
materials prices, demand for gold
in
the
gold
price.
Counting on a reduction in inter-
as China and India.
of gold which might culminate, in
the large emerging countries, such
But, since the start of October,
better forecast a surge in the price
two years' time, in a new record.
gold, in parallel with the price of
These experts in fact consider that
just as considerable reduction, and
holding this metal does not give
oil in strong decline, experienced a
is only worth 567 dollars, i.e. a
reduction of about 25% compared
to its peak at the start of the year.
Now, although with the reduction
of the price of the barrel, the inflationist pressures which threatened
the economies of the large industrialist countries dissipated, gold is
cularly attracts all holders of fixed
income securities, whose value is
eroded by the increased prices and
correlatively by the depreciation in
foreign currencies. In such conditions, a new reduction in the oil
price could draw the gold price
downwards with it.
November 2006
recovery
est rates in the United States, they
against inflationist risks. It parti-
20
for their part, betting on a major
experienced great impetus from
the ideal safe haven investment
Energie & Mines
in the barrel would benefit the
high interest rates penalise gold, as
rise to payment of interest. It is
therefore at a disadvantage compared to coupon-bearing securities.
Benefiting, furthermore, from an
expected increase in demand from
jewellers, the yellow metal could
reach a price of 700 dollars per
ounce in 2007 and 750 dollars in
2008, with peaks of around 850
dollars.
M. S. K.
Signature of the Hadjret
Ennous contractual package
ELECTRICITY
The largest project initiated in the Algerian electric industry
The future plant must be commissioned in 2008 and will cost 826 million American
dollars.
■ It is the consortium SNC Lavalin and the Emirate company Moubadala which will
build it, owning 51% stakes in SKF.
■ 70% of the investment will be financed by the banks BEA and Cnep, without a shareholders' guarantee. This is a first !
■
T
he largest project initiated in
Algeria in the electric industry,
and which should be commissioned in September 2008, was
officially concluded at the end of the
signing ceremony of the first contractual
package, which took place at the head
office of the Ministry of Energy and
Mines in Hydra.
This package, which will concern, therefore, the construction of the Hadjret
Ennous plant, is comprised of almost ten
contracts, ranging from the partnership
agreement between the contracting parties to the insurance contracts, including
the articles of association of the new company created, the SKH, and the construction and operating contracts.
With a total capacity of 1,227MW, the
new plant will cost an investment estimated at 826 million American dollars, whereas the final capital of the new company,
Sharikat Kahraba Hadjret Ennous (SKH
SPA), is 248 million dollars, which represents the equivalent of 30% of the investment. This plant will increase the annual
capacities of the Algerian electric power
plants by over 20%, as stated by
Mr Badaoui, vice president of SNC
Lavalin, who is the co-owner with its
Emirate counterpart Moubadala of 51%
of the shares of this immense project.
The financing of this investment will therefore be ensured for an amount of 248
million American dollars by the shareholders pro rata of their shareholding in the
capital of the company SKH and for an
amount of 578 million dollars by the
Algerian banks, namely, the BEA, the
BNA and the Cnep, on the basis of a norecourse financing, which implies that the
company SKH must, throughout the operating period, ensure revenues capable of
paying its costs and repaying its debt
without having recourse to its shareholders. And it is rightly this requirement
which is the main source of “the complexity of raising the contractual package”, as explained by the Chairman of
Sonelgaz, Mr Noureddine Bouterfa, who
indicated in this context the fact that
whilst the phase related to the selection
for the EPC contract, which was completed on 17 December 2005, by the selection of SNC Lavalin, had not posed
difficulties due to the fact that it put two
candidates in competition with each
other, “the phase which took place last
February, and today's phase, which have
put the investors in contact with the buyer
of the electric power production for
drawing up the contractual package, has
in fact, according to Mr Bouterfa, this
type of project, where the risks matrix is
based on a win-lose situation, “each of
the players do their best to place the risk
with the other player”.
In other words, the State, the energy
buyer, the fuel supplier, the constructor,
the operator, the banks, the insurance
companies, the investors… everyone tries
to place the risk with the other player.
For the Chairman of Sonelgaz, his group's ambition was to get the lowest price
possible by transferring as many risks as
possible to the company SKH. “It is its
responsibility to accept the possibility of
not achieving the rate of return on capital
that is hoped for”, he added, specifying,
however, that, on the other hand, each
Sonelgaz concession may incur an
increase in the price which, inevitably,
would be passed on to the end consumer.
Given this, and after negotiations,
the price excluding fuel obtained was
DZD1,750/kwh. According to the
Chairman of the Sonelgaz Group, this
project is important because it is the first
of its kind to have been concluded on the
simple signature by the Sonelgaz distribution subsidiaries, without the State's
guarantee; subsidiaries which will buy the
production from the new plant.
With regards the Algerian partners, the
teams responsible for the practical implementation of this project are far from
being neophytes, since, according to Mr
Bouterfa, these have already been involved in sealing the Kahrama project a few
years ago, and they also enabled those
working today within the framework of
the BOO and the BOT to have a minimum amount of information and documents sufficiently drawn up to enable
them to initiate and conclude such projects.
The Chairman did not forget to remind
those present, in this context that the
Kahrama seawater desalination project in
Arzew, together with an electric power
plant, “has been one of the most complex
projects to finalise given the crossed risks
induced by the particularity of having two
buyers which sampled two different
products - water by Sonatrach and
electricity by Sonelgaz”; a successful package, certainly, but which required
immense
effort,
according
to
Mr Bouterfa. Finally, the different parties
to the contract, as well as the Minister
of Energy and Mines, Mr Chakib Khelil,
did not fail to congratulate each other on
the conclusion of such an agreement each
hoping for other similar projects in the
future, based particularly on transparency
and innovation in the different stages of
their accomplishment.
Energie & Mines
21
November 2006
PERFORMANCES
performances
52,000 of the capital’s households
will be connected to the city gas
network by the end of 2009
Chakib Khelil answers questions from the deputies
The minister of Energy and Mines, Mr
Chakib Khelil, announced in front of
the members of the Assemblée populaire nationale (APN) that 52,000 households in the wilaya of Algiers will be
connected to the city gas network by
the end of 2009.
To a question on the non-connection of
some districts of Algiers to the city gas
network, particularly Dergana (Bordj
El Kiffan), the Minister emphasised
that the priority has been granted to
this city which will be connected to the
network in this vital way in 2007,
adding that the additional economic
programme 2006-2010 plans the
connection of 4,700 households in the
communes of Rahmania, Mahelma and
Bouchaoui.
To a question on the resumption of the
operating of the Oued Katrini oil field
in Bouira, Mr Khelil indicated that this
field's output, namely, 50m3, i.e. 300
barrels/day "is low", adding that
Sonatrach plans to import equipment
specially designed for the low output
wells in view of improving their production.
"If this approach were to produce good
results, it would be extended to the rest
of the wells”, he said. In the same
context, Mr Khelil announced that the
2006-2010 prospecting and exploration programme will be launched in the
wilayas of Laghouat, Tiaret, Djelfa,
Médéa, El Bayadh and Khenchela.
With regards the construction of a fuel
storage and distribution plant in Oum
El Bouaghi, the Minister indicated that
this project is open to private investment, specifying that the construction
of such an infrastructure depends on
the wilaya's investment capacities.
The wilaya of Oum El Bouaghi, which
is supplied with 70,000m3 of fuel from
the region of El Khroub, has no storage problem, emphasised the Minister,
Energie & Mines
22
November 2006
confirming that his department is ready
to build the infrastructures “if the studies confirm its opportunity”.
On the fringes of this plenary session,
Mr Khelil indicated to journalists that
the hydrocarbons law, currently with
the economic affairs, development,
industry and planning commission, will
enter into force at the start of 2007,
after the signature of the application
texts.
A 7th appeal for tenders for the prospecting and mining of hydrocarbons
will be launched at the start of 2007.
Kanaghaz obtains
the ISO certification
The company Kanaghaz has just successfully undergone the first monitoring
audit of its Quality Management System
according to the requirements of the
standard ISO 9001 version 2000.
This audit is part of the framework of the
company's 2nd Certificate and demonstrates the efforts put into continually
improving the quality of the services it
provides, namely the installation of gas
pipelines.
performances
Increase in the production,
development of exports and
improvement of the new energies
Mr Chakib Khelil in Biskra
The Minister of Energy
and Mines, Mr Chakib
Khelil, on a working visit
to the wilaya of Biskra,
announced that “the
Algerian State has set
itself the objective of
increasing the volume of
hydrocarbons exported,
promoting the petrochemical industries and
improving the new
energies”.
D
uring a working session
held at the centre of the
wilaya of Biskra, Mr Khelil
emphasised that “the
modifications made in the legislation
concerning mines, electricity and
hydrocarbons have enabled national
and foreign private operators to access
certain activities along side the public
sector, hence developing investment
and employment”.
The Minister indicated that there are
currently “four electricity production
plants within which private operators
have become partners”, adding that
“another plant is managed with a
foreign operator”.
With regards the development of the
petrochemical industries, Mr Khelil
indicated that "10 plants are in launch
and completion phase, one of which is
a fertiliser plant". He emphasised that
all the facilities "are given to investors
who can turn their ideas into reality in
the directions of their choice, by encouraging them to quickly construct the oil
product transformation plants".
"The State has put considerable effort
into the domains of prospecting and
production, which has enabled it to
increase production to 900,000 barrels/day currently, and in 2010, it plans
to increase gas production to 85 billion
cubic metres compared to 62 billion
cubic metres currently", stated the
Minister.
"The concern with increasing the production is accompanied by another
priority - to increase the network of
equipment, particularly a new refinery
in Adrar and another one planned in
Tiaret with a capacity of 300,000 barrels/day”, also indicated Mr Khelil.
"In the space of 13 months, 13 new
deposits have been discovered over the
last period, compared with 8 deposits
in 2005”, further stated the Minister
who emphasised “the encouraging
effect induced by these discoveries”.
Mr Khelil reported on an electric power
plant project of 150 megawatts in
Hassi R'mel, wilaya of Laghouat; "one
of the most modern plants, entailing a
most remarkable financial profitability”, emphasised Mr Khelil, indicating
that “this project is planned within the
framework of alternative energies to
oil". He also announced a plant in
Oumache (Biskra) for the production
of hydrocarbon by-products, methanol
alcohol (5,000 tonnes/year), but also
coffee, dates and proteins for cattle
fodder.
Answering questions from the operators present in the working session, the
Minister mentioned the issue of the
supplies of the natural gas pipelines
and the increase in the price of copper
electric cables on the world market. He
also reported on the prospect of creating 9,000 jobs in the energy and electricity sector.
It should be reminded that the Minister
inaugurated the national gas network
of the city of Sidi Okba where 3,998
households are supplied with power.
Energie & Mines
23
November 2006
ELECTRICITY
ELECTRICITY
“Sonelgaz takes over the relief”
Interview with Mr Mustapha Guitouni, Chairman of Sonelgaz
Distribution Algiers
New things are happening at Sonelgaz. The relief work which depended on
subcontractors is today taken over by the company, which just recently initiated an
ambitious training and recruitment programme. It might perhaps be important to point
out that out of the 250 new employees recruited by SD Algiers, 55% are women…
Interview by
A. Fadila
El Moudjahid : Sonelgaz has
set itself the objective of fully
taking over its relief work by
the end of 2007. What is, therefore, the importance of this
operation ?
M. Guitouni : You should be aware
that the relief work is Sonelgaz' base
activity. It is a strategic activity for any
commercial company and we cannot
leave it on the margin of Sonelgaz' restructuring. We can even compare it to
the company's piggy bank and the
favoured channel for the communication and proximity with the customer
base.
What are the missions of relief
workers ?
More than ambassadors of Sonelgaz,
they are a friend and advisor of the
consumers. They give them information and advice on the healthy use
of energy and visually ascertain the
problems with our customers.
You say that this is Sonelgaz'
base activity. Why did you
recruit subcontractors ?
We have been forced to make use of
subcontracting since 1997 and in a
very specific economic situation.
Sonelgaz then had to confront workforce and recruitment problems and
this is what pushed it towards focussing
on subcontracting. But over time, this
option has demonstrated its limitations
with a fortuitous recruitment which
was not based on training and qualification. We have even had wind of certain irresponsible actions by these
Energie & Mines
24
November 2006
employees who devote themselves to
fictitious relief work, provided they are
not moved.
What would be the impact of
taking back responsibility for
this activity on the provision
of services ?
When Sonelgaz itself ensured the relief
work, there were a lot less frauds and
significantly less complaints. The relief
worker is Sonelgaz' eye in the field and
picks up this customer base and restores the image of the company's brand.
In the near future, Sonelgaz will have
to face up to inevitable foreign competition and it is well known that it is
easier to stop an activity than to pick it
back up. This is why we have initiated a
process which grants a lot of importance to the adaptation of the customer
base to our new services. The first
stage is called the mixed relief period
which includes some serious subcontractors with out relief employees,
whilst awaiting for Sonelgaz to fully
occupy the field.
These employees will therefore be given special training...
Sonelgaz' future employees will be
given two types of training. One technical and the other commercial. This
enables Sonelgaz to settle the problems
in situ by avoiding moving subscribers.
This will therefore reduce our losses
and reduce our debt claims whilst
ensuring quick and targeted intervention. This training is part of Sonelgaz'
restructuring and its slogan is re-focussing on the human resource. It aims to
improve the company's performances
through the development of professionalism with which we will be able to
face our competitors. It is done in the
Sonelgaz schools and will soon be
taken on by schools specialised in disciplines such as marketing and others.
The recruitment targets senior technicians and particularly female personnel. Housewives can also feel more at
ease with these young relief girls and
our customs require it.
Sonelgaz is therefore focussing on new services…
Yes, it's no longer the employees who
cut and cash in, but the employees who
advise and guide the customer. This is
the objective of our new vision : to
develop the provision of service. The
cue we give to these young people is
initially to ensure sincere, fair and
regular relief through which we also
intend to make our customers loyal.
How many employees are
trained in Algiers and its surroundings ?
For the SDA which combines the regional divisions of El Harrach, Bologhine,
Birkhadem, Belouizdad and the two
wilayas of Boumerdès and Tipaza, we
will train 250 relief workers, 55% of
whom are women. Currently a wave of
50 employees have completed the training and will very soon starting working at the Belouizdad level. They will
start on 1 July.
The other relief workers are being trained and will be gradually recruited at
the Bologhine and El Harrach level.
Sonelgaz will take over the relief activity again by September 2007.
ELECTRICITY
Chakib Khelil
Sonelgaz, results and outlooks
What is the situation with SD
Algiers debt claims ?
First of all I should remind you that cutting
off power is considered as a last resort in
our relations with bad payers. 70% of the
600 billion centimes of debt claims which
SDA Algiers accumulates are backed by the
public organisations to which we have proposed the annual agreement which enables
the payment of consumptions in advance.
For private individuals, we offer the formulas such as the DCCP which comprises a
payment on the CCP account. Sonelgaz
will thus spare its customers of any travelling. They will not even have to receive a
bill since the payments are taken directly on
the account.
Your departments are also faced
with fraudsters...
This is a penal crime prohibited by law. No
less than 15% of our customers commit
fraud with illegal connections. Up to now,
we have filed no less than 120 complaints
with courts but we remain available to discuss the regularisation of these illegal
connections, particularly in the shanty
towns. The problem is, however, looked
after by our departments who work in close
collaboration with the APC.
Reminder
250 employees trained by SD Algiers.
The first ones will be operational as of
July in Belouizdad.
■
■ The impact caused by opening up refrigerators correspond to lighting one lamp
for one hour.
■ 800,000 electronic meters will be installed by 2009 in the central region.
Fraudsters represent 10% of the customer base of SDA which has filed 120
complaints with the courts for illegal
connections.
■
■ SDA's debt claims amount to 600 billion
centimes, 70% of which are backed by
public organisations.
“Few countries of our category
have achieved our level
of penetration in natural gas”
"Today, the Sonelgaz Group looks
nothing like it did ten years ago". It is in
these terms that the Minister of Energy
and Mines, Mr Chakib Khelil, described
the results announced by the electricity
producer. Making another comment on
the increase in prices claimed by
Sonelgaz, the Minister indicated that this
“is completely legitimate”, based on the
fact that this sector has an activity which
must be financed by those who use its services. Hence, for it, it is the consumers
who have to participate 30% in the financing of the projects, “which is an international norm”.
With regards the need to grant subsidies
on the consumption of electricity for the
inhabitants of the South, the Minister
specified that these subsidies are not
within Sonelgaz' remit, but rather the
State's, "as stipulated by the law on electricity and gas".
Mentioning certain projects in progress,
Mr Khelil pointed out that the interconnection links with Italy and Spain are
being finalised through discussions with
Spanish and Italian groups at the same
time. Furthermore, the Minister dealt
with the problem of energy wastage,
emphasising the necessity to continue
awareness campaigns to enable the State
and citizens alike to make savings.
Indeed, in his opinion, there is no point in
making investments which are not needed
and which are likely to serve little, starting
with the fact that the realisation of
1,000MW of electricity requires an
investment of 500 to 600 million dollars.
With regards natural gas, the Minister
indicated that he was satisfied with the
results obtained to date, stating that “few
countries of our category have achieved
our penetration level in natural gas”.
Sonelgaz
investment perspectives
A total investment of almost 9 billion
American dollars is planned over the
2005-2009 period, announced the
Chairman of the Group, stating, amongst
others, that 5.3 billion dollars will go to
electricity and over 2.2 billion dollars will
be reserved for natural gas. In addition,
the Group's partners should ensure
almost 1.3 billion dollars in participation
on the electric power plant projects.
The Sonelgaz programme for this period
also plans to produce almost 8,000MW of
electricity production means, 1,500MW
of which in replacement. Electricity
transportation will, for its part, see an
additional capacity in transportation and
interconnection lines of around 4,000km
for the very high voltage (60KV) and 113
new electric distribution and interconnection post plants.
The distribution of the electricity, which
will be ensured through medium voltage
networks (10 and 30KV) and low voltage
networks (200 and 380KV) will see a
major development, with more than
69,000km of lines, 30,000 posts and
1,250,000 meters.
With regards natural gas, the realisations
for the transportation and distribution
networks are, respectively, 3,000 and
24,000km, over 300 new public distributions in addition to the 500 already existing. The growth outlooks are counting
on increases of almost 7% for electricity
and 5% for natural gas for the period
2005-2009.
Hence, the production of electricity
should increase from 33,638GWh, in
2005, to 43,000GWh in 2009. The majority of this energy, i.e. 70%, will be ensured either by Sonelgaz, or by social partners (up to 30%). The consumption of
natural gas on the domestic market will
increase from 16.3 billion cubic metres in
2005, to 17 billion cubic metres in 2009.
With regards customer statistics, these
should reach 1,250,000 subscribers for
electricity and 700,000 for natural gas.
This could bring the total number of customers to over 7 million for electricity and
2,800,000 for gas in 2009. The Group's
total workforce, for its part, should reach
60,000 employees, after its reinforcement
through the recruitment of some 10,000
new employees over the next three years.
Energie & Mines
25
November 2006
ELECTRICITY
ELECTRICITY
Sonelgaz is using all its energy
Construction of the Hadjret Ennous plant
The future plant must be commissioned in 2008 and needs an
investment of 826 million American dollars. With Hadjret Ennous,
the sector counts on commissioning eight other electric power plants
by 2009.
T
his largest project initiated in
Algeria in the electric industry, and which should be commissioned in September
2009, namely the construction of the
Hadjret Ennous plant, has been the
subject of a presentation meeting at the
head office of the Ministry of Energy
and Mines.
The Chairman of the Sonelgaz Group,
Mr Noureddine Bouterfa, has in fact
highlighted all the specificities of this
integrated project which consists of the
construction of this combined cycle
plant, with a total capacity of
1,227MW, but also of a large evacuation system for the electricity produced
using the 400KV technique and finally
a gas pipeline intended to supply it with
natural gas.
With a total capacity of 1,227MW, the
new plant will require an investment of
826 million American dollars, whereas
the final capital of the new company,
Sharikat Kahraba Hadjret Ennous
(SKH SPA), is 248 million dollars,
which represents the equivalent of 30 %
of the investment. This plant will
increase the annual capacities of
Algerian electric power plants by over
20%. The financing of this investment
will therefore be ensured for an amount
of 248 million American dollars by the
company's shareholders, namely the
Canadian SNC/Lavalin and the
Emirate Moubadala, which own 51 %
of the capital of this immense project,
and whose investment will be made pro
rata of their shareholding in the capital
of the company SKH, and for an
amount of 578 million dollars by the
Algerian banks, namely, the BEA, the
BNA and the Cnep, on the basis of a
no-recourse financing, which implies
that the company SKH must, throughout the operating period, ensure
revenues capable of paying its costs and
Energie & Mines
26
November 2006
repaying its debt without having
recourse to its shareholders. And it is
rightly this requirement which is the
main source of “the complexity of raising the contractual package”, as
explained by the Chairman of
Sonelgaz, Mr Noureddine Bouterfa,
who indicated in this context the fact
that whilst the phase related to the
selection for the EPC contract, which
was completed on, by the selection of
SNC Lavalin, had not posed difficulties
due to the fact that it put two candidates in competition with each other, “the
phase which took place last February,
and today's phase, which have put the
investors in contact with the buyer of
the electric power production for drawing up the contractual package, has
actually been very difficult and timeconsuming.”
In fact, according to Mr Bouterfa, this
type of project, where the risks matrix
is based on a win-lose situation, “each
of the players do their best to place the
risk with the other player”.
In other words, the State, the energy
buyer, the fuel supplier, the constructor, the operator, the banks, the insurance companies, the investors… everyone tries to place the risk with the
other player.
For the Chairman of Sonelgaz, his
group's ambition was to get the lowest
price possible by transferring as many
risks as possible to the company SKH.
“It is its responsibility to accept the
possibility of not achieving the rate of
return on capital that is hoped for”, he
added, specifying, however, that, on
the other hand, each Sonelgaz concession may incur an increase in the price
which, inevitably, would be passed on
to the end consumer.
Given this, and after negotiations, the
price excluding fuel obtained was
DZD1,750, a price which remains
within the lower price bracket, excluding
fuels, observed on the world market of the
combined cycle plants, as he indicated.
According to the Chairman of the
Sonelgaz Group, this project is important
because it is the first of its kind to have
been concluded on the simple signature by
the Sonelgaz distribution subsidiaries,
without the State's guarantee; subsidiaries
which will buy the production from the
new plant, since SKH can neither sell to
other customers nor export its electricity.
With regards the Algerian partners, the
teams responsible for the practical implementation of this project are far from
being neophytes, since, according to
Mr Bouterfa, these have already been
involved in sealing the Kahrama project a
few years ago, and they also enabled those
working today within the framework of the
BOO and the BOT to have a minimum
amount of information and documents
sufficiently drawn up to enable them to
initiate and conclude such projects.
The Chairman did not forget to remind
those present, in this context, that the
Kahrama seawater desalination project in
Arzew, together with an electric power
plant, “has been one of the most complex
projects to finalise given the crossed risks
induced by the particularity of having two
buyers which sampled two different products - water by Sonatrach and electricity
by Sonelgaz”; a successful package,
obviously, but one that required immense
effort, according to Mr Bouterfa.
Hence, with the power plants which will be
fully commissioned this year (Naâma 160
MW) and Berrouaghia (500 MW), the
plants in Marsat El Hadjadj (80 MW),
Oran (80 MW), Algiers Port (80 MW) and
Annaba (80 MW) which will be commissioned in 2007, and the Hadjret Ennous
plant, the national electric system will be
better consolidated to respond to an
increasing demand, felt Mr Bouterfa who
specified in this context that the peak
demand planned for 2008 (date on which
the plant will be commissioned) will be
7,600MW, whereas it reached 5,921MW
last winter. "However, the Chairman pointed out that other plants are also planned
in 2009, with the commissioning of the
Terga (800MW) and Koudiet Ed Draouch
(800MW) plants. A large scale programme
which requires an investment estimated at
2.8 billion dollars, according to the
Chairman who specifies that, by 2009, all
the prior work for the emergence of a
competitive market will be met.
The Algiers Stock Exchange is emerging
from a long period of lethargy
Sonelgaz listed on the
Algiers Stock Exchange
Sonelgaz' bond has been introduced
on the listing of the Algiers Stock
Exchange. This introduction, which
will be followed by others, is the end
of a considerable amount of work
carried out by the players on the
market within the framework of the
establishment of a financing method
that is alternative to bank loans.
This is what the chairman of the
Cosob, the MDs of the management
company of the Stock Exchange and
of Algérie Clearing and the finance
directors of Sonelgaz and of the
BNA confirmed, respectively Messrs
Sadmi, Rahni, Ismaïl, Choual and
Chougar in a press conference held
in the hotel El Aurassi.
The latter, in fact, have turned to
this method of financing which presents many advantages for companies, banks and private individuals
alike.
The conference speakers, who were
keen to emphasise the importance of
the bond market, which is a large
source of financing that is less
expensive than the traditional financing, revealed that this first listing
session for the Sonelgaz bond was
deemed fruitful since priced at
101.10%, before continuing by
saying that the 1,500 lots of
DZD10,000 issued on the market
have been traded, corresponding to
a
value
compromised
of
DZD15,165,000.
They also recorded 21 purchase and
sale orders. The total amounts
requested for purchase are estimated at 3,197 lots whereas those offered up for sale represent 1,500 lots.
During this press conference,
Sonelgaz' finance director indicated
that the company's bond loan issued
a year ago has been preceded by the
organisation of a citizen awareness
campaign, before adding that this
financing method will enable
Sonelgaz to initiate investment projects that can better respond to the
demand for gas and electric power.
The speaker explained the use of the
bond loan by the importance of the
sector's development programme for
the next few years which will require
no less than 10 billion dinars The
same director said, furthermore,
that the difference between the operating costs and the prices is quite
significant. This is borne by
Sonelgaz – hence the interest, he
insisted, in finding other forms of
financing. To this end, he did not
exclude the launch of other operations.
It should be reminded that Sonelgaz'
bond was transmitted via bank
counters, thus enabling a saving of
almost 120 billion dinars to be saved
over the last three years.
The Sonelgaz representative, in
response to a question on the listing
of the Sonelgaz bond on the Stock
Market and its position on the bond
market, said that his company is a
large industrial investor and will not
leave the Stock Exchange.
It should be noted that Sonelgaz'
introduction on the Algiers Stock
Exchange ends a depressed period,
characterised by a stagnation in subscriptions which lasted almost five
years.
Energie & Mines
27
November 2006
PERFORMANCES
performances
“The drinking water shortage
will be overcome by 2009”
The drinking water shortage will be
overcome by 2009, countrywide,
through the national desalination programme, stated, in Chlef, Mr Chakib
Khelil, Minister of Energy and Mines.
"By 2009, this programme plans the
production of 1,800,000m3 of water"
added the Minister who specified that
“the different production plants, being
built, particularly in the west of the
country, will in the future produce
3
3
1,200,000 m to which 600,000 m will
be added in a second stage".
With regards satisfying the domestic
market's need for electric power, the
Chakib Khelil
Minister of Energy and Mines reminded those present that “important projects are being completed and others
will shortly be launched to totally satisfy the market's needs in terms of electric power”.
“However, he noted, the challenge with
which the domestic market is confronted does not reside in the volume of
production, but in the national electric
power transportation capacities, which
remain below the domestic market's
actual needs”. To overcome this malfunction, Mr Chakib Khelil mentioned
the solution of the interconnection bet-
ween the different production sources
of the domestic network, which will be
undertaken through the upcoming
implementation of the east-west
connection corridor.
With regards the management of electric power, the Minister emphasised the
advantages for the consumers, generated by the reorganisation of the
Sonelgaz company, which finds itself,
thanks to its new “holding company”
status, able to simultaneously ensure
the production, transportation and distribution.
According to the Managing Director of Andi
3 billion dollars of FDI in 2006
"Sixteen large foreign direct investment (FDI) projects representing a value of 612 billion dinars are expected for 2007”,
stated, on the waves of national radio's Channel 3, Mr
Abdelmadjid Baghdadi, managing director of the Agence
nationale de développement des investissements (Andi), who
emphasised that Algeria is attracting more and more international capital in the sector excluding hydrocarbons. The discussions underway have made significant progress, according
to Mr Baghdadi, who feels that the new investment cost is “one
of the most attractive” in the south region of the
Mediterranean. Hence the renewed interest of businessmen
who are starting to become aware, in his opinion, of the financial potentials of Algeria and the profits they might gain from
it. These large investments planned in Algeria, next year, mainly relate, according to the same source, to the strategic sectors
such as industry, tourism, energy, seawater desalination and
fertilisers. In this respect, he did not fail to recall the percentage of these investments in the Cherchell Hadjret Ennouss
electric power plant project. "By the end of 2006, we expect 3
billion dollars of foreign direct investment or in the form of
partnership”, further announced the MD of Andi, saying that
the volume of foreign investment is significantly increasing in
Algeria which recorded 2 billion dollars in 2005. With regards
Arab investments, for which Algeria is starting to become a prized destination, the speaker focussed on the success of the
Egyptian investments (Orascom), Kuwaiti investments
(Watania), Saudi and Emirate investments, as an illustration.
In this framework, he emphasised other sectors excluding
hydrocarbons such as telephony, chemistry, property and
Energie & Mines
28
November 2006
services. We should point out that Algeria has never stopped
adapting its legislation in this matter to respond to the aspirations and complaints of potential investors. "The new investment code provides for new attractive measures in this respect,
particularly customs and banking facilities, access to property
and support before, during and after the investment”, he specified. About ten one-stop service counters are currently open
nationally to receive the investment applications and respond
to the concerns of businessmen, in the place itself chosen to
carry out ones investment project. "The last one-stop service
counter to date was recently opened in the wilaya of Béjaïa”,
he stated, to highlight the new policy to promote investments
in Algeria. There is still a certain constraint to be lifted in this
matter, particularly access to property and certain bureaucratic practices and this is one of the roles of the one-stop service counters which must get more involved in the investment
development process in all circumstances.
We should indicate that in case of problems with these branches, the promoters are authorised, according to the new
investment code, to start recourse before the Minister of
Supervision. This new legislation, which has just be promulgated, makes no difference between a national investor and a
foreign investor at any time in the project, i.e. the creation,
support measures and profiles.
As to the transfer of their profits, they are not subject to any
condition, or limit once the fiscal and social obligations have
been settled. This is why this code is deemed very attractive by
the financial operators.
performances
Algeria is the no. 3 Arab country in terms
of attracting foreign investment flows
According to a study
Algeria is the number
three Arab country in
terms of attracting
foreign investments
which amounted to
34.2 billion dollars in
2005, indicated a
British study whose
results have just been
published.
A
lgeria is ranked behind the
United
Arab
Emirates,
known for their modern
legislation as well as their
openness to foreign investment, and
Egypt, the most populated Arab country and reputed for its financial openness, reveals the study entitled “World
investment prospects to 2010: boom or
backlash" drawn up by Economist
Intelligence Unit from the review
Economist Magazine in collaboration
with the “world investment programme
of the University of Columbia”
The investment flows towards Arab
countries, in 2005, reached 34.2 billion
dollars, indicated the study before predicting a 6.7% increase for the current
financial year to 36.5 billion, i.e. 3% of
world flows or what is equivalent, as a
comparison, to the investments attracted by a single country such as Canada
or Hong Kong.
The study furthermore warns against
the payment at the end of the decade of
the world direct investment flows, likely to reach 1,200 billion dollars in the
current year, emphasising in passing
that this situation would benefit industrialised countries who would see their
share rise to 70% to the detriment of
that of developing countries which is
currently around 35%. Most of these
investment flows since the start of this
year related to acquisition and purchase transactions of which the United
New confidence
from investors
Algeria is in third place in terms of foreign direct investments (FDI) in the
Arab world, according to a study which has just been published in the British
review Economist Magazine.
Algeria comes after the United Arab Emirates and Egypt in the ranking established by this study, which estimates the total amount of investments made
in the Arab world, in 2005, at 34.2 billion dollars, an amount which should
climb to 36.5 billion for 2006. This study confirms the constant improvement
in Algeria's attractiveness in terms of FDI whose projects do not only concern
the hydrocarbons sector, but also affect other activities apart from that of oil.
Investor's confidence in our country is related to numerous factors which, in
particular, are the reinforcement of the stability and the numerous opportunities the market offers in a context marked by a significant improvement in the
country's economic situation. Investor's confidence is explained also by the
improvement of the business climate, further to the implementation of the
reforms in the different domains. Other than the benefits provided by the
investment code in terms of taxation, repatriation of profits, etc. the reforms
initiated by the modernisation of the authorities and the banking system have
had very positive effects in terms of transparency and quality of service. The
adaptation to the international standards and the upgrading process are
being continued, still in view of a successful integration into globalisation.
The five year economic recovery programme, which must entail expenditure
of around 100 billion dollars, represents a significant work load for the financial operators who are also counting on the growth in consumption further to
the creation of numerous jobs and to the improvement of household income.
In addition to the rich potentials available, Algeria's comparative advantages
will be reinforced with the accomplishment of important projects in the
domain of infrastructures (east-west motorway, railway, ports and airports,
dams, etc.). This modernisation effort in terms of infrastructures is also
accompanied by a serious work with regards improving skills and qualifications - another essential asset to take up the challenge of performance and
competitiveness. With the installation of companies from Europe, the United
States and Arab countries in Algeria, the snowball effect is leading to a multiplication in the number of investments.
States is the number one beneficiary
with a large attractiveness of direct
investments (a quarter of the world's
direct investments between 2006 and
2010). As for Europe, it would remain
at the head of the direct investors in the
global markets whereas the developing
countries the most in sight such as
China, Brazil, Mexico and India would
consolidate their positions in this
domain.
Energie & Mines
29
November 2006
PERFORMANCES
performances
A volume of 788 million dollars
as of 30 September 2006
Exports, excluding hydrocarbons
The value of exports, excluding hydrocarbons, was estimated at 78 million
dollars, 70% of which represent semiindustrialised products, on 30
September of the current year, revealed
the Managing Director of the
Association nationale des exportateurs
algériens (Anexal). Mr Mohamed Bey
Nasri, who was speaking on the waves
of national radio's Channel II, feels that
Algerian exports, excluding hydrocarbons, remain very low and do not
reflect the national economic potentials
in spite of a certain improvement in this
performance compared to 2005, and
emphasised that the Algerian State has
imported the equivalent of 500 billion
dollars over the last twenty years, which
has led to, according to him, the fragility of the national policy in the domain
of exports and the absence of a clear
vision able to encourage the private
initiative. The MD of Anexal feels that
it would be judicious to consider a strategy in the sense of promoting and
diversifying exports, excluding hydrocarbons, by starting with the creation
of a Ministry which would be exclusively responsible for foreign trade.
On the basis of the current state of
play, Mr Nasri considers that it would
be utopian to claim a volume of 10
billion dollars of exports, excluding
hydrocarbons, by 2010 such as forecast
by certain parties. On the other hand,
he confirmed that the partnership
agreement with the EU has not given
this expected impetus to foreign trade
and that the national economy remains
dominated by a rigid mentality which
goes against Algeria's economic objectives at the regional and international
level. The Algerian exporters' representative forecasts an increase in the value
of Algerian imports in the next few
years in relation to the increases expected in the price of wheat and milk.
“Over 1,453,000 permanent jobs created
between 2000 and 2005”
Ould Abbès
Over 1,453,000 permanent jobs have been created during
the 2000-2005 period through job creation support schemes, announced, in Algiers, the Minister of Employment
and National Solidarity, Djamel Ould Abbès.
"The three job creation support schemes, such as the general interest activities (IAIG), the local interest seasonal jobs
(Esil) and the high intensity labour public utility works
(Tup Himo) have enabled the creation of 1,453,593 permanent jobs in the period 2000-2005", stated Ould Abbès,
during a workshop presenting the results of the study into
household life and measuring poverty. The Minister added
that these three schemes have "mobilised over 66.6 billion
dinars over the same period”. On the pre-employment
contract (CPE), Mr Ould Abbès indicated that this scheme
has undergone a growing evolution in the number of jobs
created, increasing from 8,917 jobs in 2000, to 48,718
jobs in 2005. He also emphasised that the activities financed within the framework of the micro-company have permitted the creation of 145,714 jobs during the period
2000-2005.
Mentioning, furthermore, the importance of the survey
into the standard of living of households and the poverty
measurement, the Minister indicated that this is part of the
framework of the National Conference to fight against
Energie & Mines
30
November 2006
poverty, organised in October 2000. In the same context,
Mr Ould Abbès reminded people of the content of the
millennium declaration, adopted during the extraordinary
session of the Millennium Summit, on the large actions
which humanity must undertake, by reducing, inter alia,
poverty and famine in the world. The Minister also came
back to the eight millennium development goals, to be
achieved by 2015, particularly the reduction of poverty, the
protection of infants and the environment. For his part, the
Minister of Participations and the Promotion of
Investments, Mr Abdelhamid Temmar, said he was "satisfied" with the results of this survey which he described as a
"key element” for reinforcing the strategies adopted to fight
against poverty.
"I want us to be able to take the results from this survey to
start very quickly to structure our decisions in social matters”, he said.
The resident representative of the UN in Algiers, Mr Marc
Destanne de Bernis proposed, for his part, during the
works of this workshop, the organisation of a meeting,
bringing together all the players concerned to define a criterion specific to Algeria to measure the poverty rates with
the support of the United Nations Development
Programme (UNDP).
performances
Algeria's foreign exchange reserves exceeded
70 billion dollars at the end of August
Finance
Algeria's foreign exchange reserves
amounted to 70.28 billion dollars on
31 August 2006, revealed the president
of the finance and budget commission
on the radio to the APN, Mr Benalia
Boulahouadjeb, citing "official figures
of the Bank of Algeria”.
Boosted by a particularly favourable oil
climate, these reserves have thus
increased by about 4 billion dollars
since the end of May 2006 where they
settled at slightly more than 66 billion
dollars. At the end of 2005, they
amounted to 56.18 billion dollars and
today represent about 3.5 years of
imports, at the current pace. Mr
Boulahouadjeb also noted that the
increase in reserves has meant an
increase in the amount of the Revenue
Regulation Fund (FRR - Fonds de
régulation des recettes) to 2,700 billion
dinars or about 30 billion dollars, compared to 1,923 billion dinars at the end
of last year.
This fund, which holds the surplus oil
revenue, has particularly been used to
pay foreign debt whose early repayments, initiated in May, brought the
volume to less than 6 billion at the start
of the year. Since its creation in 2000
and up to the end of August 2006, the
FRR has been credited by a total
amount of 4,009 billion dinars, according to official data. Over the same
period, the withdrawals made on this
fund for the repayments of the principal of the public foreign debt reached
1,303 billion dinars, i.e. a payment rate
of 32.5%.
The Arab investment bank Gulf
Finance House (GHF) wants “to develop its knowledge of the Algerian market” and explore all the possibilities
offered by the rapid development of the
Algerian economy, indicated a
press release made by this financial
institution.
The company GFH, as an investment
bank, “wants to develop its knowledge
of the Algerian market and explore all
the possibilities offered by the extremely rapid development of its economy” it
writes.
“The financing needs are important
and GFH intends to provide its expertise and its know-how in establishing
structuring projects”, emphasises the
press release.
More generally, the bank expressed a
particular interest in setting up in the
sub-regions of Maghreb and the
Middle East. This interest "is shown by
the 1.4 billion dollar transaction
concluded recently with Morocco related to two mixed-use property projects”, it states. This "marks the start of
active prospecting by the financial insti-
tution – in Algeria, Morocco and
Tunisia – and proves its interest in
developing projects in the region”, further states the press release.
Algeria is “a key component of our
regional expansion strategy (…) in a
region which is experiencing sustained
economic development”, confirmed the
Chairman of the bank, Mr Esa Janahi.
The GFH, created in October 1999 in
Bahrain, is a regional leader in the
domain of investment in accordance
with the precepts of Islam.
Gulf Finance House wants to invest
in the Algerian market
Energie & Mines
31
November 2006
PERFORMANCES
performances
“The Energy and Mines sector
is booming”
Chakib Khelil, Minister of Energy and Mines,
a guest of the El Moudjahid Press Centre
Algeria has made 40 billion
dollars of oil revenue
in nine months
Algerian hydrocarbon export revenue
reached the threshold of 40 billion dollars at the end of September 2006,
indicated Chakib Khelil. The unprecedented upsurge in the price of crude
oil, which marked the first seven
months of 2006, is the source of this
new record. Over the entire year 2005,
also marked by high oil prices, Algeria
made turnover of 45.6 billion dollars.
The Energy and Mines sector continued its progress in the first half of
2006, recording significant growth, in
the wake of the series of good results
initiated in 2005, thanks to the reforms
undertaken, indicated, in Algiers, the
Minister responsible for the sector,
Chakib Khelil.
The “strong and sustained” growth
which has affected all the energy and
mining products is due, explains the
Minister, to “the considerable economic expansion of the country” and
“confirms the continuous improvement
of the population's standard of living”.
However, he stated, this growth “poses
serious challenges in terms of investment throughout the energy chain
which the sector is in the process of
taking up".
The bets to succeed in include the
necessity, according to the minister, to
find the sources of financing major
investments to be granted, including
through a “more rational pricing” of
energy, in other words a recovery of the
energy product consumption prices.
Illustrating the importance of the
results recorded by his sector, the
Minister cited, supported by figures,
the increase in primary production (all
products included) to 89 million tonnes
of oil equivalent (TOE) during the first
half of 2006, the making of 15 discoveries (a record) and the investment of an
amount of 24 billion dollars, 13 billion
Energie & Mines
32
November 2006
of which in partnership, since 2000.
This growth has not only affected the
energy sector but also the mining sector which, thanks to the law of 2001 on
mines, has experienced a major impetus, particularly with the participation
of national and international investors
in the appeals for tender concerning
the exploration and mining of deposits.
Since the year 2000, this sector has
recorded average growth of 10%,
mainly drawn from the production of
gold, iron and aggregates.
The minister estimates that the “new
investments in the mining activity
should support this growth over the
duration, and cites several partnership
projects already concluded such as the
one with the Australian company Gold
Mines of Algeria, which develops with
Enor (Entreprise national de l'or), the
gold deposits of Tirek and Amesmessa
(Tamanrasset). The sector is starting to
interest, through its attractiveness and
its potential, partners from several
countries, particularly China, Great
Britain, India, Lebanon and Morocco.
The new dynamic introduced by the
mining law is evaluated by the “arrival
in the mining domain of over a thousand new national private operators
thanks to the 18 small and medium
sized mine allocation operations which
have enabled 681 mining permits to be
granted and revenue of 2.6 billion
dinars to be generated, paid to the
Public Treasury”, informed the
Minister. These permits mainly concerned the extraction of mining substances required for the manufacturing of
construction materials.
Returning to the amendments of the
hydrocarbons law, the Minister emphasised that they had been decided upon
"to enlarge and reinforce the State's
control over the hydrocarbons resources and to better guarantee their rational mining".
The purpose of these measures can be
summarised as “preserving resources
for the future generations”, he insisted.
Questioned on the gas agreement between Sonatrach and the Russian companies Gazprom and Loukoil which
seemed to concern the European companies, particularly the Italian company
ENI, Mr Khelil repeated that these
agreements were "memorandums of
understanding related to energy cooperation" such as those already signed
with the companies Shell (GB Netherlands) and Statoil (Norway).
"The Italian company ENI has also
signed an agreement with Gazprom”,
the Minister was keen to point out.
24 billion dollars of
investment, 13 million dollars
of which in partnership
The El Moudjahid Press Centre welcomed the Minister of Energy and Mines,
Chakib Khelil, within the framework of
a debate-conference on matters related
to his sector, the analysis of the international gas and oil market, the amendments made to the hydrocarbons law
and the Algerian-Nigerian gas pipeline
and partnership.
As usual, the Minister made an analysis
of very big relevance on these major
issues and responded with a lot of
honesty and competence to the questions asked him during the debate.
A progressing sector
Talking about his report, the Minister
reminded people of the physical
accomplishments of his sector and
revealed that this continues to make
progress for the development of the
country's energy and mining resources.
He gave a report running from the year
2000 to June 2006, stating the signature of 43 production research contracts,
the making of 62 oil and gas deposit
discoveries, 12 of which during the first
half of 2006.
There has been an investment of over
24 billion dollars in partnership. The
Minister noted that, in terms of primary energy production, represented by,
he emphasised, the quantities of hydrocarbons extracted, this production
increased from 152 tonnes of oil equivalent (TOE) in 2000 to 180 million
TOE in 2005, i.e. an average increase
performances
of 4%. During the first half of 2006,
this production reached 89 million
TOE. With regards electricity, the production has experienced strong growth,
going from 25 tetrawatts/hour (TWH)
in 2000 to 34TWH in 2005, reflecting
an annual rate of 6%; this trend has
been maintained during the first half of
2006. The installed capacity of the
national electricity production at the
end of June 2006 is almost 7,100MW
compared to 5,900MW in 2000, which
corresponds to an expansion of over
20% over the period.
Increased energy
consumption
The national energy consumption, all
forms included (gas, oil products, electricity) has gone from 30 million TOE
in 2000 to 35 million TEO in 2005.
During the first half of 2006,
consumption reached 18 million TOE,
i.e. 4% growth compared to the same
period of the previous year. These figures, according to the Minister, reveal
that the demand for oil products recorded a strong and sustained increase of
almost 6% a year during the period to
reach 11.6 million tonnes in 2005.
This trend continued in 2005, particularly driven by the exceptional increase
in the consumption of diesel of over
11%.
Strong growth for natural gas
The final consumption of natural gas
experienced the largest growth with an
average rate of more than 7% a year
during the period 2000-2005 and
☞
Energie & Mines
33
November 2006
PERFORMANCES
performances
☞ continued at a similar pace in 2006.
The electricity consumption recorded
an average increase of 6% during this
period to reach 27.3TWH in 2005.
This growth continues in 2006 with
consumption of 13.9TWH during the
first half. This strong and sustained
growth, in the Minister's opinion,
results from the significant economic
expansion of the country and confirms
the continuous improvement of the
welfare of the population during the
period. It does, however, pose serious
challenges in terms of investment
throughout the energy chain, which the
sector is in the process of taking up,
emphasises Chakib Khelil.
The Minister also sees this evolution in
the efficiency potential existing in our
energy consumption model and the
need for a more rational policy in terms
of energy pricing. Among the challenges to be taken up, the Minister points
out the continuous electrification of the
country and reveals that the effort
made by the State during this period
has enabled the realisation of
22,500km of electric lines for the
connection of almost 270,000 households. Through these figures, the
Minister notes that the electrification
rate reached 96% at the end of June
2006 with a total number of 5.7 million
subscribers. 354 towns were connected
during this period to natural gas, enabling 600,000 households to benefit
Energie & Mines
34
November 2006
from this service. The number of subscribers therefore increased to 2.1
million people. This development has
enabled, according to the speaker, a
national gas connection rate to be reached of 36% compared to 29% in
2000.
145 million TOE in 2005
in terms of exports
The total volume of national exports of
hydrocarbons, for its part, increased
from 124 million TOE in 2000 to 145
million TOE in 2005, reflecting an evolution of more than 17%. The value of
exports, during the period 2000 to June
2006, reached 186 billion dollars, 27
billion of which made during the first
half of 2006.
9,500 billion dinars
paid out in oil taxation
With regards the State's revenue, an
amount of almost 9,500 billion dinars
in oil taxation has been paid to the
Public Treasury during this period
(1,435 billion of which in the first half
of 2006). In terms of employment, the
sector in its entirety uses the needs of
some 207,000 employees, 41,000
which by the private industry.
The Minister then dealt with the issue
related to the Trans-Saharan gas pipeline project. This project is part of the
framework of the new partnership for
the development of Africa, Nepad. It is
of a total length of 4,100km and should
supply Europe with natural gas from
the Nigerian gas deposits via Niger and
Algeria. According to the speaker, this
project has multiple advantages at the
national and regional level. Chakib
Khelil cited, among other advantages,
the recovery of flared gases in order to
preserve the environment, he said.
He also cited the option in favour of
regional development which such a
project enables through supplying gas
to the countries through which the
pipeline runs. There are also synergies
with the other projects planned on the
same outline, such as the TransSaharan road and the fibre optic cable.
The feasibility study
is complete - an investment
of 10 billion dollars
According to the Minister, the results
of the feasibility study carried out by
PENSPEN/IPA were presented on 19
September 2006 to the Ministers of
Energy of the three countries concerned. The study shows, without any
ambiguity, the technical-financial feasibility of the project whose investment is
estimated at 10 billion dollars. It has a
transportation capacity of 20 to 30
billion cubic metres / year of gas which
is planned for 2015.
The Minister mentioned the evolution
of the mining sector for which he noted
that although the potentials and performances are still relatively little known
by the public, the growth is however
there and strong. According to the
speaker, it represents almost 10% on
average, annually.
The increase in the production of gold,
iron and aggregates is the main driving
force of this growth; according to the
Minister the new investments in the
mining activity should support this
growth over the duration.
The percentage of foreign investment is
growing, reveals the speaker, with
Australian, Indian and Egyptian companies and is in perspective with China,
Morocco and Great Britain to which
we have to add the national partners
participating in the appeals for tenders.
1,000 new national private operators
arrived on the market for 18 contract
allocations between 2000 and 2006
and the issuing of 581 mining permits.
The Minister then mentioned the putting in place of the directors and personnel of the new hydrocarbons' agencies, Alnaft and the ARH.
Enlarging and reinforcing the
State's control
Mentioning the amendments made to
the hydrocarbons law, Chakib Khelil
reminded people that they had been
decided upon to enlarge and reinforce
the State's control over the hydrocarbons resources and to better guarantee
their rational mining. The purpose of
these measures remains, of course, the
preservation of these resources for
future generations. These measures
provide for a majority stake by
Sonatrach in the research, mining and
transportation by pipeline activities of
hydrocarbons as well as the refining
activity. The other innovation results
from the establishment of a non-deductible tax on the extraordinary profits
applicable to the partnership contracts
concluded within the framework of the
law 84-14.
This measure is motivated by the
preoccupation with recovering part of
the large capital gains made by the
foreign companies that are partners of
Sonatrach in case of a high price of oil.
The impact is quantified in the increase
in the State's resources as of the second
half of the current year. The Minister
then mentioned the deregulation of the
electricity sector which is underway.
2006, a record year
With regards the oil market, Chakib
Khelil reminded people that 2006 was a
year of record prices, given the persistence of the factors which triggered the
upsurge in prices in 2004, namely a
robust economic activity which caused
a strong increase in demand faced with
limited production capacities both in
the upstream and in the downstream.
The geopolitical tensions and climate
factors also contributed to exaggerating insecurity premiums and reinforced the speculation activity, thus
accentuating the upwards trend in prices. As an annual average, the prices,
according to the speaker, increased
during the current year by 24% compared to 2005 with an OPEC basket price
of 62.6 dollars a barrel compared to an
average in 2005 of 50.6 dollars B/T for
the same OPEC basket. According to
the Minister, the OECD countries'
trade stocks are at comfortable levels,
but were not able to contain, alone, the
upsurge in the price of the barrel observed up to the end of the summer. The
players, confirmed Chakib Khelil, were
rather preoccupied with the lack of surplus capacities of the oil chain.
Accentuated decline
as of September
In September and the start of October,
prices experienced a strong decline of
performances
almost 17 dollars b/d compared to the
record level observed on 8 August. This
downturn is due to the reduction,
indeed the disappearance, which enabled the upsurge in prices.
The Minister announced that the
OPEC member countries are in contact
and are monitoring the evolution of the
situation on the market in view of
taking the corrective measures required
in case the prices deteriorate. The
world's economic activity will experience weaker growth in 2007 than in the
current year, with a rate estimated at
4.3%. The world's oil demand should
continue to grow in 2007, with an
increase estimated at 1.5mb/d.
Chakib Khelil did however note that the
strong increase in the non-OPEC oil
supply, which would be higher than the
growth in demand, will entail a reduction in recourse to OPEC oil, based on
the expansion in the production capacities of the OPEC member countries.
These oil supply-demand outlooks and
the evolution in the production capacities will entail a significant increase in
the unused OPEC capacity.
The Minister considered this as a major
stabilising element of the oil market, as
it enables potential production losses to
be compensated for and hence, would
reassure consumers.
It should be reminded, added the speaker, that it is the weakness in the production capacities used which has fed
the fears of a shortage in supply and
fed the speculation which strongly
accentuates the increase in prices in
2005-2006.
Balanced supply-demand
in 2007
For Chakib Khelil, the outlooks for
2007 reveal a balanced supply-demand
for oil that is a lot tighter than in the
current year, with comfortable stock
levels and a larger unused OPEC production capacity. This, according to the
speaker, should lead to a moderation of
prices. Chakib Khelil did however recall
the duty of vigilance to which OPEC is
summoned, given the change in the
situation. He recalled the principle on
which the organisation's action is based
- that of working hard to ensure prices
stabilise.
☞
Energie & Mines
35
November 2006
PERFORMANCES
performances
☞ Gas: a non-globalised market
Mentioning the natural gas market, the
Minister noted that this takes place in a
non-globalised market, unlike the oil
market. The gas market remains marked by three regions: the Asian market,
the European market and the North
American market.
The majority of this trade is done on
the basis of long term contracts, whose
prices are indexed on the price of crude
oil and/or oil products; this is particularly the case for the Asian market,
noted the speaker, and for the continental European market.
The natural gas prices in these two
regions are evolving in line with those
of crude oil with a lag of some months,
however. With regards the North
American market, and the United
States market, the prices are determined by the spot market on the one hand
and by the Stock Exchange on the
other. There is the same phenomenon
in the United Kingdom.
These last few years, the prices have
experienced large volatility reaching
exceptionally high prices as at the end
of 2005 and the start of 2006, before
returning to trend levels.
Chakib Khelil revealed that the general
evolution in the price of natural gas
over the three continents will overall
reflect the price of crude oil which
remains the driving force of energy globally with seasonal shifts and strong
divergences sometimes in the very
short term. In the debate, the Minister
returned to a certain number of issues,
hence responding to the questions
made by the participants.
African oil remains
important for the market
With regards African oil, some of the
continent's countries are not part of
OPEC such as Angola, Equatorial
Guinea, Sudan which has the status of
an observer, and Chad. The African
countries that are not members of
OPEC support the organisation as they
hope to join it also. This being the case,
non-OPEC African oil remains important. It will be even more important in
the future, perhaps not as important as
Gulf countries' oil, but the African
countries may constitute a threat for
them.
Cooperation
resulting in projects
With regards the Algerian-Norwegian
cooperation, further to the visit by the
Norwegian Minister of Energy to
Algeria, the Minister noted that
Norway greatly collaborates with
OPEC. With regards Algeria, our
country has two large projects with
Norway, in In Amenas and In Salah.
Sonatrach and Statoil, the Norwegian
company, have signed a master agreement, and with the Norwegian Ministry
there is cooperation for the development and in the training with a
Norwegian stake of 10% in the IAP.
On the question of the price of the barrel and the fact of knowing whether a
price of 25 dollars is possible, the
Minister revealed that this is possible,
adding that a price of 10 dollars is also
possible as happened in 1986.
The Minister explained that, when oil
demand reduces on the market, supply
is there. If this supply is maintained,
then the prices will, of course, tumble.
We can also balance supply-demand to
stabilise the price.
Should demand decline, OPEC must
be able to react and have a countering
device. With regards the substitution
energies, we speak a lot about bio diesel, etc. noted the Minister. For these
products to be able to substitute petrol
and diesel, they have to be competitive.
Brazil is an exporter of bio diesel and
ethanol. This competitiveness is only
possible if the prices of the bio fuels
remain high, otherwise it will be a failure. There is also recourse to performing
technologies to attempt to maintain
this. The Europeans are still in this
rationale. This being the case, bio is not
a threat as it is a very specific niche.
Carbon continues to support requirements, but no longer has the supremacy it had in the past; in the same way oil
may one day lose its supremacy over
gas for example, but oil will continue to
be used.
A law of the Algerian State,
and not of the sector
Returning to the hydrocarbons law further to a question, the Minister revealed that this is a law of the Algerian
State and not of the sector. It has been
adopted within the framework of preserving the interests of future generations. With regards the contract signed
between Sonatrach and Gazprom, the
Minister revealed that this contract is of
the same nature and responds to the
same objectives as the contracts signed
with the other countries.
This is a completely normal agreement
which concerns different domains.
With regards the potential criticisms
made by the foreign partners, Chakib
Khelil confirmed that he was not aware
of such criticisms. These partners can
come to the market where they have
adequate profitability with the risks
they want to take.
The importance
of the stabilisation fund
Energie & Mines
36
November 2006
With regards the precautions to be
taken to avoid the consequences of
performances
The Western countries are swept along
with avoiding corruption but also weeding out markets. With regards the
reduction in production faced with the
current economic situation, there is,
noted the speaker, a downwards
consensus. This being the case, OPEC
must be credible and do what is decides
to do. With regards nationalisation, in
Latin America, the Minister, who cited
the case of Bolivia, recalled that the
nationalisation decision is not yet
implemented, as the Bolivian oil company cannot assume the problem.
Concerning the industrial risk, this is
inherent in all activities, recalled the
Minister.
volatile prices, the Minister recalled the
existence of a stabilisation fund worth
40 billion dollars, according to the very
recent estimate given by the Minister of
Finance. Algeria's problem is that the
funds exist, but the question is posed of
their digestion or their digestion capacity. Today, the economic machine has
difficulties in digesting these funds. We
therefore have to learn to digest them
and this can be done through the
reforms which are undertaken, banking
reforms in particular, and the existence
of the guarantee fund (SME, etc.).
A system is being slowly put in place
with the stability which has returned;
consuming credit can only be done
once stability has been found again.
The laws may exist, but they can also be
improved to boost our economy.
There will always
be oil and gas in Algeria
With regards the reserves, there will
always be oil and gas in Algeria, replied
the Minister, recalling that deposits
which date back a century are still operational. The new technologies and the
new mining procedures are capable of
guaranteeing the extraction and more
extraction for a long time.
Chakib Khelil said that we have the
same level of reserves as in 1971, whereas a lot of studies predicted a reduction in reserves in 20 years' time.
For the Minister, technology and
research are capable of guaranteeing
the future, noting that Sonatrach is
putting a lot of effort into research. We
will extract more oil thanks to all this.
With regards the Trans-Saharan gas
pipeline, the Minister emphasised the
guarantees needed to obtain the project
financing from bankers. If there is a
consortium of companies which sells
and another which buys the gas, the
sale and purchase contract would be a
guarantee to finance the project planned for 2015, with a production of 18
to 25 billion cubic metres. The
Europeans would be very happy to see
such an availability of gas in this study,
revealed the speaker. This being the
case, the project's studies are complete.
We have to act now, emphasised the
Minister who remarked that the African
market will remain too tight to absorb
the quantities produced and make the
project profitable.
Concerning the fire in the Gassi Touil
wells, this was a human error, as is
often the case. We are putting effort
into the maintenance and renovation of
the sites to avoid these risks reoccurring. With regards Gassi Touil, it
should be reminded that is it Repsol
which managed the site. An investigation has been initiated to isolate the
responsibilities. Still with regards safety and the existence of service stations
near buildings, this exists throughout
the world, said the speaker; there is a
specific regulation on this matter.
These stations exist, we can always
transfer them, but there is the public
service, so where should we put them?
With regards the reduction in production, in case of gloominess in the market, each member of OPEC must
contribute to this reduction to ensure
the equilibrium of the market, pointed
out the Minister. This is a choice to be
made, he added.
Corrupt, but corrupters also
With regards a report by Transparency
International on corruption and the
accusations made on Algeria, there are
foreign companies which are not the
most perfect either in this domain,
remarked Chakib Khelil, adding that if
there is corruption, there are corrupt
people but also corrupters. There are
laws in the Western countries on corruption which are not necessarily
applied properly.
Energie & Mines
37
November 2006
PERFORMANCES
performances
Creation of jobs, reduction in tax pressure,
making investments dynamic
The drawing up of the finance
bill for 2007 has set itself the
ambition of improving the
growth rate fixed at 5.2% and
6.1%, excluding hydrocarbons,
thus maintaining the surge
which occurred a few years ago
now with the launch of the economic recovery support programme followed by the five
year programme 2005-2009.
For this year 2007, the third year of the
implementation of the five-year plan, a large
financial package is allocated to the equipment budget in view of the start-up of the
east-west motorway works and other large
scale infrastructure projects. The operating
budget also benefits from a consistent package that has significantly increased with
the reinforcement of the Public Service's
workforce and the increase in the salaries of
civil servants. The State's role appears preponderant in providing impetus to the economic recovery dynamic inducing a high
level of public expenditure.
We also note a strong increase in imports, of
around 8%, in the aftermath of the equipment effort and to satisfy the needs of the
companies which have seen the work load
increase. The social-type expenditure, which
is very large, related to the solidarity policy
for the disadvantaged, the realisation of the
housing programme supported by the State,
the implementation of the charter for peace
and national reconciliation providing for
compensation have had the consequence of
sinking the budgetary deficit which will
reach 1,821.1 billion dinars and the
Treasury deficit of 1,722.4 billion dinars,
which will undoubtedly require dipping into
the Revenue Regulation Fund to overcome
part of the deficit, on the understanding that
the Regulation Fund's reserves must not fall
below a certain threshold.
The current financial affluence with foreign
exchange reserves which exceed 60 billion
dollars have made it possible to lighten companies' work loads. The government has
decided to reduce corporation tax for com-
Energie & Mines
38
November 2006
Finance law 2007
panies that create jobs and there are other
tax benefits for some activities. Overall, the
government has decided to decrease corporation tax for companies that create jobs and
there are other tax benefits for some activities. Overall, the government has deliberately opted for an approach which attempts to
reduce the tax pressure to encourage investment in the productive activities and encourage all those working in the grey economy
to integrate the legal framework to be able
to benefit from the advantages provided by
the legislation. These measures, along with
other support schemes (upgrading, attractive bank loans, etc.) must enable private
investment to be boosted which must take
on the relays of public expenditure.
The revenue forecasted by
the State budget 2007
The finance bill 2007 forecasts revenues
of 1,802.6 billion dinars (compared to
667.92 billion dinars in the 2006 finance
law).
Tax revenues (direct and indirect contributions, customs revenue, etc.) amount to
676.116 billion dinars whereas ordinary
revenues (revenue from the domains, etc.)
amount to 23 billion dinars. As for oil taxation, this is evaluated at 973 billion dinars
compared to 916 billion dinars in the 2006
finance law.
The revenue from oil taxation that tumbled
in the first half of 2006 reached 1,420
billion dinars, whereas the forecasts counted on 916 billion dinars in revenue for the
entire financial year 2006. The record
increase in tax capital gains made in 2006
is particularly explained by the upsurge in
The main tax
and customs provisions
Here are the main tax and customs
provisions proposed by the 2007
finance bill :
■ Companies which create and maintain jobs benefit from a reduction on
corporation tax and income tax over a
period of 3 years as of 1 January 2007.
This reduction is fixed at 50% of the
amount of salaries paid by virtue of
the jobs created and 5% of the taxable
profits without this reduction exceeding 1 million dinars.
■ The benefits granted to investments
made within the framework of the support scheme for creating jobs for
unemployed people aged between 35
and 50 will be extended to the investments approved, by the latest, on 31
December 2009. The initial deadline
that was fixed for this type of investment was 31 December 2006.
■ The employer organisations, with
the exclusion of public authorities and
institutions, must devote an amount
equal to at least 1% of the annual payroll to continuous vocational training
actions. Failing this, they are subject
to the payment of a learning tax
whose amount will be paid into a special allocation account.
■ The annual housing tax for premises of residential or corporate use
located in the wilayas of Algiers,
Annaba, Constantine and Oran is fixed
at DZD360 for housing (instead of
DZD300) and DZD1,500 for corporate
premises (instead of DZD1,200).
■ A unique fixed tax is established (as
a replacement of income tax, VAT and
corporation tax) for businesses whose
annual turnover does not exceed 3
million dinars. Ten business activity
categories are excluded from this system (wholesale, dealerships, supermarkets, sale of medications, service
stations, construction sites, etc.).
■ Prohibition (ban) on importing into
the state spare parts, parts and accessories of vehicles and engines. The
confiscated spare parts must be destroyed whereas the vehicle is confiscated in favour of the State and local
authorities.
■ The exporting of ferrous or nonferrous metal waste, hides and leathers is subject to a specification.
performances
the world oil prices whereas the benchmark
price for calculating these revenues had
been fixed, out of prudence, at 19
dollars/barrel, i.e. well below current prices.
In 2005, oil taxation revenue amounted to
2,267.83 billion dinars compared to forecasts of 899 billion dinars.
Reduction in tax pressure and
encouragement to create jobs
The finance bill for 2007 forecasts the mobilisation of a large budgetary package for the
continuation of the complementary growth
support programme (PCSC) and introduces
new measures to reduce the tax pressure
and reorganise certain foreign trade activities. The macroeconomic framework of this
bill has not fundamentally changed in comparison with those of the 2005 and 2006
finance laws due to the solid macroeconomic and financial stability of the country
observed for several years now.
The authors of the bill have, furthermore,
given in by keeping the oil barrel benchmark
price unchanged at 19 dollars when drawing up the State's budget, whereas all the
oil forecasts count on a much more expensive barrel.
■ The loans granted by the banks to
companies in the energy sector provide entitlement to an interest rate discount for the projects related to electricity production, transportation and
public distribution of electricity and
gas.
■ The Public Treasury is authorised to
assume the operating support needs of
the dismantled public companies and
public institutions.
■ A copyright royalty is established for
using intellectual works to be paid in
favour of the Office national des droits
d'auteurs (ONDA). It is fixed at 10%,
calculated on the amount of revenue
recovered by the mobile telephone and
land line operators (ring tone taken
from the musical repertoire, adverts
using music, etc.).
■ The gold, silver and platinum works
support a guarantee right fixed per
hectogram at DZD8,000 for the gold
works (instead of DZD16,000 currently), at DZD20,000 for platinum works
(instead of DZD40,000) and at DZD300
for silver works (instead of DZD500).
■ VAT is reduced from 17% to 7% for
the sale of accessories required for the
conversion of vehicles from traditional
fuel to LPG or NGV (natural gas for
vehicles).
For the year 2007, the third year of the
implementation of the PCSC, GDP of 6,233
billion dinars is forecasted, an overall economic growth of 5.2% and 6.1%, excluding
hydrocarbons, inflation of 3.5%, an increase
in the value of exports of goods of 2.1%, an
exchange rate of DZD74 per dollar and an
8% increase in imports of goods.
The authors of the finance bill do however
warn that inflationist risk factors may, in
2007, influence the general level of consumer prices. They summarise these factors
as the high level of public expenditure, the
readjustment of the level of salaries and the
over-liquidity generated mainly by a favourable situation of the oil market. With
regards the budget, it forecasts revenues of
1,802.6 billion dinars (+7.1% compared to
the 2006 complementary finance law) and
expenditure of 3,623.8 billion dinars
(+1.9%) broken down into 1,574.9 billion
dinars for operating and 2,048.8 billion
dinars for equipment. For the second
consecutive financial year, the equipment
budget will thus significantly exceed the
operating budget - a previously unheard of
economic fact in the history of independent
Algeria.
■ The tax on leaded petrol (normal and
superior grade) is reduced from DZD1
to DZD0.10 / litre whereas a tax is established for diesel at DZD0.30/litre,
without an impact on the prices at the
pump.
■ VAT is reduced from 17% to 7% for
olive oil.
■ Within the framework of fighting
against grey trade, dealers in customs
who fulfil customs formalities on
behalf of the importer or exporter must
have mandates that are drawn up and
duly signed by the latter.
The customs authority is granted more
room for manoeuvre in dealing with
cases where it has reasons to doubt
the veracity or the accuracy of the
information or documents provided by
the importer to support the value it has
declared.
The budgetary deficit will reach 1,821.1
billion dinars and the Treasury deficit
1,722.4 billion dinars, i.e. respectively 29.2% and -27.6% compared to GDP. But
these deficit ratios must be qualified,
emphasise the authors of this bill, thanks to
the possibility of using the available funds in
the Revenue Regulation Fund (FRR) to
finance the Treasury deficit with the obligation, however, of keeping this fund solid at a
level that cannot be less than 740 billion
dinars. Since its creation in 2000 and up to
the end of August 2006, the FRR has been
credited by a total amount of 4,009 billion
dinars, according to official data.
Over the same period, the withdrawals
made from this fund for the repayments of
the principal of the public foreign debt reached 1,303.62 billion dinars, i.e. a payment
rate of 32.5%. Thus, we are further explained, as the GDP that is used as a basis for
calculating these deficit ratios is reduced
due to the fact the added value of the hydrocarbons' sector is evaluated on a price per
barrel of 19 dollars, i.e. greatly below
current actual prices and probably future
ones (of around 60 dollars). In legislative
terms, the finance bill provides measures
contributing to reducing the tax pressure
and reorganising certain foreign trade activities. Provisions have therefore been proposed to encourage the creation of jobs, to
support the realisation of projects, to produce certain goods and services, and to
protect the environment.
These provisions provide tax benefits in
terms of corporation tax and income tax in
favour of companies that create jobs, interest rate discounts in favour of projects to
create public infrastructures (Algiers's
metro system, East-West motorway, etc.)
and to produce a distribution of electricity
and gas as well as to reduce the VAT on
equipment to convert traditional fuels to
LPG and NGV. For the reduction of the tax
pressure, the bill proposes the reduction of
taxes on gold, silver and platinum works, as
well as the VAT rate on olive oil.
Other than the establishment of a unique
fixed tax for small taxpayers, it also provides customs measures related to fighting
against contraband, importing spare parts
and drawing up specifications for exporting
certain products.
Energie & Mines
39
November 2006
REFORMS
Reforms
Amendments
to the hydrocarbons law
The Council of
Ministers, in a meeting on 9 July, examined and approved a
bill amending and
completing the law
no. 05-07 of 28 April
2005 on hydrocarbons.
The amendments proposed to the law 0507 aim to adapt it to
the evolutions recorded at the international energy market
level and to reinforce
the management of
our resources so as to
preserve them for the
benefit of future generations.
In the Council of Minister
In this framework, the national company Sonatrach will have larger participation in access to the hydrocarbons
exploration, exploitation and transportation contracts.
It also introduced tax provisions by virtue of the contracts concluded under
the tax regime of the law no. 86-14, to
take account of the evolution in prices
on the international hydrocarbons market.
Speaking at the end of the examination
of the bill, the President of the Republic
was keen to point out the pressing need
for the current generation to rationally
mine the resources of our sub-soil by
taking account both of the needs induced by the efforts of increasing and
sustainable growth and the necessarily
greater needs of future generations.
Energie & Mines
40
November 2006
Facilitation and development
of investments
The Council of Ministers examined and
approved the bill amending and completing the order no. 01-03 of 20
August 2001 on developing investments.
This bill aims to introduce measures to
facilitate investment which particularly
consist of :
■ simplifying the benefit granting process, currently based on the establishment of a decision to bring it closer to
a declaration system that guarantees
better transparency.
■ setting up a simplified system for eligibility to the benefits by removing the
prerequisites resulting from the requirement of conditions for the benefit of
advantages. The new system accompanies the putting in place of lists of activities or needs not eligible for benefits
(negative list systems fixed by the
National Investments Council), except
for the projects with an interest for the
national economy. These benefits only
concern the new production goods,
except in the event there is a change in
resistance, relocation and privatisation.
■ Modifying the contracting exemption system so as to introduce clear criteria for identifying projects by determining the benefits they give right to.
■ Redefining the missions of the
National Investment Development
Agency to re-focus them on information, facilitation, support and promotion of investments as well as to
control, in relation to the tax and customs authorities, respect by the investors of the commitments made in
exchange for the benefits accorded. In
the same perspective, the National
Investment Council responsible for
monitoring the implementation of the
law is faced in its role with a strategy in
terms of developing investments.
Speaking at the end of the debates, the
President of the Republic was keen to
emphasise the need to simplify the rules
and procedures and of making them
clearer and more transparent so as to
free up the initiatives to establish,
through the facilitation of the deed of
undertaking, a new dynamic for productive investment and development.
The President of the Republic then
added :
“As the obstacles resulting from the
complexity of the legal framework, difficulties of access to property and the
rigidity of the banking system have
been identified as the main constraints
faced by the potential investors and
national and foreign entrepreneurs, it is
in the sense of lifting these constraints
and all other obstacles which the
government’s efforts must converge,
which must take the necessary measures to ensure better attractiveness in
terms of investments”.
The main amendments
of the hydrocarbons law
Reforms
The National Popular
Assembly unanimously (minus 1 vote)
adopts the law approving the order amending the law 05-07 on
hydrocarbons.
The deputies of the National Popular
Assembly (APN) have adopted the bill
approving the order amending the law
05-07 on hydrocarbons. Here are the
main amended articles:
Art. 12: (…) Each hydrocarbons agency has a secretary general appointed by
presidential decree, upon the proposal
of the Minister of Hydrocarbons. (…)
At the end of their mission, the president, the members of the executive
committee and the secretary general
cannot exercise a professional activity
in companies of the hydrocarbons' sector. Likewise they cannot exercise professional consultancy activities concerning the hydrocarbons' activities,
within the framework of a liberal profession or for whatever reason, for a
period of 2 years.
Art. 32: The research and exploitation
contracts are concluded further to an
appeal for tenders. The research and
exploitation contracts provided for
each appeal for tenders are approved by
a decision made by the Minister of
Hydrocarbons.
The Minister may, if reasons and justifications are given – and after the
approval of the Council of Ministers be exempt of the provisions hereinabove for reasons of general interest within
the framework of the hydrocarbons
policy. The research and exploitation
contracts contain, as a requirement, a
stake-holding clause for the national
company Sonatrach SPA.
In both cases, the Sonatrach SPA
stake-holding rates are fixed at a minimum of 51%. The company Sonatrach
benefits from the granting of a concession granted by order of the Minister of
Hydrocarbons when said company of
Algerian law exercises the transportation by pipelines activities.
Art. 68: The transportation by pipeline
activities may be exercised by
Sonatrach or any company of Algerian
law comprised of any entity and
Sonatrach which must have a stake in
said company of a minimum rate of
51%. The company Sonatrach benefits
from the granting of a concession granted by order of the Minister of
Hydrocarbons when said company of
Algerian law exercises transportation
by pipelines activities.
Art. 77: The refining activities may be
exercised by Sonatrach alone or in
partnership with any other entity.
When said activities are exercised by
Sonatrach in partnership with any entity, the Sonatrach stake holding rate is
fixed at a minimum rate of 51%.
Art. 101a: For the partnership
contracts
concluded
between
Sonatrach and one or several partners
within the framework of the law 86.14
of 19 August 1986, “a non-deductible
tax on the extraordinary profits made
by these foreign partners is applicable
to the percentage of production returning to them when the monthly mathematic average of the prices of Brent oil
is above 30 dollars a barrel”. Said rate
is applicable as of 1 August 2006.
The rate of this tax, applicable to the
production returning to foreign partners, is 5% as a minimum and 50% as
a maximum. To pay this tax to the
Public Treasury, Sonatrach shall
deduct from the production returning
to said partners the percentage corresponding to the amount of this tax.
Art. 58: Disputes arising out of the
contract interpretation or execution or
the application of the present law or to
the documents issued in this regard
between both the national Agency for
Hydrocarbons resources valorisation
(ALNAFT) and the contracting body,
shall be subject to a prior conciliation
according to the terms and conditions
agreed in the contract. If the matter
fails to be settled amicably, the dispute
may then be referred to an international
arbitration in the conditions agreed in
the contract.
In all cases of a Sonatrach shareholding, the international arbitration procedure "solely concerns entities other
than Sonatrach being the contracting
party". However, when Sonatrach
S.P.A. is the sole contracting party, the
dispute shall be settled by arbitration of
the Minister of Hydrocarbons.
Energie & Mines
41
November 2006
REFORMS
Reforms
Simplification and clarification
of the procedures
Adoption of a bill approving the order
on investment development
The National Popular
Assembly (APN)
has adopted the bill
approving the order
08-06 amending and
completing the order
01-03 on investment
development.
The bill adopted - with an overwhelming majority - introduces amendments
to the system for promoting investments
in force in view of simplifying it and
providing it with more efficiency. This
also means simplifying the benefit granting process related to investment, particularly the establishment of the declaration system instead of the decision
system.
It finally provides for compensating for
the reduction in customs duties through
exemptions with the purpose of relieving the measures and respecting the
price dismantling process imposed on
the largest equipment imported. Its
main provisions hence target :
• simplifying the benefit granting process, currently based on the establishment of a decision to bring it closer to a
declaration system that guarantees better transparency.
• Setting up a simplified system for eligibility to the benefits by removing the
prerequisites resulting from the requirement of conditions for the benefit of
advantages.
• The new system accompanies the putting in place of lists of activities or of
goods that are not eligible for the benefits, except for the projects with an interest for the national economy.
These benefits only concern the new
production goods, except in the event
there is a change of residence, relocation and privatisation.
Energie & Mines
42
November 2006
The APN adopts the law
on land to be used for
• modifying the contractual exemption investment purposes
system so as to introduce clear criteria
for identifying projects by determining
the benefits to which they give right.
• Redefining the missions of the
National Investment Development
Agency to re-focus them on information, facilitation, support and promotion
of investments as well as to control, in
relation to the tax and customs authorities, respect by the investors of the commitments made in exchange for the
benefits accorded. In the same perspective, the National Investment Council
responsible for monitoring the implementation of the law is faced in its role
with a strategy in terms of developing
investments.
The
Minister
of
Participation and Promotion of
Investments, Mr Abdelhamid Temmar,
reported to journalists, at the end of the
voting session, that the new law must
simplify the attraction of investments by
removing “any slowness of the administrative procedures”.
As for the industrial property application, the Minister indicated that this
would be finally settled before the end of
this year.
The National Popular Assembly (APN)
has adopted the bill approving the order
on conditions related to transferring and
selling land falling under the private
domain of the State to be used for setting
up investment projects, presented by the
Minister of Finance, Mr Mourad Medelci.
The bill, adopted by an overwhelming
majority, aims to define the conditions for
selling or transferring land falling under
the private domain of the State to be
used for setting up investment projects
with a concession of a duration of 20
years, renewable and convertible, according to clearly defined criteria, with
regards industrial, tourist or service-type
projects as well as the sale of land on
which property promotion operations
have been carried out in favour of integrated projects. Excluded from the scope
of this text are: farming land, plots of land
located inside the expansion zones and
tourist sites, required for the setting up of
investment projects that fall within the framework of a tourist development plan,
the plots of land located inside mining
acreages, the plots of land located inside
hydrocarbons' research and exploitation
acreages and the plots of land intended
for property and land promotion.
Modification
of the benefits system
Reforms
Mr Temmar explains the amendment of the law on investment
The Minister of Participation and Promotion of Investments,
Mr Abdhelhamid Temmar, presented before the Commission of economic
and financial affairs of the Council of the Nation the reasons for the
amendment of the order 01-03 on investment development.
During the meeting, Mr Temmar returned to the reasons for the amendment
as well as "the hopes aroused by such
an approach in the promotion of
investment" indicated a press release
from the Council of the Nation.
The Minister furthermore answered
questions from the commission, added
the press release, before specifying that
the meeting is part of the framework of
examining the bill by the commission in
order to draw up its report.
The bill in question has been adopted
by the National Popular Assembly
(APN).
The new bill introduces “amendments
to the system for promoting investments in force in view of simplifying it
and providing it with more efficiency”.
It further targets “simplifying the benefit granting process related to investment, particularly the establishment of
the declaration system instead of the
decision system”.
It also proposes the "modification of
the benefits system by introducing new
criteria for defining these benefits to
those entitled to them” as well as “the
reintegration of the exploitation benefits whose abrogation has had a harmful affect on Algeria's positioning in the
race to attract capital" and "the compensation for the reduction in customs
duties by exemptions with the purpose
of relieving the measures and respecting the price dismantling process
imposed on the largest equipment
imported”.
The main provisions of the new law
thus target :
• simplifying the benefit granting process, currently based on the establishment of a decision to bring it closer to
a declaration system that guarantees
better transparency.
• setting up a simplified system for eligibility to the benefits by removing the
prerequisites resulting from the requirement of conditions for the benefit of
advantages.
• Redefining the missions of the
National Investment Development
Agency (Andi) to re-focus them on
information, facilitation, support and
promotion of investments as well as to
control, in relation to the tax and customs authorities, respect by the investors of the commitments made in
exchange for the benefits accorded.
In the same perspective, the National
Investment Council responsible for
monitoring the implementation of the
law is faced in its role with a strategy in
terms of developing investments.
• The new system accompanies the
putting in place of lists of activities or
of goods that are not eligible for the
benefits, except for the projects with an
interest for the national economy.
These advantages only concern the new
production goods, except in the event
there is a change of residence, relocation and privatisation.
• Modifying the contractual exemption
system so as to introduce clear criteria
for identifying projects by determining
the benefits to which they give right.
Energie & Mines
43
November 2006
REFORMS
Reforms
Attracting investments to the Hauts
Plateaux and the South
Adoption of the bill on promoting employment
The deputies of the National Popular Assembly (APN) have adopted, with a
majority, a bill on promoting employment during a plenary session presided
over by Mr Mohamed Kenaïm, vice-president of the APN. The Minister of
Employment and Social Security, Mr Tayeb Louh, presented this bill to the
National Popular Assembly on 21 June this year, it recalls.
The Minister of Employment and
Social Security, Mr Tayeb Louh,
confirmed that the law creating
encouragement measures for supporting and promoting employment
targets the adoption of financial
approaches in terms of fighting
against unemployment. Reviewing the
objectives of this law, the Minister
explained that it particularly aims to
“fight against the phenomenon of
non-declaration of workers to the
Social Security authorities”.
The bill adopted by the deputies of the
APN, he emphasised “also aims to
encourage the national investments,
to attract foreign investments, particularly to the regions of the Hauts
Plateaux and the South and encourage employers to upgrade their human
resources through training and,
hence, preserving their jobs".
The new law sets out other objectives:
“better control of the job market,
through recording job applications at
the employment agencies, in view of
benefiting from the advantages
contained in this text”, stated
Mr Louh.
The bill in question also attempts to
"deal with the concerns of employers
mainly consisting of relieving the
social costs to reduce the cost of creating new jobs”.
In this context, Mr Louh recalled that
the fight against unemployment is one
of the main concerns, both for the
governments and the social partners
and "for certain international organisations such as the International
Labour Organisation (ILO), the
United
Nations
Development
Programme (UNDP), but also for the
Energie & Mines
44
November 2006
African Union (AU), within the framework of the New partnership for
Africa's development (Nepad)".
"Analysts agree on saying that unemployment is one of the main challenges facing companies, particularly
Arab ones, given that 60% of the Arab
population is under the age of 25”,
confirmed the Minister.
"Among the essential stages planned
in the world employment campaign,
we should note the UN's recommendation on putting in place national
programmes to take up the challenge
of employing youths" recalled Mr
Louh. With regards employing
youths, the UN has set down four
priorities to be included in the national programmes for promoting the
employment of youths including "the
qualification for employment thanks
to investment in education and vocational learning” and “equal opportunities for all youths in terms of integration in the working world”, explained the head of the employment sector.
The priorities include "the creation of
new projects in favour of youths in
view of facilitating and encouraging
the creation of jobs, so as to offer
employment opportunities”, specified
the Minister, adding that, starting
with these strategies, “several countries, including Africa, have put in
place a policy to promote employment
based on several mechanisms, including direct support for employment”.
Mr Louh : “The investments
made by the State have enabled
2,400,000 jobs to be created
from 2001 and 2005”
The Minister of Employment and Social Security, Mr
Tayeb Louh, confirmed that the efforts made by the State
since 2001 in terms of investments, through the
Economic Recovery Support Programme (PSRE) 20012004, have enabled 2,400,000 jobs to be created up to
the end of 2005. During a plenary session at the
National Popular Assembly (APN) dedicated to voting
on the bill on encouragement measures aiming to support and promote employment, the Minister explained
that the efforts made by the State, within the framework
of the Economic Recovery Support Programme 20012004, have concerned, as a priority, the construction
and public works, hydraulics and agricultural sectors
which are large purveyors of jobs.
Dealing with the Algerian experience, a "pioneer in
Africa", in terms of promoting and supporting employment, Mr Louh indicated that, in parallel to certain
employment schemes, “three new schemes have been put
in place and provide assistance to the creation of jobs
through the small companies and self-employment,
almost 206,000 jobs up to the end of 2005”.
"These achievements, he said, have enabled the increasing annual demand to be absorbed in terms of employment and the number of unemployed people to be reduced (thus falling from 2,611,000 in 2000, i.e. an unemployment rate of 29.5%, to 1,475,000 unemployed in
2005, which represents 15.3% of the working population". Mr Louh further emphasised that "the national
economy's growth rate, which has steadily increased
since 2000 with a peak of 6.9% in 2003, before stabilising around 5% in 2004 and 2005, incurs a return to
sustainable growth”. The time has come, he pointed out
“to make a qualitative revision of the employment strategy by a return to an economic approach for dealing with
the plague of unemployment, particularly through
encouraging investment and reducing the cost of
employment”.
"This approach implies, he added, the implementation of
a sustainable employment policy adapted to the economic demand in the production sector and responding to
the demand for employment".
“Modernising the State’s
budget is our largest task”
Reforms
The Minister of Finance to the directors of the press associations
The Minister of Finance, Mr Mourad Medelci, at the head office of his
ministerial department, met the managing directors of the press associations in a conference during which the current economic and financial situation was mentioned as well as the problems encountered by
the press which includes access to financial information.
Dealing with the financial reforms,
several of whose parts have already
been initiated particularly in the
tax, banking and insurance
domains, Mr Medelci indicated
that the largest task being prepared
is that of modernising the State's
budget system which essentially
aims to improve the management
of public finances".
According to the Minister, the
State's annual budget will be presented in accordance with its new
design as of the 2009 finance law.
Unlike what has been practiced for
over forty years, the State's budget
will no longer be drawn up in the
finance law in the form of operating and equipment budgets, but
will be designed through the definition of allocating loans for each
specific project falling within the
remit of each Ministry whilst defining the objectives.
Furthermore, he added, the budget
for the 2007 finance law will be
simultaneously drawn up in the
form in force and under the new
formula but “blank”.
The risk that any total
convertibility of the
national currency
into currencies
comprises whose main
consequence is
undoubtedly a “major
leak” of capital which
might be used as
money laundering.
For the Minister, “the management
of public affairs must not be improved only in terms of texts, but also
by revising the entire system in
order to ensure transparency and
efficiency in managing the State's
finances”.
In his speech, Mr Medelci also
mentioned the recent abrogation of
the decree of November 2005,
which should enter into force on 1
September 2006 and which stipulated that all payments exceeding
the sum of DZD50,000 must be
made by cheque, bank transfer,
payment card, withdrawal, bill of
exchange, promissory note and any
other written payment method.
Explaining the reasons for the
abrogation of this text, the Minister
indicated that the date of
September 2006 had initially been
used as it had been envisaged that
all of the new electronic payment
system would be ready before this
deadline. “This is not the case” he
noted. However, he added “we are
not losing sight of” the implementation of the system stipulating the
use of cheques for all payments
exceeding the sum of DZD50,000.
Furthermore, he specified, the decree of November 2005 which establishes this measure comes in
application of a law dating back to
2004 and related to fighting
against money laundering and the
financing of terrorism. ☞
Algeria has made early
repayments of foreign
debt of over 12 billion
dollars
Algeria has made early repayments of foreign
debt of over 12 billion dollars and hence saved
an amount of around 2 billion dollars by virtue
of interest, indicated Mr Mourad Medelci. The
figures put forward by Mr Medelci indicate that
the 12 billion dollars paid early are comprised of
the re-staggered debt contracted with the Paris
Club (7.9 billion dollars), the London Club
(almost 800 million dollars) as well as multilateral loans for an amount of almost 4 billion dollars contracted with international financial institutions (World Bank, African Development
Bank, etc.).
Mr Medelci also confirmed that the early repayment of the debt has enabled Algeria to save
an amount of almost 2 billion dollars in interest,
debt servicing commissions and other financial
costs related to the contracted loans and which
should be repaid, according to the initial payment schedule, between 2006 and 2011.
By adding to these agreements the one of the
cancellation of Algerian debt with Russia, estimated at 4.737 billion dollars, Algeria has therefore paid, between 2004 and 2006, total foreign
debt of an amount of 16 billion dollars, he further specified.
With regards the debt taken out with the
London Club evaluated at almost 800 million
dollars, the Minister announced that not only
had the early repayment agreement been
signed at the end of last week in London, but
that the creditors have already been paid by
Algeria.
Energie & Mines
45
November 2006
REFORMS
Reforms
☞
In front of the bosses of the national
press, the Minister also dealt with the
issue of the convertibility of the dinar.
On this matter, he recalled the risk that
any total convertibility of the national
currency into currencies comprises
whose main consequence is undoubtedly a "major leak" of capital which
might be used as money laundering.
During the debate which ensued by Mr
Medelci, the MDs of the press associations raised several questions mostly
dealing with access to financial information, the sale of national newspapers abroad and the State's aid to the
press sector.
For Mr Medelci, the improvement of
relations between the sources of financial information and the press from the
point of view of accessibility to a maximum amount of information with
more precisions is a “real challenge”.
In this sense, he admitted that the
Ministry he is in charge of must encourage its executives to communicate
more with the press. He did however
remark that the specific nature of
financial information requires specialised training of journalists to ensure
better quality of information.
On this point, he suggested that the
Institut supérieur de gestion et de planification (ISGP), which was recently
transferred under the supervision of
the Ministry of Finance, put in place a
training programme especially designed for journalists involved in financial issues. Questioned on the holding
Energie & Mines
46
November 2006
The large public
investment
programmes
are sustainable
of information by the banks involved in
financial scandals, the Minister replied
that the head of a banking institution
“is surely not burning with desire” to
talk to the press.
Furthermore, he added, once the matter has been introduced in the legal
system, "it is not the banker's responsibility to disclose the content of the
matter being investigated". As to the
problems of exports and repatriation of
currencies coming from sales of
Algerian newspapers abroad, the
Minister remarked to the MDs of the
press associations concerned by this
issue that they are subject to the same
conditions as those of other exporting
companies from other sectors.
In his speech, the Minister also mentioned foreign debt. He thus indicated
that Algeria has made early repayments
of foreign debt of over 12 billion dollars by virtue of interest. With regards
the debt taken out with the London
Club evaluated at almost 800 million
dollars, the Minister announced that
not only had the early repayment
agreement been signed at the end of
last week in London, but that the creditors have already been paid by
Algeria.
The Minister of Finance, Mr Mourad
Medelci, reconfirmed that the different
public investment programmes for the
period 2005-2009 (Complementary growth
support programme and complementary
regional programmes) are financially
sustainable thanks to the good performance
of Algeria's financial situation.
To lay out his proposals, the Minister
unveiled for the first time the financial conditions for the realisation of these ambitious
programmes whose cost, according to him,
is around 120 billion dollars.
According to the calculations made, he stated, the implementation of these large
public investment programmes requires
a minimum amount, respectively, of
30 billion dollars for the foreign exchange
reserves, 10 billion dollars for the Revenue
Regulation Fund (FRR) and a price per
barrel of oil within a range of 50 and
55 dollars. In this sense, he stated that the
respective amounts of these three elements
greatly exceed these minimum criteria,
citing as an example the FRR whose current residual is 30 billion dollars and a price
per barrel of oil of over 67 dollars.
The 2006 complementary finance law
stipulates that, under no circumstances,
must the level of financial resources of the
FRR fall below 747 billion dinars, i.e. the
equivalent of 10 billion dollars. Currently,
the level reached by this fund is
2,200.44 billion dinars (around 30 billion
dollars) compared to 1,923 billion dinars
at the end of 2005.
Reforms
Training for almost 10,000 employees
will be launched in 2007
The reform of the State's budgetary system presented in detail
The project to modernise
the Algerian State's budgetary system, which must
be implemented as of
2009, has been presented
in detail by a representative of the Ministry of
Finance during a Maghreb
Court of Accounts Forum
held in Algiers.
Designed with the technical support of
the World Bank, this project aims, essentially, to establish a “results culture” by
focussing the budget on “performance”
(precision of the commitments and
results) and to increase the “transparency
of budgetary information”, explained the
director of research at the Ministry of
Finance, Mr Ferhat Iken.
For the implementation of this new budgetary system, a vast training programme
will be launched in 2007 aimed at almost
10,000 employees from all ministerial
departments.
The main new elements which will be
introduced in drawing up the State's budget are summarised in the putting in place
of a medium term expenditure framework
(CDMT), the implementation of a budgetisation through programmes focussed on
results, a multi-annual budgetary framework, a new budgetary presentation and
the accountability of managers.
Further explaining these new elements,
Mr Iken indicated that the CDMT will be
a budgetary policy forecast document
over a three to four year horizon which
must enable the consistency between the
State's expenditure and income to be
ensured. As for the budgetisation focussed on results, it must put an end to the
current practice consisting of a simple
allocation of operating and equipment
budgets for each ministerial department.
According to Mr Iken, the loans will be
granted to each ministry by the definition
of a specific programme of activities and
will be “supervised by objectives, measured by results and evaluated by performance indicators”.
Citing the case of the programme budgetisation structure for the Ministry of
Education, according to the next budgetary system, Mr Iken explained that the
performance approach will, as an example, consist of defining an objective aiming to increase the quality of secondary education. The budgetisation outline
must therefore define the success rate in
examinations as a performance indicator
whilst specifying the actions which must
be undertaken to arrive at these objectives
such as the design of a new secondary
education programme. For the same
ministerial head, the performance measures will enable “the difference between the
actual results and the expected results to
be measured, the result obtained to be
assessed compared to the expected result
and resources used and corrections to be
made to the action undertaken".
With regards the 2009 State budget draft,
this will be presented in three new separate documents called “volumes”.
This relates to the "State's main expenditure budget” (by ministry, by programme
and by large category of expenditure”), a
“report on the priorities and planning”
over a three-year period (detailed information on the programmes, the objectives, the resource requirements, etc.) and
the "decentralised wilaya service expenditure budget", which will indicate the
geographic redistribution of the State's
budgetary expenditure.
The other new fundamental element
provided by this budgetary system reform
project is identifying a “responsible
manager” in each ministry and in each
wilaya. The role of this manager, confirmed Mr Iken, will consist not only of
defining the actions to achieve the objectives fixed and drawing up the necessary
expenditure budget, but also “reporting
the differences between the actual results
and expected results”. Presented under
the theme "Budget by objectives for good
governance", this forum is organised by
the Algerian Court of Accounts, in partnership with the German Development
Cooperation (GTZ), within the framework of the “good financial governance
programme” initiated in 2002 by this
Germany organisation designed for five
Maghreb countries.
It particularly took place in the presence
of managers of the Maghreb Courts of
Accounts, representatives of the National
Popular Assembly (APN) and foreign
experts.
Explaining the choice of the theme under
which this 2nd forum is organised, the
president of the Algerian Court of
Accounts, Mr Abdelkader Benmarouf,
estimated that even if the Maghreb countries have initiated budgetary reforms
whose extent differs depending on the
national context, “the stage which hopes
to move from a traditional budget to a
programme-budget is deemed laborious”.
Positioning the challenges of renovating
the budgetary practices at the Maghreb
level, the president of the finance and
budget commission of the APN,
Mr Benalia Belhouadjeb, emphasised, for
his part, that with regards Algeria,
“Parliament wants a deep reform of the
budgetary system in order to confirm the
sense of the finance law” and considered
that “the use of much more budgetary
strictness is deemed essential”.
In this sense, he indicated that the next
budgetary system which Algeria hopes to
put in place by 2009 mainly relies on the
budgetisation by objectives which must
enable “the performances of public
actions to be evaluated through
their results, their legibility and their
transparency”.
Energie & Mines
47
November 2006
REFORMS
Reforms
Adoption of a regulation
on bank creation conditions
The Currency and
Credit Council (CMC)
has just opted for a
regulation on the
conditions for creating a bank or a
financial institution
as well as criteria
for setting up bank
branches in Algeria,
indicated the CMC in
a press release sent
to the APS.
This new text completes the implementation of the regulatory framework in force with the order of
26 August 2003 on currency and
credit, explained the CMC which
adds that this contributes to “the
emergence of a modern banking system which responds to the needs of
the national economy”.
The regulation, notes the CMC, for
its part, uses the universal fundamental principles applicable in terms
of authorisation and approval of
banks and financial institutions and
of setting up bank branches. The
text, in the spirit of the 25 Basel
Committee principles, "enlarges the
control of banks in approval phase
by focussing on the quality of the
shareholders, its financial capacities,
its professionalism as well as the
quality of the management", indicates the council.
The new system which the CMC is
putting in place aims to create the
conditions to “consolidate the financial health of the banking system and
ensure its security by reinforcing the
conditions for access to the banking
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48
November 2006
Currency and credit council
profession", emphasises the same
source. The objective sought after
for putting this reinforced system in
place, further indicates the CMC, is
to ensure that "all new approval
applications must be examined in
accordance with a transparent and
strict regulatory and legal framework, in order to guarantee the establishment of quality banks and preserve the banking system”.
The Basel Committee is, in reality,
that of the Bank for International
Settlements (BIS) which has taken
the habit of naming the systems it
draws up in reference to the Swiss
city of Basel where it is based.
Published in 1988 and adopted by
over 100 countries, Basel I introduced a prudential rule through the
minimum capital requirement of 8%
to cover credit risk. But the shakeups that occurred afterwards on the
international financial markets led
the BIS to revise the Basel I system,
thus giving birth to Basel II. Among
the reasons which made such a revision necessary are the liberalisation
and the deregulation of the financial
markets, the financial innovations
not taken into account by Basel I,
the growing importance of risk
management techniques and the
increased volatility on the financial
markets such as the Asian crisis in
1997.
The implementation of the Basel
systems (Basel I and Basel II) are
not of a mandatory nature for the
member States of the BIS, but
represent, in their eyes, an important
tool enabling the bank risk management capacities to be improved.
CPA and BNP Paribas
Al Djazaïr authorised to
increase their capital
The Currency and Credit Council (CMC) has
just authorised Crédit populaire d'Algérie
(CPA) and BNP Paribas Al Djazaïr to increase
their respective capital, announced the CMC in
a press release. United under the presidency
of the Governor of the Bank of Algeria, Mr
Mohamed Laksaci, the council thus responded
favourably to the requests made by these two
banks in view of obtaining the authorisation
to increase their capital :
• CPA increased its capital by 4 billion dinars
to increase it to 29.3 billion dinars.
• BNP Paribas Al Djazaïr increased its capital
by 1 billion dinars to increase it to 3.5 billion
dinars.
These capital increases "prove the continued
improvement of the banks' asset situation”,
comments the CMC. A regulation from the
Bank of Algeria dating back to March 2004
and amending the regulation of 1993 imposes
upon banks minimum capital of 2.5 billion
dinars, compared to 500 million dinars for the
financial institutions. The banking regulation
further requires banks to totally pay up their
capital from the date they are established.
Reforms
“Insurance cover for exports,
excluding hydrocarbons,
does not exceed 10%”
Mourad Medelci, Minister of Finance
It is with the finding that the insurance cover for exports, including hydrocarbons,
does not exceed 10% that the Minister of Finance, Mr Mourad Medelci, estimated
that this rate is “insufficient given the large amount of our country's trade”.
Mr Medelci, who presided over the opening of the works of the conference on
investment guarantee and insurance
mechanisms for exports in Arab countries, attended by numerous financial
operators, explained that these “very
modest” results, i.e. between 8 and 10%,
do not in any way reflect the reality of the
volume of trade, excluding hydrocarbons, estimated at some 20 billion dollars
of imports and hundreds of millions of
dollars of exports.
Given this, according to him, the export
credit insurance companies “are called
upon to develop in view of adapting to
the dynamic of the current economic
development”. This is an ambitious programme where the role of the Algerian
investment guarantee and insurance
company (Cagex) is called upon by the
Minister who emphasised that this body
should bring itself in line more with the
world of financial operators and financial
institutions to offer its services.
Mentioning the aspect of inter-Arab and
international cooperation, the Minister
also recalled that two agreements have
already been signed since the start of the
year between the Cagex and the Arab
investment guarantee company - agreements which related to the aspects of
reinsurance and insurance guarantee for
exports ensured by the Cagex; “a cooperation which will tend to get bigger”, in
his opinion.
The low penetration rate of export credit
insurance in Algeria, for its part, must be
seriously looked into, hence the decision
made by this institution, recently, to
reduce its insurance rates, as announced,
for his part, by the MD of the Cagex, Mr
Djillali Trikat. These rates have been deemed redhibitory (between 3 and 5% up
until now) and which have just been revised downwards, since they now vary,
according to Mr Trikat, between 0.20%
and 1.5%.
Hence this insurance recorded turnover
of 5 billion dinars in 2005, and almost 1
billion dinars in the first quarter of 2006,
still, according to Mr Trikat, who specified that these insurances particularly
concerned manufactured products and
hydrocarbon by-products.
To come back to the meeting, this, whose
objective is to make the large activities
inherent to the Arab investment guarantee company known, has enabled,
through its managing director, Mr Fahd
Rached El Ibrahim, this institution,
whose vocation extends at a regional
level, to be created in 1974 in view of
favouring transfers of capital and interArab trade flows - trade favoured, of
course, through the Arab export and
investment insurance guarantee.
The current capital of the Arab company,
whose head office is in Kuwait, is around
190 million American dollars. Up to
2005, this institution guaranteed a total
of 6.2 billion dollars. 75% of this amount
was designed to finance the guarantee of
investments. For the rest, the IAIGG has
been devoted to insuring the credit lines
(9%) and the goods and equipment of
the companies (1%).
However, the main vocation of this insurance company remains the ambition to
“be able to set up a real guarantee industry in the Arab world”, as announced by
Mr El Ibrahim who specified, in this
context, that the IAIGG is currently in
the process of updating new formulas to
respond to more diverse requests issued
by Arab businessmen and investors. For
Mr El Ibrahim, Algeria is, by far, one of
the most promising markets of the
region, currently. This is based on the
vast programme of economic reforms
initiated these last few years and which
has enabled the equivalent on 1 billion
dollars' investment to be attracted
annually; a figure which will tend to get
bigger in the next few years, according to
him, since Algeria has updated a policy of
promotion and assistance to the farming
sector and to SME, “which will enable it
to diversify its income and set up a solid
economy, in view of no longer suffering
from the fluctuations of the international
oil markets”. However, as the speaker
emphasised, the Algerian economy has
not greatly benefited from the services of
the IAIGG although it is a 4% shareholder in it. Indeed, the value of services
from which Algeria has benefited since
1974 is around 147.6 million dollars, i.e.
5.7% of all services insured to Arab
member countries. The total value of the
export investments amounted to 5.5%,
i.e. 0.2% of all services insured by the
Arab company.
Given this, the stakes are far from negligible and particularly in the context of
globalisation in which the world economy will be positioned, according to the
managing director of the IAIGG, who, in
this context, focussed on the importance
of investments to guarantee the developments in the countries which are in the
process of this. "The Arab countries have,
in this respect, promulgated legislations
and very favourable incentive measures
to attract investors, some have succeeded
in this policy - even brilliantly”, added
Mr El Ibrahim, and it is rightly in this
perspective that the institution he manages has been set up, according to
Mr El Ibrahim, who specified that the
regional vocation of this company
reinforces the desire of Arab countries to
develop economic exchanges and trade
with each other, particularly through the
guarantee of these exchanges against
non-trade risks.
Energie & Mines
49
November 2006
REFORMS
Reforms
The Caisse de garantie des crédits
d’investissement is operational
The head office of the
Association des banques
et des établissements
financiers (Abef) hosted a
signing ceremony for the
partnership agreement by
Mr Ammar Doaudi,
Managing Director of the
Caisse de garantie de
crédits d'investissements,
CGCI-PME and the
Chairmen of the shareholder banks (CPA, BNA, BDL,
BEA, Badr, Cnep Banque).
This new institution is now operational.
It has been created by the public authorities to guarantee the risks incurred by
the banks and financial institutions
when financing the investment projects
of small and medium sized companies.
The putting in place of its management
bodies and the appointment of its
managing director, Mr Ammar Daoudi,
took place at the start of the current
year.
The instrumentation of the guarantee
system, the definition of the resources
and the organisation required for its
operating were designed and put in
place in the first quarter of 2006 with
the support of international experts
selected during the Meda programme
appeal for tenders.
The “caisse” is a joint stock company
with capital of 20 billion dinars, owned
60% by the Public Treasury with the
remaining 40% shared initially between
public banks (CPA, BDL, BNA, BEA,
Badr, Cnep Banque). The large amount
of its capital makes it a first class institution in terms of commitment capacities. Its resources do, in fact, enable it
to guarantee, as of the first year, about
6,000 SME financing projects.
Its creation responds to a strategy of
the public authorities, whose priority
objective is to significantly improve the
SME investment environment particularly by facilitating their financing by
Energie & Mines
50
November 2006
credit establishments. Up to present,
the access constraints to sources of
bank financing have been one of the
major obstacles delaying the emergence
of a performing SME environment in
Algeria. The role specifically played by
SME in the economic growth of a
country and which entails the creation
of wealth and, particularly, of jobs, is
indeed a driving force for economic
development that, today, is fully accepted. It should be pointed out that, in
general, and just like in other countries,
the banker rightly considers that the
financing of SME is very risky. Indeed,
the failure rate in the financing of the
creation of a company is around 30%
to 40%.
Furthermore, when the failure occurs
and the bank commits to the guarantee
invoking process, other than the slowness of the legal procedures which may
entail disputes lasting up to 10 years, it
only generally recovers less than 20%
of the imported debt. Hence, the banks'
reticence to grant investment loans to
the SME and more specifically to
finance their creation are due to objective considerations.
Overall, we can commonly cite: the low
amount of capital, the lack of cost
control, the insufficient guarantees of
the backer and often the lack of reliable
data enabling the banker to assess and
correctly anticipate the risk, given the
lack of technical-financial studies of the
projects submitted by the investor. The
guarantee system of the CGCI-PME
has been validated by international
experts and declared conformant to
international standards. The "caisse"
offers its guarantee to shareholder
banks but also to all the credit establishments of the place they wish to
subscribe to.
Furthermore, in the coming days, the
"caisse" plans to approach all the establishments to offer them its system.
The CGCI-PME guarantee is a particularly attractive product for the credit
establishments. They benefit from risk
hedging that is much greater than what
they would obtain from the best guarantees in value, in speed of mobilisation and in cost.
The bank’s quick compensation, 30
days after the declaration of the incident, constitutes an undeniable advantage insofar as it will quickly recover its
resources up to the amount guaranteed. The CGCI system thus covers
80% of the loans dedicated to financing
the creation of companies and 60% of
the loans designed for developing production of goods and services' activities.
The level of the CGCI guarantee premium is less than the rate applied by
similar foreign organisations. It is fixed
at a maximum of 0.5% of the outstanding amount of the loan granted by the
bank. The amount of the loan eligible
for the guarantee is set at a maximum
of 50 million dinars to take account of
the limit of the usual financing demand
specific to small and medium sized
companies. The SME investment
financing is eligible for the CGCI-PME
guarantee, with the exception of farming and trade activities.
By outsourcing a large part of the risk
taken by the bank to the "caisse”, this
will certainly contribute to modifying
bankers' attitude to the SME risk. The
positive feedback from the guarantee, a
product that is still new within the
Algerian banking community, will, in
the field, mean the progressive lifting of
reticence to the financing of SME. The
CGCI-PME will from now on guarantee about sixty applications this month
and records a potential guarantee
demand for about 400 applications by
the end of the current year.
In the Council of Ministers
Reforms
Approval of the bill on savings
and loan cooperatives
The Council of Ministers has examined
and approved the bill on savings and
loan cooperatives. This bill is part of the
framework of the modernisation of the
financial system and of the diversification of its players.
The savings and loan cooperatives are
groups of individuals who pool their
savings to distribute it in the form of
loans to their members with advantageous conditions. They are non-profit
making organisations. The members
participate in the management of the
cooperative through their social bodies,
namely the general meeting, the board
of directors, the supervisory committee
and the credit committee.
The members of these different bodies
are elected by the general meeting as
well as the managing director of the
cooperative.
The aim sought after through the putting in place of these cooperatives is to
offer their members the financial services which are not accessible to them
through commercial lenders, either due
to a low level of income, their financial
culture or their geographic remoteness
and to favour bankarisation of the largest number of populations.
Establishment of a
Commission for the National
Plan
On Tuesday 11 September, the Council
of Ministers examined and approved
a draft presidential decree to create missions and organise the Commission for
the National Plan.
The Commission for the National Plan is
set up as a specialised authority enjoying
financial autonomy. It is responsible for
assisting the government and selecting
and drawing up its strategy in the
domains of economic, social and spatial
development. More precisely, the commission's tasks will be :
• to analyse the consistency of all development policies in terms of economic,
social and spatial actions and to assess
their effectiveness,
• to organise, in a multidiscipline
approach, a prospective consideration of
the factors likely to affect the nation's
social, economic and spatial revolution in
the long term,
• to organise the putting in place and
development of strategic watch activities,
• to organise and monitor, in association
with the institutions and organisations
concerned, the implementation of the
national statistical information system
and to develop the macroeconomic forecasting and simulation instruments,
• to draw up joint documents for the
monitoring of the economic and social
evolution,
• to draw up and submit to the government the annual report on the economic
and social situation,
• to drawn up the nation's medium and
long term development outlooks.
To accomplish the tasks entrusted to it,
the commission acts upon its own initiative or upon the request of the government.
Speaking further to the adoption of this
bill, the President of the Republic
instructed the government to ensure that
the planning role is made more dynamic
as a means of support for decisionmaking and as an objective evaluation
instrument for the progress of the country's development.
This instrument must contribute to the
identification of the strategic stakes and
challenges posed by the economic and
social development and propose a
concerted and graduated approach
according to the short, medium and long
term.
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51
November 2006
REFORMS
Reforms
Tripartite commission : total success
The minimum salary increases from
DZD10,000 to DZD12,000
Government-UGTA-employers
The tripartite commission has adopted,
in Algeria, the National Economic Pact
and signed the economic sector's branch
agreements (public and private). In a closing speech for the works of the 12th tripartite commission meeting, attended by
the government, the Union générale des
travailleurs algériens (UGTA - General
Union of Algerian Workers) and the
employers, the head of the government,
Mr Abdelaziz Belkhadem, announced
that the pact adopted by the tripartite
commission is valid for four years.
Mr Belkhadem indicated that the pact is
“the cornerstone” for dialogue and collaboration which will encourage efficiency
in (company) management giving consideration to the balance between social
demands and economic requirements.
The signature of this pact, added Mr
Belkhadem, will for the first time in
Algeria's history enable the employer to
participate in the execution of the natio-
nal programme. Furthermore, the tripartite commission has signed branch agreement concerning the public sector and
the “master” collective agreement of the
private sector.
In this respect, Mr Belkhadem emphasised that the signature of the "master" collective agreement between the private
sector and the UGTA with measures that
attempt to improve the purchasing power
of all workers.
The tripartite commission also revised
upwards the national minimum guaranteed salary (SNMG), which, as of 1
January, will be around DZD12,000.
After congratulating the change of view
of the union members, particularly in
relation to the question of privatisation,
the secretary general of the UGTA, Mr
Abdelhamid Sidi Saïd, declared that
“regardless of the content of the pact, it
has the intelligence to exist with the commitment of all parties”, emphasising that
“we have a challenge that it must assume”.
In this sense, he added that with the
results obtained by the tripartite commission “we have just overcome a new stage
and initiated good economic and social
governance".
For their part, the representatives of the
employer organisations felt that this pact
will enable the challenge to be taken up,
employment to be preserved and progress to be made towards sustainable
development, considering it as “a gauge
of everyone's commitment to push things
forward”.
The UGTA backs the social
and economic pact
The Union générale des travailleurs algériens (UGTA) has
backed the social and economic pact.
The meeting attended by the managers of the UGTA and the
different federations "sanctioned the choice for which the
union has fought, since the 1990s, by backing the social and
economic pact”, indicated to the APS the national secretary
of the UGTA, responsible for general relations, Mr
Abdelkader Malki.
"The pact will definitively determine the relations between
the UGTA and the government, on the one hand, and between the UGTA and employers, on the other hand", he specified. Furthermore, the debates also dealt with, in the same
meeting, the branch agreements and, according to the same
sources, the federations gave a report on the state of progress of the negotiations with the asset management companies (AMC). In this respect, the 18 federations all expressed
their “satisfaction” as to the results of these negotiations
Energie & Mines
52
November 2006
since, it added, "the majority have succeeded, even if this has
been difficult for some, in achieving the hoped for results,
particularly with regards increasing salaries”. In this context,
Mr Malki said that “the secretary general of the UGTA,
Mr Adbelmadjid Sidi Saïd, has committed to take responsibility for the case of the Fédération nationale des travailleurs
de la métallurgie, de la mécanique, de l'électricité et de
l'électronique (FNTMMEE - National federation of metal,
mechanics, electricity and electronic workers) and continue
the negotiations until a solution is found that is satisfactory
to all parties”. "The misunderstanding that persists between
the FNTMMEE and the AMC, responsible for these sectors,
only concerns the issue of the increase in salaries”, indicated
to the APS, for his part, the national secretary responsible
for organics, Mr Salah Djenouhat.
Reforms
Reference documentation to the
standards for the audit function
Sonatrach finalises the adaptation process
of the Internal Audit function
The adaptation
process of the
Sonatrach Internal
Audit function to the
international standards and practices
was finalised with the
signature of its reference documentation.
Falling within the framework of the
Sonatrach operating modernisation and
development process, the company project on the “Organisation and development of the Sonatrach Internal Audit
function” has enabled the Group Audit
central division to adapt the organisation of the Group's internal audit function to the international standards and
practices governing the profession, to
develop the different management tools
of the Audit function and the necessary
procedures, enabling the auditors to
accomplish their missions with the
maximum efficiency and diligence and
to identify, in terms of human resources, the requirements for recruitment,
training and development of skills as
well as the performance appraisal criteria. To this end, on 30 May 2006, in the
conference room of the General
Division, a signing ceremony took place
for the Group's internal audit reference
documentation, comprised of three key
and founding documents for the function, namely :
■ The Sonatrach Group audit policy
■ The Sonatrach Group Internal Audit
charter
■ The Sonatrach Group's internal auditors' code of ethics and professional
behaviour.
Note on the internal audit function
drawn up with the assistance of Deloitte
& Touche, a global point of reference in
this activity.
Mr Mohamed Meziane
“Reference documentation which brings us
closer to the large international groups”
After recalling Sonatrach's determination to
achieve the international standards in this
domain of internal audit, Mr Meziane spoke
of his conviction that his Group is moving
closer to the best practices shared by the
large international groups, particularly
those in the oil and para-petroleum industry.
"The reference documentation reflects, he
said, the satisfactory progress made in the
Audit Function's development and organisation project which we launched with the
assistance of our partner Deloitte & Touche
just over a year ago, since this is what will
give us the new tools to modernise the
Internal Audit function in Sonatrach". Mr
Meziane then gave more detail on the three
documents comprising the reference documentation:
"The first one deals with the Sonatrach
Group's internal audit policy. Its purpose is
to guide the Sonatrach Group's directors in
putting in place and maintaining appropriate internal control procedures, based on
evaluating risks. It defines the principles of
internal audit and the terms which must
govern the audit domain throughout the
Group, with the essential aims being:
• the efficiency and effectiveness of the operations;
• the correct auditing of persons and assets;
• reliability and regularity of the financial
and operational information reported;
• respect of the laws, regulations, contracts
and the application of guidelines.”
The second document, "The Sonatrach
Group Internal Audit Charter” fills in a void
found when bringing the audit function in
line with the profession's standards. "This
charter, continued the Chairman of
Sonatrach, establishes the role, the organisation, the scope and involvement of
Internal Audit; it is a reference for the rights
and duties of the internal auditors, all entities of our Group to be respected by everyone within the framework of their activities
and it clearly and carefully displays the
methodological guidelines implemented for
the accomplishment of an Internal Audit
mission”.
The third and final document of this audit
reference documentation, “the internal
auditors' code of ethics and professional
behaviour”, defines the profession's rules of
ethics and behaviour. "Auditors, he emphasised, finally have a precise, clear and directing reference framework, which they must
conform to."
The document is comprised both of the
code of ethics and professional behaviour of
the Sonatrach Group's internal auditors and
of the applicable practical terms and conditions and standards decreed by the Institute
of Internal Auditors (IIA).
After emphasising the increase in the audit
missions and their extension to almost all
domains, whether compliance missions or
insurance and consultancy missions,
Mr Meziane declared that "undoubtedly
considerable effort has been put into this”.
It will undoubtedly encourage the improvement of skills, knowledge and know-how of
the Group's auditors to finally make the
internal audit function an exemplary place
and a driving force for passing on good
practices within Sonatrach”.
To conclude, the Chairman of the
Sonatrach Group recalled that the overall
process initiated is being continued to
improve the company's performances and
adapt its organisation to provide it with
effective audit tools and systems to enable to
it achieve, with the professionalism required
and through the good governance rules, the
objectives it has set itself for the short and
medium term.
"We will achieve all this, he stated, thanks to
the skills and commitment of the Sonatrach
men and women and the qualitative reinforcement of our human resources.”
In conclusion, Mr Mohamed Meziane
announced the initiation of the Annual
Executives' Conference of the Group Audit
central division, this year devoted to the
development of human resources specific to
the Internal Audit function by the signature
of this reference documentation.
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53
November 2006
Economic debate
and political aims
CHRONICLE
Chronicle
By Mohamed Sofiane Kasbadji *
For a few months now,
various forums, societies
and other more confidential meetings have acted,
or reacted, in view of
debating on the country's
economic situation and
correlatively the policy
followed in this domain
by the government.
T
hese are commendable and healthy initiatives, a priori, insofar as
they enable the opinion to be clarified and thus the democratic
field to be enlarged. These meetings and these conclaves do not however
enable questioning - at least for some of
them - as long as they highlight practices and
behaviour revealing a state of mind particularly enlightening as to the actual aims
underlying them. Bringing together political
men and former executives, the discussions
which these meetings placed under the banner of “scientific rigour” give rise therefore
for questioning and particularly: whether this
current frenzy only finally proceeds from one
and only concern: eroding and sharpening
arguments, refining strategies in view of
these decidedly important political timeframes represented by the referendum on the
new Constitution and the legislative elections
of next spring?
Under this report, there would still not be
anything to say as in this case there would be
nothing very normal in wanting to take the
lead and precipitate the adjustment of starting blocks. What is a problem in reality is
indeed the scientific relevance of these
exchanges and the table tennis game drawn
from connivance to which they give rise.
Those who hoped to see authentic attempts
at economic analysis develop in favour of
these debates, will therefore be disappointed:
the scientifically staggered argument is
unfortunately often absent from it whereas
the amalgams and the approximations prospering here are mutually stimulating.
Energie & Mines
54
November 2006
The tropisms of economism
If we systematically denounce, and often
rightly so, the shortcomings of the banking
system, the deficiencies of the human
resources training system, the worrying
weakness of the human development indicators and the vulnerability of our economy
built over 25 years ago on mono-exporting,
we never, however, give justice to the overall
positive macroeconomic report of the period
from 2000 to present.
The imperfections of this report are only
rarely attributed to the difficulties (or to the
requirements) of the political-economic
transition of the country. If we speak of economics, we arbitrarily disassociate both
terms from the word by reasoning mechanically, purely accounting. The spectacular
improvement in the fundamentals of the
national economy has only, for its part bet on
the increase in oil prices. We finally have the
aberrant protest of requiring everything, here
and now. This aspect must lend to consideration in terms of governmental communication. From the point of view of good
governance, moralisation of public life,
diversification of the national productive
potential, etc., the central question in all
debates is the following: "Should we keep the
hydrocarbons in the group to leave them as
they are for future generations, or should we
use them in good conscience to prepare for
the post-oil period?, given that the current
status of our foreign exchange reserves is
arousing lively (local and foreign) greed
which we cannot always say are animated by
the public interest. Beyond any criticism,
whether legitimate or not, we often forget in
these “economic debates” that we cannot
validly answer this question through economism.
Now, with regards the Economic Policy
committing the future of our country, we
cannot content ourselves with the financial
variable alone without proposing new recovery solutions supported on structural analyses, required for building a self-maintained
economy, i.e. sustaining and creating progress for future generations. Hence saying
that the entire importance of a clear and precise definition of a promulgated economic
policy, which clarifies the long terms, gives
the consistency required for the options of
the present whilst reinforcing our country's
credibility.
A source of consolidation of the national
sovereignty, this approach which will rely on
the programme of the President of the
Republic, on which he has been elected, will
favour the visibility required from investors,
will ensure better legal stability and will enable better harmonisation of the economic
relations between the different business sectors of the national economy. Apart from this
necessity, the leitmotiv which comes to any
economist or supposed political scientist is
the following: how can we usefully and efficiently spend our currency assets whilst avoiding underhand dealings and dilapidation?
This is of course the responsibility of all business sectors and of the State first of all. But
this is also part of our economy's absorption
capacity. This capacity which has tragically
failed us, by slowing down investment,
remains determined, to a large extent, by the
qualification of our human resources and the
adaptation of our institutional organisation.
But the more sensitive problem, and which is
inevitably part of complex tendencies, is that
of the education-training to be considered in
its entirety. As it is obvious that it is the
pupils educated in primary education, or
even in nurseries, who will later add to the
specialised institutes, the faculties and the
different business corps. The training given
must still be adapted to the needs of the job
market. Hence, we must consider that the
economic measures will still be insufficient
for as long as they are not supported by an
appropriate institutional organisation that is
completed, in a restrictive way, by budgetary
selection rationalisation instruments, rigorous monitoring of the execution of public
policies and of an (internal or external) audit
system worthy of its name so that it is preservative, educational and dissuasive.
Recent one-off decisions which are part of
the framework of the so-called second generation reforms are moving in this direction :
new provisions for the preparation of the
State's finance and budget's laws; creation of
the Commission for the National Plan. These
are very encouraging measures which
deserve being followed and particularly
completed.
M. S. K.
(*) Economics expert
Reforms
“The potential tributary advantages
of continuing the reforms”
The IMF comes back on the Algeria-EU agreement and investments
The IMF comes back in a report on Algeria's economic situation. First point covered,
the partnership agreement with the European Union that entered into force
in September 2005.
For the authors of said report, the recent
agreement has “costs and benefits”. But
whilst the costs are only in the short
term, the "benefits gained will be over the
longer term" to reassure on the passing
aspect of the first malfunctions born of
its implementation.
Among the difficulties felt by the fund's
experts, we quote the “reduction in revenue, turn around of trade diversion,
transitional unemployment and enterprise closures”. But this cannot in any event
hinder the optimism of the authors of the
report for whom “Algeria's strong financial position together with the deep economic reforms would help mitigate the
short-term costs of the agreement”.
That said, the expected benefits “would
come mostly over the longer term and
consist of welfare gains, increased
foreign direct investment, transfers of
technology and knowledge, and higher
productivity and potential growth”.
As an indication, the loss of customs
resources will increase continuously,
going from 0.1% of GDP in 2005 (the
agreement only entered into force in
September 2005) to about 0.4% of GDP
in 2006 and to 2% of GDP in 2017,
when the agreement will be fully applied.
The revenue loss would be higher if
account is taken of "the impact of trade
diversion and of the adverse effect of the
agreement on the import substitution
sector", notes the report. Working in the
other direction, however, potential
higher economic growth resulting from
the agreement will generate additional
fiscal revenues, which would partly offset
these losses.
To conclude, the fund feels that “realising
the potential benefits of this agreement
depends, to a large extent, on Algeria’s
commitment to reforms”, as, it adds,
“the Barcelona Process positively affected mainly the countries that showed
serious commitment to reform”.
It cites the cases of Jordan, Morocco,
Tunisia, Lebanon and Egypt.
Furthermore, Algeria has an “advantage”, according to the fund's managers,
in the sense that its position - it is the 8th
country to sign this type of agreement enables it to benefit from the experience
of others. Furthermore, the new EU partner is the only “major exporter of oil”,
which means a strategic position for the
entire country.
Another chapter reviewed in the report
deals with Algeria's ranking in terms of
attracting foreign investment compared
with several countries. The business climate and the incentive conditions for
foreign investors is the subject of an
additional study which is based on a survey based on various parameters. The
recommended measures include undertaking “structural reforms aimed at
diversifying the economy and achieving a
transition to a market economy” and
above all ensuring macroeconomic stability.
With regards the industrial policy, the
IMF recommends “accelerating the
restructuring / privatisation of the stateowned enterprises” as well as “increasing
labour market flexibility”. These elements can be used as assets for a modernisation of the national industry and
provide it with the elements of its competitiveness.
Finally, with regards the financial aspect,
the report notes that "banking reform
would improve the mobilisation of
domestic saving and the efficient allocation of the financial resources available
for intermediation”.
“Modernising the banking system requires, in particular, privatising several
banks to reputable investors; improving
the governance of the remaining public
banks; strengthening banking supervision, and developing the regulatory
structure”, recommends the report.
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55
November 2006
Engineering
Case study
“... In terms of knowledge, no country, industry or company has a natural advantage
or disadvantage. The only advantage it can process is the ability to exploit universally available
The key to development
knowledge.” Peter Drucker
ENGINEERING CASE STUDY
Engineering
The driving force of economic development
A driving force for economic
growth
TECHNOLOGY
Abdelmoumen Ould Kaddour
Chairman & CEO
Brown & Root - Condor
“To achieve great things, we need
engineers who dream as well as act;
not only plan but also believe.”
Anatole France
E
ngineering is surely at the
basis of all new development: it is a fundamental
domain thanks to which
we can achieve our dreams and our
ambitions. It enables strong and
vigorous companies to be created
as well as a robust and healthy economy. It also provides opportunities to develop our capacities to be
competitive at the international
level.
We only need to look at the results
obtained within the framework of
the Marshall Plan, designed by the
United States after the Second
World War, for the reconstruction
of the allied countries of Western
Europe. This plan, drawn up under
the American President, Harry S.
Truman, for a period of four years
from 1947, concerned technical
and financial assistance estimated
at 13 billion American dollars -
Energie & Mines
58
November 2006
equivalent to $130 billion dollars in
2006 - to help the European countries recover. Never before had a
single cause known such a concentration of technology and engineering which enabled Western
Europe to experience unprecedented growth and prosperity in the
following two decades.
There is a lot of proof supporting
the idea that technological innovation is at the heart of the creation of
wealth. Indeed, technological progress, raised to front line status,
has been, without any doubt whatsoever, the driving force of the economic and cultural boom of the
20th century. A lot of studies indicate that during the last 50 years,
technological innovation has represented over a third of the growth of
the western economy.
In this context of innovation and
productivity, engineers have played
and will continue to play an ever
more important role. Engineers
will still have to develop new processes and products and manage
new systems in the domains of
infrastructures, industrial production, health, information management, data transmission, etc. In
general, they will have to put their
know-how to the use of society
and, so doing, procure enormous
opportunities to the public and private sectors for the creation of
wealth and of jobs.
In the same way that Japan surprised the West between the 1970s
and 1980s with the increasing
sophistication of its technologies,
the attention has since been turned
to the technological achievements
of the economies of South Korea
and Taiwan and, more recently,
towards the technological potential
and competitive strength of India
and China.
These emerging economies all have
the same vision. The elites, adepts
of modernisation, place the development of sciences and technology
at the top of their concerns. They
have quickly put in place or set up
policies and incentives aiming to
improve the quality of and access to
education, encourage investments,
favour deregulation, keep highly
qualified personnel and attract
foreign investment as well as the
skills of expatriates.
According to Forrester Research, in
the next 15 years, over three (03)
million intellectual workers representing a payroll of 136 million
American dollars, will go to countries like India which, given the
technological profile jobs offered,
are attracting this migratory flow.
India, which has seized this opportunity, is responding to the future
demand of qualified jobs, by training 3.1 million university graduates a year (it is planned to double
this number in 2010).
To support this growth, the number
of engineering educational establishments is likely to increase by
50% to reach almost 1,600 establishments in the next four years.
In 2005, 450,000 studies enrolled
in four-year engineering courses in
India, which means that the outgoing number of engineers will
more than double in 2009.
Europe in its entirety trains, for its
part, 100,000 engineers a year
whereas America only trains
70,000.
Likewise, countries such as South
Korea have seized the national
importance of becoming a main
player in the domains of research,
innovation and engineering. The
result of this is that high technology products today represent over
30% of all products manufactured;
an average well above that of most
OECD countries and the United
States where this ratio is 25%.
The majority of Asian countries
accord a lot of importance to their
capacities in terms of sciences and
technologies and consider them as
being at the very heart of the challenges facing them in various
domains such as the military, economic, environmental and security
domains. Better still, they are
Engineering Case study
convinced that sciences and technologies are, currently, among the
most globalised activities in the
world. Consequently, those who
commit to exploit the opportunities
are ensured that they will have
national innovation systems capable of enabling them, on the one
hand, to reinforce the national
technological capacities and, on the
other hand, better exploit the
opportunities given to them by globalisation.
The political desire of governments
to support and also, above all, to
promote the necessary environment in which innovation and technology can flourish has been the
centre of their success. When
governments adopt a proactive collaboration approach and look to
favour partnership in the domains
of education and industry, their
countries become capable of quickly responding to the ever changing
and ever increasing national needs.
The real wealth of a nation resides
in its human capital, and a lot
consider that this particularly
applies to its engineers. In this
respect, I would like to specify that,
for me, an engineer is someone
who not only knows how to do
things well, but also knows how to
appreciate the right thing to do.
Engineers must, in fact, be capable
of seizing the opportunities for
innovation rather than simply
contributing to increasing productivity. Innovation is the result of the
application of new knowledge to
new and different tasks, and this
process in its entirety is maintained
by a continuous cycle of education,
training and the sharing of knowledge. As the company's "main
integrators", engineers must have
the functional competence required
to provide the leadership capable of
adding to the continuous and interactive innovation process and that
of creating wealth.
75 years ago now, the philosopher
José Ortega Y Gasset predicted
today's challenge in terms of engi-
neering education, writing in the
University's Mission (1930) that
“the need to create good syntheses
and the systematisation of knowledge… will call upon a sort of
scientific engineering which, today,
has only existed as an aberration:
engineering
for
integration.
Through necessity, this means specialisation, as any creative effort
requires, but this time the person
will specialise in overall construction”.
Technological innovation has been
the emblem of the oil industry since
its beginnings. Engineers and geologists are constantly challenged in
looking for oil and gas deposits,
how to extract the hydrocarbons
from rocks or from the soil efficiently, whilst reducing to a minimum the impacts on the environment. Learning from the successes
and even failures of others, engineers feel armed for the next technological breakthrough, which will
contribute to improve the industry's
capacity to produce the oil and gas
the world needs.
The economies are also currently
moving towards an era of knowledge and shared intelligence, where
knowledge is accessible to everyone, no matter where or when, and
where the power, information and
control go from centralised systems
to the individual.
To only take one example, computers have, after a period of a few
years, gone from air conditioned
rooms to cabinets, then into offices, to then become portable and
finally end up in our pockets.
Likewise, the extent of the reach of
telecommunications has largely
increased the intellectual and political connectivity and that of
business. The number of internet
hosting sites went from just 200 in
1983 to 10 million in 1996 and is
in the process of doubling annually,
according to the evaluations of the
Computer Research Association.
☞
Energie & Mines
59
November 2006
ENGINEERING CASE STUDY
☞ In
the current business world,
companies must be able to quickly,
efficiently, dynamically and responsibly react to the changing needs of
the market. They must reduce their
access timeframes to the market
and adapt to changes of circumstances. Furthermore, with governmental regulations becoming stricter and the consumer being more
and more aware, companies have
realised the importance of protecting their environment.
In their effort to become even more
agile, companies have adopted
strategies such as the Engineering
Concomitant. This business strategy replaces the traditional design
and
engineering
sequential
approach, enabling the parallel execution of tasks. The strategy is
focused on optimising and distributing the company's resources in
the design and development stages
so as to ensure an efficient and
effective development process. The
Engineering
Concomitant
is
unquestionably the wave of the
future in that it reduces the time,
costs and execution risk and
improves efficiency and effectiveness. However, to achieve these
advantages, the collaboration
between individuals, groups, structures as well as with the clients,
suppliers and partners is essential.
Throughout the world, people are
focussing their attention on the
importance represented by protecting the environment. Pollution is
increasingly contaminating the air,
water and neighbouring land. This
has led to the introduction of the
industry's environmental practices
in the districts, communities and
even in individual homes. For this
purpose, companies are concentrating more energy on environmental
issues from the design and development stage of new projects. This
“green design” process consists of
systematically taking into consideration the environmental management, safety, waste management,
ecology, conservation and restoration problems.
Energie & Mines
60
November 2006
Looking to be constantly more
dynamic and more receptive to the
market's needs, companies are still
continually ready to adapt the complex business models to unforeseen
challenges. This is not a banal task,
but rather a complex strategic plan
which requires the company's full
commitment, powerful leadership
and continuous dialogue with everyone inside the business value
chain. Doing this, there is no
doubt that the advantages are substantial and those who have succeeded have transformed these best
practices into competitive advantages.
Successful engineering relies on
the following prerequisites :
• A clear strategy
for the execution of the work
• An evident commitment to
improving health, safety and the
environment
• Efficient and effective project
management
• Well trained personnel
• An interface control
• Standardised tools
• Computer simulation tools
• Global supply sources
• Knowledge management
• Risk management
If these prerequisites are fulfilled,
the future can only then be the fact
of organisations and individuals
that have the ability to :
• design whilst responding to the
objectives of safety, reliability, the
environment, operating costs and
maintenance:
• continually design projects which
respond, to, or exceed, the clients'
expectations;
• acquire the intellectual qualifications required for on-going training :
– create, at the world level, effective partnerships which will enable
them to increase their areas of
expertises and access the latest
technologies;
– understand the physical constructions and the economic, industrial, social, environmental, politi-
cal and international context in
which engineering is applied.
In Algeria, we are living in a period
of shake-ups of the structures and
mentalities. At this particular time
in its history, our country is going
through a difficult transition to
a market economy where technology plays a vital role for economic
growth and sustainable development.
In this reform, restructuring and
economic recovery effort, we
consider that it is of the utmost
importance that a significant percentage of investments are reserved
for technology as a privileged basic
tool for resolving a lot of difficult
social and economic problems,
such as the creation of jobs, housing, the improvement of infrastructures and communications,
managing the environment and
living areas, designing more efficient and more profitable public
health systems, etc.
In spite of the remarkable efforts in
terms of training and numerous
initiatives in the domain of scientific and technological research,
Algeria has not been able to, for
various reasons, accomplish the
necessary integration of projects to
draw from its potentials and develop skills in terms of engineering
which would have enabled it to
support a strong industrial and
economic base in general.
Today, a second opportunity is
offered to it with the emergence of
its services' sector. To ensure its
success, it must, however, establish
strong collaboration between the
public authorities and the companies that can guarantee legislative
and regulatory support, a reduction
in bureaucracy and a commitment
to develop the skills within the
Algerian workforce. The reward, in
case of success, will be the opportunity to become, in the coming
years, an important player in the
world's services' economy, by creating jobs and important added
value both inside and outside the
country.
In this perspective, and by continuing to favour the latest research
which is the basis of competitiveness, our country must ensure that
its engineers and managers assume
increasingly complex roles in the
future.
To do this, we need to reinforce the
national fundamental research
capacities, establish new incentives
and institutional arrangements to
link the research to the economy,
find new mechanisms to bring a
national innovation system in line
with the trends towards a globalisation of research and innovation and
reinforce the capacities for the
international cooperation in sciences and technologies.
To support this global effort, we
need to develop a scientific
approach in terms of education,
training and managing skills that is
capable of ensuring the attraction,
the motivation and the loyalty of
people in the different engineering
disciplines. This can only be done if
there is real active cooperation between the training institutions,
industry and the public authorities
through the putting in place of
significant and measurable action
plans. To make this expensive
investment effort profitable in
terms of training the engineers of
the future, we must improve the
way in which skills are managed.
Achieving competitive advantages
in engineering companies is not
only a technological matter, it is
also a human resources management matter in terms of using them
and ensuring that they generate
added value for the economy. We
therefore need to create an environment where the skills we have
are committed, well trained and
motivated. If we succeed in this
crucial development stage, we will
have established a solid and productive technological base which
the country can make use of to
build up a self-maintained and therefore inexhaustible potential for
the future.
Engineering Case study
This means that it is essential for
the public authorities to make
improving endogenous technological capacities an absolute priority,
which can only be achieved with
direct financial support from the
State as, if this is left up to the
vicissitudes of the market or is
considered the sole responsibility
of industry, we will certainly fail
to guarantee the future of our
country.
References
1) Society of Petroleum Engineers.
2) Forrester Research.
3) The Future of the Oil & Gas Industry Harry J. Longwell - Director and
Executive VP. Exxon Mobil Corp.
4) Next-Generation Engineering - Joseph
A. Bordogna - Acting Deputy Director
Science Foundation.
5) Computer Research Association
6) José Ortega y Gasset.
To summarise, we have to note everything that other countries have
accomplished, learn from their
experience and look to make similar programmes succeed that are
adapted to Algeria's stage of development. For this purpose, it is
essential for the public authorities
to play a leadership role, channel
financial aid to specific industries,
encourage risk-taking, and stimulate and influence the acquisition of
foreign technologies.
The highest standards must above
all be put in place to create and
promote a climate favourable to the
development of science and technology supported by a powerful
education system along with the
participation of industry.
I hope that the articles below will
further highlight the importance of
engineering as a driving force of
economic growth and will give
examples of best engineering practices and relevant case studies.
Other articles will also give you an
overview of the progress of engineering and comparisons enabling
you to get an overview of the progress of engineering and the problems having an impact on Algeria.
To finish, I would like to remind
everyone that our efforts and
perseverance are the key to our
success. One thing is certain: to
succeed we all have to be a lot more
imaginative and intellectually ambitious.
Energie & Mines
61
November 2006
ENGINEERING CASE STUDY
South Korea's experience
Engineering
T
Namhee Park
Managing Director
Keangnam Algeria
he Republic of South
Korea, with a relatively
small surface area, representing 1/24 of Algeria's
land surface, has weak natural
resources but did however have
48.3 million inhabitants in 2005
and has one of the highest population densities in the world. This
country, located to the north-east of
Asia, is the only country in the
world to remain divided, in spite of
the ethnic homogeneity of its population.
In the aftermath of World War II, a
Republic of Korea (ROK) was created in the southern half of the
Korean peninsula, whereas a communist type regime was set up in
the north (the Democratic People's
Republic of Korea). In 1950, the
"Korean War" began which devastated the peninsula causing several
millions of deaths and casualties.
Thereafter, and for the next twenty
years, the Republic of Korea benefited from the support of western
countries.
In the space of thirty years, Korea's
transition from the status of a country devastated by the war and lacking natural resources to a country
with advanced technology is a
unique case in the world.
In what follows, we will see how the
Republic of Korea has overcome the
weaknesses and constraints specific
Energie & Mines
62
November 2006
to its environment to become a
strong country in the field of engineering.
tion was, however, structured on an
intensive use of labour.
Initially, he adopted an economic
policy focussed on exporting and,
through a strategy avoiding the
importing of raw materials; he created a chemical industry necessary to
put in place the infrastructure for
light industry. At this time, construction of factories essential to the
development of the country depended on foreign engineering companies and the realisation of public
works and architectural construc-
Supported by the initial economic
progress recorded in the industrial
infrastructure development plan,
the Korean government drew up the
so-called "Engineering Service
Nurturing Law” to enable the transition from industry based on an
intensive use of labour to heavy
industry with intensive use of technology. In the terms of the law and
the governmental policy, a lot of
benefits were granted to newly-
Elected to power at the start of the
1960s, President Park Chung-Hee
launched a National Economic
Development Plan with the objective of overcoming the deplorable
situation suffered by the country
due to the war.
Thanks to the development of heavy
and chemical industries, the volume
of exports multiplied by 10 in 1969
compared to the first years of the
same decade. This gave the Koreans
self-confidence and made them
aware of their ability to do more if
they focused on their objectives.
created engineering companies.
Hence, large companies became
owners of factories and construction companies, in their turn, created engineering companies to construct new factories and develop
their business activities.
By virtue of the engineering service
nurturing law and thanks to the
annual increase in exports which
exceeded 40%, the country needed
to build more factories, industrial
zones, industrial facilities, roads,
ports, etc.
Consequently, training and education courses were deemed necessary to be given, in this period, to the
highly technical engineering workforce. For this purpose, the Korean
government drew up a policy
encouraging the training of the
technical
workforce
required
through the establishment of several
technical colleges and setting down
quantitative objectives for the workforce to be trained by each college.
Practical manuals in all fields of
industry as well as scholarships
designed for research were made
available to the technical workforce.
In the middle of the 1970s, Korea
was to suffer two oil crises. As a non
oil producing country, Korea could
not avoid the shortage of foreign
currencies essential for importing
oil, particularly after the oil price
surged. Furthermore, it was very
difficult in the economic crisis
conditions to ensure the supply of
the raw materials needed for its
exports whereas the demand on oil
facilities and infrastructures remained very high in the countries of the
petrodollar wealthy Middle Eastern
countries.
To exit the crisis, the Korean
government placed its highly qualified and well trained workforce,
through the cooperation with the
private engineering and construction companies, in the petrochemi-
Engineering Case study
cal industries and in infrastructure
construction projects in the Middle
East. Acting in this way, the government was not only able to overcome
the oil crisis in consideration for the
petrodollars earned in the Middle
Eastern countries, but at the same
time saw its construction and engineering industries make enormous
progress in the quality and quantity
aspects.
Hence, the training of technicians is
a key and essential element of any
industrial modernisation policy and
of an industrialisation which would
lead the government to contribute
to the creation of jobs and increase
Koreans' salaries. Furthermore,
when Korea found itself confronted
with a national crisis, the private
engineering and construction companies were able to save the country
thanks to their breakthrough into
the overseas markets, using their
know-how acquired in terms of
engineering.
In the 1980s, the Korean engineering companies were at the top of
the world's ranking in terms of
technology and equipment for
having successfully concluded
large-scale international contracts.
In 1982, these performances ranked Korea in second place after the
United States of America in terms
of order volumes in overseas cons-
truction, particularly in the Middle
Eastern region where the Korean
market share was 20.9% compared
to 36.1% for the USA and 7.2% for
France. This means that Korea's
construction engineering technology has not only judiciously and
more than adequately overcome the
two oil crises of the 1970s, but also
achieved its strategic objectives by
making Korea a developed country.
In conclusion, in the decades between 1960 and 1980, Korea was
able to draw up and succeed in a
technological development strategy
adapted to national economic development. This on-going strategy
enabled Korea to have strong engineering technology in the industrial
and construction sector.
Finally, by completing the development of engineering, Korea has
managed to improve the quality of
life of its citizens, create jobs, set up
a high technology industry and a
country that is resolutely focussed
on exports; a country which thus
ended up by joining, between the
years 1990 and 2000, as a highly
industrialised country, the group of
developed countries.
Ranking of overseas construction orders in 1982
Country
America
Korea
France
Germany
Japan
Italy
Great Britain
Order
amount
Total
44.9
13.8
11.4
9.5
9.3
7.8
7.5
Market share
(%)
36.5
11.2
9.3
7.7
7.6
6.3
6.1
Middle Eastern Region
Order
amount
18.5
10.7
3.7
2.4
2.5
2.8
3.0
Market share
(%)
36.1
20.9
7.2
4.7
4.9
5.5
5.8
(Unit : USD billions)
Energie & Mines
63
November 2006
ENGINEERING CASE STUDY
Importing and exporting
services in Algeria
TRANSFORMING HYDROCARBONS INTO SKILLS
W
e often hear debates on
the obstacles of Algerian
society. Why aren't these
foreigners coming to
invest more heavily in our so beautiful
country ? Is there in some way a desire
to harm or damage the political stakes
which would make investment in
Algeria be boycotted ?
Today, the search for energy supplies
and outlets for the products of industrialised countries is such that no country can enable itself to boycott Algeria
that is so full of great hopes.
If the obstacles are not coming from
outside, they must be caused inside the
country. In my opinion, these obstacles
totally come from inside the country
and there is not, without any doubt
whatsoever, an external concerted obstacle or particular coldness. Investing
in Algeria from Europe is so much
easier than going to China or India. If
the foreign investments are insufficient
it is because of internal reasons that are
difficult to accept in situ.
We therefore have to question these
internal reasons. After so many years of
shortage, Algeria and Algerians aspired
to consume. It is remarkable that you
can find anything and at low prices in
Algeria. Sometimes, I've even looked
for what present I can give to friends something that was not found in
Energie & Mines
64
November 2006
Jean-Marie PINEL
CEO KPMG Algeria
Algiers. It is very difficult as you can
find almost everything there.
However, the country brutally and dramatically lacks skills. There are, of
course, great skills in Algeria, but in
such an insufficient quantity that it is a
lot easier and more financially viable to
manufacture abroad and import. Why
deprive ourselves when Algeria has the
means to pay for them ? This is fair,
but the population to be employed is
such and the future exhaustion of natural resources is evident that the current
chain of wealth is likely to leave behind
it a very bitter taste.
A lot of players have considered explaining this reticence in investing in
Algeria. Each of these factors contributes to it for a good part: land, nit-picking administration, lack of legal publications, obsolescence of most of the
industry, etc. But one of the essential
factors constituting the largest obstacle
both today and tomorrow is know-how
and skills. To overcome this, we need to
transform part of hydrocarbons into
knowledge and know-how into value
for Algeria. This means a major
investment which will benefit future
generations much more than physical
investments.
If, after World War II, Europe recovered with overwhelming speed, it is that
the money given or lent by the
Americans within the framework of the
Marshall Plan has fallen on the competence that the war did not have the time
to make obsolete faced with great
needs. Twenty years later, GDP per
capita was no longer far behind the
GDP of the United States.
The financial amounts procured by oil
are much bigger each year, per capita,
than those given to Europe by the
Marshall Plan.
Everyone knows that we have to get
ourselves organised to create this competence; schools and universities are
working on this but I don't know
enough to talk about it. However,
schools and universities must be
prolonged by experience, continuous
training, foreign techniques, etc.
Today there is no contingent for any
manufactured product whatsoever.
Even a useless product can be imported, provided it finds a taker on the
Algerian market. You order it, it goes
through customs. The Bank of Algeria
takes what is needed from its currency
fund to pay for it and make it available
to you.
If you manage a services company and
you do not have the specialist you crucially need to achieve the mission you
have committed to and you need to pay
for it, you will enter into a process
which makes you despair of being able
to make progress. All companies are in
this situation. There are contracts to be
drawn up, in forms which suit those
who release methods of payment; we
need to argue, justify, demonstrate,
spend a lot of time to the detriment of
profitability and productivity to import
the service you need and which, by
buying it, will enable you to train your
employees who will learn even more
than at school, in contact with people
who have great experience but who,
unfortunately for you, are foreigners.
Algeria, a formidable investment country, also has great know-how: at least
that of advising foreigners on itself. We
thought that to do this, we needed to
fix ourselves in Algeria, particularly to
better advise our potential foreign
clients.
Today, there is still a debate on finding
out whether the advice we sell to a
director from a foreign general quarter
is an export. For example, if we carry
out a due diligence mission to take a
potential stake-holding in a company
that can be privatised, will this service
that we are selling to a Montreal company in Canada be an export? This is
very important as if you give this service from Paris, Beirut or Tunis, as our
competitors do; you will invoice it
excluding VAT and will be paid in fully
available currencies. If you invoice it
from Algiers, the doctrine is not yet
clear to find out whether you need to
add 17% VAT which your client cannot
recover to which is added the 2% corporation tax and which will make your
service too expensive.
The bank is highly likely not to reserve
you a part of the currencies it receives
as currencies available for buying, in
exchange, services you need : in short,
the authorities today have difficulties in
accepting that a service can constitute
an export whereas foreign countries
favour this type of export which enables
them to improve their balance of payments, the skills of their workers and
the radiation of their economy.
Here you have one of the reasons why
we are, for the time being, the only one
of the four major foreign research firms
to be set up in Algeria rather than working from abroad.
Engineering Case study
So, you are particularly told that the
balance of services between Algeria and
abroad is in a deficit situation :
• How could it be otherwise if we
account it as such with the cost of
importing services, but that do not
recognise exports in the same way?
• This is so serious that the services
balance is in a deficit situation, as if the
service bought interfered with the work
of Algerian specialists. Are we not therefore in the process of creating tomorrow's service economy by importing
real know-how ?
Perhaps we simply have to ask each
service importer to have a surplus
export balance of services. A lot have it
in the service and it is remarkable compared to the trade deficit, excluding
hydrocarbons where imports of goods
are not covered at 10% by imports if we
exclude the coverage procured by
hydrocarbons.
The most developed countries have
GDP comprised of over 70% services.
This is the economy of tomorrow. The
percentage of manufactured products
is tending to decrease compared to services. But services enable us to improve the knowledge required to keep the
factories in place. France – a country
with very high labour costs – is one of
the most important receptacles of
foreign investments. This is why,
thanks to services, productivity there is,
in spite of everything, stronger.
Counting on the barely valuable chimera of cheap labour is an error when the
lack of services eats away at this so-called comparative advantage.
Nothing will be done without being
aware of the contribution of service to
the welfare of humans and the progress
factor it represents. This will then mean
finding the means to enable it to express itself as if we have managed to find
the means to facilitate the importing
and exporting of physical goods.
Tomorrow we will manufacture with
less and less work, but with more and
more specialists who will sell their service to enable this manufacturing. Will
we enable them to exist, be recognised,
and develop ? The most numerous and
most highly paid jobs are in services.
The development of services is an
important factor of social stabilisation
and of the creation of jobs.
The service economy enables the long
term maintenance of the balance of
payments and the North/South trade
terms. Without taking this factor into
account, the most developed countries
will consider us to be their energy supplier compared to the technology of the
North, but without the creation of
independent development due to the
constitution of specific know-how.
Factories set up here are often out of
date and no longer profitable in the
North; this will teach us much. On the
other hand, if we master the latest technologies, we will create these poles of
competences here.
How can we do this without, beforehand, having created service companies
whose exporting we accept as well as
their importing to develop and win
advanced technology market shares ?
We have to enter feet first into the
economy of knowledge, service, invention… which will provide the productivity. Failing this, I fear that we are
forced to import, even longer, the
goods we need, as it is far too complicated to manufacture here and far too
expensive particularly because the skills
here are more expensive than abroad –
no matter what proportion is kept.
Often, this doesn’t even relate to very
high skills, but those we need every
day.
Energie & Mines
65
November 2006
ENGINEERING CASE STUDY
Short history of engineering
in industry in Algeria
I
n the aftermath of Algeria's
independence, a few rare
industrial plants remained in
activity in the country. Their
number was insignificant, but they had
research capacities for their own sectors.
The companies Durafour and Somel
produced the necessary research for
the construction of industrial buildings
and the metallic framework.
The company Neypric studied the
hydraulic equipment and manufactured
it in its own plant. The public company
EGA, just like EGF France, also had a
research structure for constructing its
stations' electricity poles…
1962-1963
Emergency industrial plan
Algeria's economic and social situation
required a quick initiation of an industry as a source of job and income generating development. The country had
to be industrialised.
The Berim research firm (Bureau d'études, de réalisations et d'interventions
industrielles et minières) was created
for this purpose in February 1963. Its
missions were to research and execute,
within the framework of plans and programmes, the industrial and mining
exploitation projects. It enabled it to
launch the first manufacturing plants
thanks to international cooperation.
Bulgarian co-operators provided skills
and seriousness and provided the framework of this research firm.
Energie & Mines
66
November 2006
Hachemi BENYAHIA
Vice-President Audit
Brown & Root - Condor
This research firm provided complete
documentation to suppliers :
• Machine specifications and files
• Civil engineering and assembly
studies
It controlled, managed and supervised
the assembly of buildings and equipment.
In September 1964, the research firm
Berim was dissolved and replaced by :
• The research firm Beri (Bureau d’études et de réalisation industrielles)
whose purpose was to research, within
the framework of industrial equipment
programmes and projects, the new
investment or extension projects for the
existing industrial plants which would
be entrusted to it by the Ministry of the
Economy.
• The research firm Barem (Bureau
algérien de recherches et d'exploitations minières), whose mission was to
promote the research and exploitation
of resources from the sub-soil, with the
exclusion of hydrocarbons, to execute
or have executed geological or mining
research works. The research firm was
then merged into the national company
Sonarem.
In July 1968, the research firm Beri was
dissolved and all its assets, rights and
obligations were transferred to the
national company Sneri (Société nationale d'études, de gestion, de réalisa-
tions et d'exploitation industrielles)
which had just been created.
Sneri’s purpose was to research and
realise all investments of an industrial
nature and provide the services entering within the framework of this
purpose.
In April 1982, the Sneri was dissolved
and all its assets, rights and obligations
(assets and liabilities) were distributed
between several light industrial companies (Edil, Enitec, ENRI-East, ENRIWest, ENRI-Centre).
The creation of different national companies saw the appearance of prime
contractors whose mission was to
construct industrial works.
The company Sonelgaz (Société nationale d'électricité et de gaz), heir of the
research firm EGA (Electricité Gaz
d'Algérie), had its own research departments which prepared complete documentation for the construction of
industrial plants (electric power plants)
which it divided up into separate lots
for the companies.
The company SNS (Société nationale
de sidérurgie), by perfectly integrating
technical co-operators, would go further into research works with clearly
separated lots in terms of local assembly and construction skills.
The SNS then created an engineering
plant and then the subsidiaries Sidem,
Cosider and Genisider.
The company SN Metal (Société nationale de constructions métalliques),
created by an order in November 1967,
was responsible for running and managing the metallic construction factories
of the public sector and running all
constructed plants.
It did this excellently, accepting the
research and doing the assembly for:
•
•
•
•
Electric power plants,
Industrial buildings,
Storage tanks,
Storage spheres.
For the construction of the electric
power plants' framework, or the manufacturing of pylons, the company SN
Metal received the necessary and detailed studies from the company
Sonelgaz. With regards the storage
spheres, it bought licences.
The company SNS ordered from SN
Metal a “turnkey” individualised lot that of “preparing materials” where the
SN Metal played the role of chief engineer for the procurement and construction studies of the plants.
This decision by SNS, aware of the
problems of timeframes and prices, was
taken with the desire to set up plants
outside the company SNS capable of
contributing to the development of the
steel industry. This attitude was also
that of the company Sonelgaz.
Both these companies wished to develop job and income generating plants
and to see the emergence of construction companies capable of responding
to their needs. The decisions made by
the companies SNS and Sonelgaz were
undertaking decisions led by the
concern for the country's industrial
development.
They were part of a general climate in
which the national awareness and the
fact that industrialisation was a source
of economic and that social development prevailed.
Engineering was felt to be a necessity
as it enabled the plants needed to be
designed and also enabled them to be
divided up in lots likely to be constructed, manufactured or taken in and by
local industrial plants.
Engineering Case study
Engineering was thus used for national
promotion. But engineering, in the
modern sense, had no meaning.
In the domain of oil, gas and petrochemistry, the contractor, whilst being
mindful of the need to use the national
assembly and manufacturing capacities
as much as possible, did not succeed in
creating all effective studies capable of
providing accurate technical data to
achieve these objectives.
Sonatrach, just like large international
oil and petrochemical companies, also
opted to construct its works for the
“turnkey” formula.
However, what was not apparent at the
start was that these large international
companies had developed their own
departments capable of providing complete documentation with specific
briefs and its own standards that they
provided to engineering (general
contractor) that took responsibility for
the detailed studies, the procurement
and the assembly.
In its relations with the international
companies in charge of the construction of the works, the company
Sonatrach had focussed more on the
contractual legal, financial and administrative aspects. No system was put in
place that was capable of transferring
knowledge and technology, even if
these international companies wanted
to do this.
The Sonatrach END (Engineering and
Development Division) realised, as
contractor, all projects for the oil and
petrochemical sectors of the country
(pipes, LNG, refineries, fertilisers,
plastics) for the two four-year plans.
Although it had completed a very large
number of industrial works, it did not
however succeed in creating an engineering unit that was capable of national integration. Neither was it able to
initiate a transfer of skills.
In its quest to master its development
and get the existing (or to be created)
local companies involved, Sonatrach,
through its END (Engineering and
Development Division) attempted
several routes. It created, either alone
or in partnership with foreign companies working in Algeria, research, construction and assembly companies.
It created a few engineering companies, including:
The company Altec, with the assistance
of Topsoe (Danish company), for the
construction of an ammoniac plant - an
enormous ambition that failed. After
terminating its relations with Topsoe, it
constructed the refineries in Hassi
Messaoud and In Amenas with
Hydroprocessing. This company then
also dissolved.
With the rest of the Altec elements and
those of the END division, in August
1983 it created the company Enep
(Entreprise nationale d'engineering
pétrolier). The latter was responsible
for carrying out the general, technical,
technological, economic, financial and
commercial studies in the domains of
feasibility studies, market studies, technical-financial studies and profitability
studies.
This company was born with an enormous handicap that it was never able to
overcome, as it had inherited a great
deal of administrative personnel
without great qualifications, without
great means, without an important
work load and with only a few study
activities, a lot more in the domain of
control and supervision.
Abroad, it worked in Libya and particularly in Mauritania in the revamping of
the Nouadhibou refinery. It was used
for one-off actions and became much
attached to design engineering and was
not able to develop construction engineering.
As never being backed by a large international engineering company to be
able to hope for its development, the
company Enep did not succeed either
in achieving its objectives. It was dissolved in February 2003 and its assets
were transferred to Sonatrach from
which it was created.
The company Enac (Entreprise nationale de canalisations), designed as a
research and construction firm, having
to successfully carry out the pipeline
studies, construction, supervision and ☞
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November 2006
ENGINEERING CASE STUDY
☞
general inspection of the works, was
never able to emerge in the domain
of pipelines and finally failed and dissolved.
The company Safir (Société algérofrançaise d'ingénierie et de réalisation)
created in 1991 between Sonatrach,
Sonelgaz and the French companies
GDF and Sofregaz, participated in the
revamping of the LNG-4 Arzew gas
facilities, but did not succeed either in
convincing.
In the end, it was separated from its
foreign partners and no longer has a
work load capable of ensuring its survival. Discussions should be currently
underway with another foreign partner
to purchase 49% of the capital.
Brown & Root - Condor
In January 1992, Sonatrach, Naftec
and the CDM (Centre des matériaux)
falling under the remit of the Ministry
of Research, signed a master agreement for the creation, in the form of a
joint stock company, of an engineering
company named Condor Engineering.
This company was able to obtain
numerous small study projects; it did
however lack the experience so much
sought after in the use of the very latest
technologies, methodologies and
management techniques used by the
large international engineering companies - experience which is essential
to convince the large national and
international clients of its ability to
competently execute large projects of a
complex nature.
It became necessary to develop a partnership with an international engineering company of great repute having
up-to-date technology in order to
acquire know-how in the realisation of
more complex projects.
In April 1994, a master agreement was
concluded between Sonatrach and the
American company Halliburton (parent
company of Brown & Root) to develop
a partnership, particularly in the field of
engineering.
One of the most important results
expected from this partnership was
access to the immense resources of the
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68
November 2006
different Brown & Root plants which
has worked for tens of years in the field
of engineering throughout the world.
In other words, the partnership with
Brown & Root had the aim of transferring to an Algerian company the most
modern techniques in terms of systems,
organisation and management. This
partnership also had the aim of reinforcing the company's intervention abilities and extending the remit of its activities to fields as complex as detailed
studies, procurement, management
and monitoring of industrial projects,
particularly in the oil and gas, refining
and petrochemistry sector.
The targeted objective was to integrate
all the functions and activities related to
engineering and the construction of
projects in view of having, at the national level, a tool capable of responding
to the national needs.
The company Brown & Root-Condor
quickly imposed itself on the engineering and project management project,
initially in the domain of hydrocarbons
and, then, in other sectors such as
infrastructures and new technologies.
As it developed its resources and skills
and successfully completed the projects
entrusted to it, the company consolidated its work load and diversified its
business portfolio.
Within the timeframes and to the satisfaction of its clients, it accomplished
major and complex projects such as :
• the Hassi Berkine oil field production
facilities;
• the Aïn Naâdja, Oran, Constantine
and Blida hospitals;
• the Bouchaoui criminology and criminalistics centre;
• the Aïn Naâdja expertise centre;
• the Tamanrasset air base;
and a lot of other projects which would
be too long to list.
In conclusion, we can confirm that all
the attempts made for the creation of
performing Algerian engineering companies, capable of accomplishing large
projects in the different business
domains, all practically failed.
Hence, in 2006, with the exception of
Brown & Root - Condor, which continues in a difficult environment to win a
large share of the market available in
Algeria, the other investment projects
continue to be won and carried out by
foreign companies in the form of “turnkey” contracts and, most often, without
any transfer of technology or knowhow.
It is becoming necessary and imperative to develop a national strategy and
encourage the creation of Algerian
engineering companies able to favour
and “pull up” the development of the
country.
Birth and development
of an engineering company
Engineering Case study
Brown & Root - Condor
T
he industrialisation policy
implemented by Algeria as of
the end of the 1960s caused
huge demand in terms of the
construction of projects. Now, given
the complexity of the technologies
implemented in these projects and the
requirements for highly skilled personnel, the national capacities did not
experience development capable of
overcoming the constraints and meeting the requirements of the market.
The acquisition of expertise and knowhow in this domain is, as everyone
knows, a cumulative process that is
both long and difficult and, despite the
efforts made here and there to build up
local capacities, Algeria remained – and
still remains – largely dependent on
foreign engineering companies.
Aware of this great shortfall, the public
authorities, from the start of the 1980s,
decided to set about the creation of
national research and project realisation capacities on behalf of the main
objectives of the scientific and technological project.
In fact, basing itself on the recommendations of the National Seminar on
Scientific and Technical Research,
organised in February 1982, the
Supreme Council for Scientific and
Technical Research, which met in the
month of April of the same year under
the presidency of the Head of State,
adopted an action plan for research in
which the reinforcement of the national
research capacities was deemed one of
Abdelkrim RAMTANI
Consultant
its main priorities. Within the framework of this perspective, the Centre de
développement des matériaux (CDM)
introduced, within the framework of its
mission within the New Energies
Commission, as of 1985, an engineering business whose initial aim was to
enable the development of materials at
the pilot and industrial scale. In fact,
the introduction of this business inside
the centre led to the acquisition, during
the year 1984, of the ASPEN Plus
(Advance
System
for
Process
Engineering) software.
The opportunity of building a bridge
between research and the industry
became essential given the possibilities
offered by the system for the design,
renovation and optimisation of chemical and petrochemical industrial plants.
After training the personnel in its use,
beforehand, the CDM undertook,
within the framework of the improvement policy then encouraged by the
supervisory body, deploying this in the
industrial sector and particularly the
hydrocarbons sector (Sonatrach,
Naftec, foreign partners, etc.).
The adoption of the law no. 86-14 on
hydrocarbons and the subsequent recovery of investments in this sector had
the effect of once again making engineering demand highly dynamic, both
for the new projects and for the renovation of the existing plants. Hence
various plant simulation studies or gas
and oil production fields’ development
studies started to be entrusted to the
CDM by Sonatrach.
The success of the initial projects
encouraged the centre's managers to
reinforce its intervention capacities
thanks to the acquisition of the
Intergraph system - a set of computer
aided design modules used for basic
engineering and industrial and architectural design.
Origin of the creation
of Condor Engineering
The evaluation of the engineering market as of 1990 confirmed the trend
towards a strong increase in potential
demand, particularly since the recovery
of the hydrocarbons' sector, and showed that the experience accumulated
within the research centre could be
usefully and quickly used by the industry. Given its status and its vocation,
the centre could not, however, undertake large scale engineering projects
without failing in its fundamental
research mission. Starting with this
reality and the pressing need to develop
an effective engineering tool, the executives of the Ministry of Research and
Technology, and the Ministry of
Energy, decided to transform the
Process Engineering Department of the
Centre des matériaux into an engineering company capable of working in
accordance with the standards accepted at the global level, and to give
young researchers and engineers the
opportunity to develop and perfect
their skills to bring them in line with the
standards and requirements of a market economy based on the spirit of
competition. The first stage in this pro-
☞
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ENGINEERING CASE STUDY
☞
cess consisted of putting in place, in
partnership with national industrialists,
an independent company capable of
improving the experience developed
within the CDM by making this available to the economy with, as an outlook,
its later opening up to foreign partners
possessing the appropriate resources
and technology. The main stages of the
subsequent creation process are summarised below :
• the authorisation to create the company on 3 December 1991;
• the fixing of the CDM stake-holding
in the company's capital at 40% in the
form of contributions in kind;
• the contributions' transfer conditions
from the Centre de développement des
matériaux to the company.
In parallel to the approaches undertaken to obtain the administrative authorisations and evaluate the contributions, negotiations were started with
Sonatrach, Naftec and the Fonds de
participation hydrocarbures, chimie et
pétrochimie (which later withdrew),
negotiations which led to the signature,
on 15 January 1992, of a master agreement between the three shareholders
for the creation, in the form of a joint
stock company, of an engineering company named Condor Engineering with
capital of DZD25,000,000.
Transformation of Condor SPA
into a joint venture company
Although the first stage of this process
was relatively successful, in terms of
the company being able to obtain
numerous small study projects; it did
however lack the experience so much
sought after in the use of the very latest
technologies, methodologies and
management techniques used by the
large international engineering companies - experience which is essential to
convince the large national and international clients of its ability to competently execute large projects of a complex nature.
It was therefore recognised that the
quickest and most efficient way for
Condor Engineering to assimilate this
type of know-how and experience was
to forge closer relations with an international engineering firm of great
repute with the latest technology, wishing to transfer its technology and
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70
November 2006
know-how. Now, as of the end of the
year 1992, Sonatrach and Halliburton
(parent company of Brown & Root)
had negotiations on the way in which
the two groups could collaborate more
closely. A series of joint venture companies were considered and discussed,
the most significant of which was the
joint venture between Condor
Engineering and Brown & Root. The
negotiations continued in the year
1993 and, in October of the same year,
an agreement between shareholders
was signed within the framework of the
new legislation on promoting investment. One of the most important
results expected from this partnership
was access to the immense resources of
the different Brown & Root plants.
In other words, the partnership with
Brown & Root had the aim of transferring to an Algerian company the most
modern techniques in terms of systems,
organisation and management, reinforcing the company's intervention abilities and extending the remit of its activities to fields as complex as detailed
studies, procurement, management
and monitoring of industrial projects,
particularly in the oil, gas, refining and
petrochemistry sector.
The targeted objective was to integrate
all the functions and activities related to
engineering and the construction of
projects in view of having, at the national level, a tool capable of responding
to the national needs.
The agreement between shareholders
particularly provided for :
• a 49% stake-holding by Brown &
Root;
• changing the company name to add
the name and logo of Brown & Root,
with the company thus becoming
Brown & Root - Condor SPA;
• increasing the capital to the equivalent in dinars of 8 million dollars (i.e.
288 million dinars at the exchange rate
of the time). In April 1994, the creation
formalities were finalised and the company Brown & Root - Condor was
born. The company's different transformations and the break down of shares per shareholder are outlined below.
Development and main achievements since the creation
of the company
Despite Algeria's political, economic
and social context at the start of the
1990s and the particularly difficult
conditions of this era, the company,
thanks to exceptional determination,
quickly imposed itself as a partner to be
reckoned with on a market as up-todate and complex as engineering and
the construction of projects, initially in
the domain of hydrocarbons and then
in other sectors such as infrastructures
and new technologies. As it developed
its resources and skills and successfully
completed the projects entrusted to it,
the company consolidated its work load
and diversified its business portfolio.
The company's initial strategic plan for
a five-year period was drawn up and
implemented in 1996 with precise
development objectives in terms of
markets to be targeted, resources to be
developed, organisation and financial
performances. The strategy implemented thus enabled particularly remarkable growth of business, by considerably
enlarging its project portfolio and, particularly, the launch of major and complex projects such as the crude oil production plants of the Hassi Berkine
field. Doing so, the company's turnover
was multiplied by more than 19, going
from DZD615,000,000 in 1996 to
DZD29,687,000,000 in 2001.
This strategy was continued and reinforced with the adoption, in 2002, of a
new strategic plan for the period 20032012 whose more ambitious objectives
were defined, taking account of the
prior evolution of the company as well
as the new challenges to be taken up to
respond to the strong demand and to
provide a greater contribution to
Algeria's economic and social development. Within this framework, a study
of great importance for the strategic
focus of Algeria's economic and social
development, called “Algerian New
Deal Initiative” (Andi) was set up in
1999 to be used as a guide for decision-makers.
Likewise, two prospective studies are
being executed related, respectively, to
Algeria to 2015 and the other to an
energy consumption model to 2050.
Given its extent and the complexity of
the activities and operations required to
accomplish it, the implementation of
the plan required, as a support, a vast
programme of developing the resources, technology and know-how of
BRC, but also improving its organisation and its management system. All
these elements are in the process of
being culminated into a Global
Integrated
Management
System
(GIMS) similar to those of international engineering and construction companies.
With regards the actions undertaken in
this sense, we should particularly note
the ISO 9001-2000 and 14001 certifications. Since the ISO 9001 certification, the efforts to fine-tune the quality
assurance systems, project management and operations are intensely
being pursued. This has not only enabled the annual re-certification of
B&R-C, but also improved the process
and the quality of the services to offer
what is best to our clients.
Engineering Case study
company ESCB from El Achour after
the
agreement
of
the
State
Participations Committee. This acquisition aims to reinforce the integration
of activities whilst participating in the
recovery of this company in difficulty
whose workforce amounts to over 800
workers.
From 2002 to 2005, the personnel
workforce multiplied by three, going
from 400 to 1,150 and continues to
increase.
B&R-C has put particular effort into
training for its employees. The latter
are often totally immersed in projects.
They work in close collaboration with
experts from the KBR shareholders.
They thus acquire know-how and
expertise which are consolidated by the
latest training courses at universities or
international schools.
These are just a few indications which
enable us to measure the stages overcome by this company, which is particularly distinguished in the Algerian economic landscape by its dynamics and
its achievements. From the modest
engineering company of 1992, it has
become, in the space of one decade, a
recognised leader in the field of engineering and construction with, to its
credit, numerous projects of major
interest for the Algerian economy.
Hence, not only has it been able to
significantly contribute to the development of certain key sectors of the economy, but it has also, at the same time,
been able to ensure more than enviable
growth as shown by its operational and
financial performances.
In parallel to this, B&R-C is implementing, when conducting its business, the
highest performance standards in
terms of health, safety and the environment (HSE). A training and awareness
policy is carried out permanently for all
sites opened by B&R-C.
It concerns both its own personnel and
those of all subcontractors working in
its projects. This results in a magnificent reduction in the accident frequency rate.
The acquisition of the construction
means specific to the company has
always been an objective for the company and, for this purpose, B&R-C has
recently acquired the construction
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ENGINEERING CASE STUDY
EPC-Lower Risk, Shorten
Construction Cycle
and Reduce Costs
Risk Management
Rich Marking-Camuto
EPC vs. Traditional Approach
EPC has emerged as the delivery
method of choice for executing system
projects in all market sectors. The acronym EPC is short for "EngineerProcure-Construct," which implies that
a single entity has complete responsibility for a project from start to finish.
Oddly, the key function that assumes
this overall responsibility, namely project management, is not in the name.
Traditional Project Approach
Historically, utility, industrial and large
commercial entities, including governmental and institutional facilities,
employed sufficient resources to perform project management, engineering
design and procurement, and in some
cases, construction. However, "right
sizing" to meet competitive and economic constraints has greatly trimmed the
in-house capabilities of many firms,
sometimes down to a single individual.
To compensate, project work was primarily "outsourced" to consultants and
contractors. Consultants developed the
Energie & Mines
72
November 2006
design and bid packages, while the successful contractor was responsible for
equipment and material procurement,
installation and start-up. The figure
below depicts the relationships in this
traditional project approach.
The customer has at least two major
contracts to administer and multiple
lines of communication to oversee.
Generally, the customer is assuming
the business risk associated with the
project and when problems arise, they
often result from mis-communications
between
the
major
parties.
Consequently, "finger pointing" ensues.
When viewed from a time-line perspective, the traditional project approach
has two distinct drawbacks. First, the
two major functions, engineering and
construction, are performed at different times. Second, the total project
schedule is longer because of multiple
bidding phases. Consider the following
observations:
• Not all major parties are known at
the beginning of the project.
• The total cost is not always known at
Systems Integration and Packaging
the start of a project. Many work from
a best estimate.
• The overall schedule has not been
defined at the start of the project.
• The two major third parties, the
consultant and the contractor, are not
in "sync," i.e. by the time the contractor
is on board, the consultant has already
completed as much as 95% of the engineering design. This means most of the
consultant's resources have been redeployed with few left to satisfy the
remainder of the contract, particularly
when it comes to resolving problems
encountered by the contractor, unless a
series of change orders are issued along
with a corresponding schedule commitment.
• The return on investment is delayed
due to the prolonged project schedule.
Fast-tracking is sometimes used to
accelerate the project schedule, but this
usually increases the overall cost and
risk.
Engineer-Procure-Construct
(EPC) Approach
In the EPC approach, the EPC firm
assumes overall responsibility for the
project, thereby relieving the customer
of this burden and risk. The customer
deals with a single-point contact - the
EPC project manager - thus simplifying
the lines of communication as illustrated in the diagram below.
With an EPC approach, the parties
involved, the project budget and the
project schedule are known BEFORE
the project begins. Communication
between engineering design, procurement, and construction begins immediately, which makes accelerating the
Engineering Case study
revenue generating benefit of the accelerated project schedule.
The following diagram compares the
project schedule of a traditional project
versus an EPC project. Note the durations of each major task are the same,
yet the project can be delivered more
efficiently. This clearly shows the project's expected return on investment
(ROI) will be realized sooner, which
may make the difference between doing
the project or not.
project schedule possible without
imposing greater risk. Customers skeptical of using an EPC approach for projects are generally concerned with the
perception that EPC projects command
a premium price. This is not true. EPC
can be more cost-effective when the
value of the risk assumed by the EPC
firm is considered, along with the early
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73
November 2006
New contractual
strategies
ENGINEERING CASE STUDY
T
he relations between client
and contractor have considerably changed over the last
20 years. In fact, everyone
has responded to the changes of the
local market, the impact of globalisation and to the tenacious desire to
improve margins and added value. This
has never been more experienced than
in the realisation of EPC contracts at
the international contractual industry
level.
Historically, clients directly managed
the engineering, procurement and
construction elements with the different contractors assigned to each project. This led to the emergence of complex communication interfaces and the
need to have large personnel to manage the main and secondary activities.
Furthermore, the people responsible
for managing the contracts at the client's team's level possessed limited experienced in the domain of constructing
works, thus increasing the costs and
the risk exposure given that their main
objective resided in the production
results of said works. Furthermore, the
strategy also had a negative impact on
the main financial activities given that
the attention was focussed on the
management of secondary elements,
with this implying a low overall yield
for the company.
Due to the market pressures at the start
of the 1980s, and in order to improve
the operational and financial performance as well as identifying and introducing the practice of better working
methodologies, several clients launched
themselves into the practice of global
benchmarking. The result of these
Energie & Mines
74
November 2006
Tarek MOKRANE
Vice-President Operations
Brown & Root - Condor
efforts was a decision by the client to
develop the vertical integration strategies which would introduce internal
technological skills inside their working
structure. The latter strongly invested
in making this new strategy a reality.
However, a large number of them realised that the approach had not worked
property due to the unmanageable
increase in costs, the time incurred for
management turned far away from the
basic activities and the investment was
important whereas their ROI (return
on investment) was low.
In 1986, the impact of the crash in oil
prices affected the entire world and
clients quickly refocused on reducing
the risk exposure and stabilising costs.
This had a dramatic result: clients
abandoned their strategies aiming at
vertical integration in favour of subcontracting all secondary activities.
Contractors responded to this market
opportunity as well as to the pressure
from clients to provide engineering,
procurement services and the contractual capacities of a main contractor by
strongly investing. Consequently, the
category of contractors specialised in
the EPC fixed price projects was created (figure 1).
The advantages of an EPC contract
were quickly identified by the clients :
• It enables the simultaneity of the activities, whereas, within the framework
of conventional contracts, the interfaces between the disciplines were
sequential and contractually managed.
• The contractual obstacles were lifted.
• The communications are clear and
unambiguous as the client controls one
contract interface.
• The "fast track" approach is now possible.
• The lead-times for the projects and
the costs are reduced and the client's
ROI is improved.
Towards the end of the 1980s, clients
realised that the "fixed price" approach
was excessive and inflexible given that
all the risks were incumbent upon the
Engineering Case study
Type of contract
Reimbursable contract
“Fixed price”
Unit rate
Description
Table 1
All the services provided by the contractor are
reimbursable at agreed rates.
The contractor undertakes a specific task
at a price fixed in advance.
A unit price is applied to certain specific elements
of the project that can be measured (BPU).
Mixed contract : fix price
A unit price is applied to certain specific
elements - reimbursable party - elements of the project that can be measured
unit rate (BPU)
(BPU). The elements that can be fixed are
subject to fixed prices. Certain services or
equipment that cannot be fixed or measured
are reimbursable.
Open Book + Fee
Bonus clause
The contractor is reimbursed for all the
subcontracted works. The management, the
administration and the profits are included
in a fixed percentage of the invoicing (Fee).
Similar to the Open Book, but with incentive
measures.
contractor. To resolve this problem, the
latter endeavoured to work in collaboration with the contractors, with the
aim of gaining more flexibility in the
contracts. Consequently, the contractors developed a menu of types of
contracts (table 1 & figure 2) enabling
clients to minimise their risk exposure
as well as optimise their management
and flexibility requirement by adopting
one type of contract only or a combination of types.
Currently, the market conditions are
pushing us towards improvement,
given that clients and contractors each
recognise the considerable investment,
in the human expertise, technical
resources, business experience and the
financial capital. By adopting a long
term position leading to the development of contracts with incentive mea-
sures and alliances with the contractors
(figure 3), the client identified the
considerable interest of such a position.
Contractual development in Algeria has
numerous parallels with the overall evolution of contracts. However, specific
economic conditions have affected its
alignment with the global model.
Whereas Algerian clients identified the
high costs and the low profits due to
having internal technological competences, the latter put pressure on the
contractors to develop an EPC potential. KBR (a subsidiary of Halliburton)
and Sonatrach responded to this
opportunity by putting in place an
Algerian EPC company - Brown &
Root - Condor in 1994. Consequently,
an immediate transfer of the latest
technologies enabling a fast track of
Algerian skills was available for all
clients. No other Algerian company had
responded to this opportunity of entrepreneurship in EPC and no other international contractor was ready to invest
in Algeria due to currency problems at
that time. Although the situation
improved, no Algerian or international
company was able to put EPC companies in place.
Whereas the economy quickly developed in the world, clients increased their
demand to start the projects quickly;
more efficient contractual strategies
therefore had to be developed. Clients
and contractors such as BP/KBR and
Exxon/Bechtel recognised the significant investment they made by developing the common skills necessary, the
technologies and relations for better
quality and costs and, consequently
“preference contracts” were developed.
Turning towards the future, a lot of
clients and international contractors
are already in the process of exploring
ways of improving their alignment
which remains still far off.
By looking to identify and eliminate all
the activities with no added value, aligning the common interests and motivating contracts, they hope to create
long term partnerships based on trust
and performance. This partnership
approach is already working well in
several other industries as they are
focussed on the creation of a single
team with a common objective. It is
clear that adopting this win-win mentality can only be a positive step for
everyone.
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75
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ENGINEERING CASE STUDY
T
What is the role of engineering
in the economic development
in Algeria ?
he global economy has entered into a phase of profound
changes of the organisation
and operating of industry
whose employment and revenue generating role has shrunk little by little. The
services related to this industry have
been developed to take first place. What
are, therefore, these services related to
the industry - a factor of global development? These are outlined in figure 1.
From this diagram, we see that a large
number of activities related to industry
are in the initiation, creation and execution of projects.
What was part of the organisation of the
industry itself is being outsourced and is
being autonomous.
Hence, engineering, conceived as "new
works" in the industry just before World
War II in Europe is increasingly becoming independent, outsourced by the
parent industry which thus finds its justification here, through the skills which
are being developed here, the level of
adaptation of these services to the new
discoveries and new technologies. In
economic history, industry as a driving
force of development has considerably
reduced the importance of agriculture,
and has, itself, stagnated and reduced
its importance in the development to
leave space for services which are now
taking on a preponderant place.
In Algeria, these services have not been
given the attention they deserve and are
often poorly understood and confined
to a “secondary” role. Engineering has
undoubtedly experienced a specific evolution in the global economy, but in
Algeria it seems that a lot of people have
understood it as a simple research firm,
an author of plans, an activity for drawing up designs and diagrams whose
main activity is either works, assembly
or equipment. The engineer that reali-
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76
November 2006
Hachemi BENYAHIA
Vice-President Audit
Brown & Root - Condor
ses an industrial project is perceived as
possessing the infrastructure to realise
all the civil engineering, assembly and
even equipment manufacturing works
and, why not, machines.
Now, engineering is nothing of the sort.
The Japanese experience of transferring
technologies has demonstrated that a
conversion "agent", i.e. an intermediary
between the transferor and the transferee, is one of the most important prior
conditions for the success of this transfer. Engineering plays a determining
role in this role of “mediation”. It can
eliminate the part taken against the local
companies in favour of foreign companies.
Engineering is capable of disassembling
technologies in block and adapting
them and modifying them in view of
making them usable, accessible and
thus respond to local needs. The suppliers of technologies and licences have
often testified to a negative attitude
towards the transferees, by preventing
them, through restrictive means, from
making use of local contributions and
materials. It can thus, little by little,
integrate the local capacities in terms of
equipment or spare parts produced
locally for the existing or new companies.
At the start, we thought that the purchasing of technologies and the setting
up of large industrial plants by purchasing appropriate technologies was
necessary and sufficient to boost development. Very quickly we realised that
this was far from being sufficient. We
particularly focussed a great deal of
attention on the creation of new industries whereas the existing industries
were experiencing an accelerated deterioration. In the developing countries,
this phenomenon explains how, with a
constant volume of investments, we
result in a reduction in GDP: a large
part of the contribution from the new
investments is counterbalanced by the
constant reduction in the yields from
the former plants.
What can engineering do?
In an era of never ending transformation and innovation, the most advanced
industries are becoming obsolete overnight. The cost of modernisation is
becoming excessive and the industries
are thus abandoned.
Algeria cannot abandon the modernisation of its industry to the skills of
foreign experts as the cost of these
modernisations would weaken its competitive position. The role of engineering in the studies, then the management and commissioning of industrial
projects is becoming increasingly
obvious.
Taking responsibility for the maintenance, the putting in place of a management system is barely starting to awaken interest. However, this role has
devolved to it in the modern organisation of the industry. The engineering
company can favour the emergence and
development of many research firms,
service companies, etc. to which it will
easily subcontract a large number of
activities. This orientation will, without
context, be a stimulant for the development of local expertise. We tend to
believe that the shortfall of executives is
a question of workforce and qualifications, knowledge and practical education; now, the specialists and graduates
who have gained practical experience
abroad find it difficult to get jobs.
The lack or weakness of these services
related to the industry only enable a few
career outlets in education or public
administration where these rare resources are far from being used as they
should be.
Engineering Case study
The emigration of graduates (brain
drain) is considered to be caused by the
level of salaries. This is only partly true.
The general climate of development
through practical experiences offered by
the range of jobs is its main reason.
The vast domains covered by these
industrial support services may constitute the crucible of employment of skills
from experts and thus contribute to
stopping and reversing the brain drain.
There is no doubt whatsoever that the
engineering company can participate in
the developments of services and those
particularly with high added value and a
high content of information knowledge
(in the information technologies). In
national reality, the problem of water
has become dramatic. A new industrial
strategic focus can be considered. The
seawater desalination plants, for example, which are small industrial plants,
whose planned number is very important, may give the engineering company
this role of “mediator” as it is able to :
• select the appropriate technologies;
• dismantle these technologies and
upgrade them in line with local skills
through clearly separated lots that it can
control and distribute to the local companies;
• create around it a subcontracting network of research firms, expert firms,
industrial or construction units;
• with these thus established networks,
set up a database capable of focussing
on looking for goods and services
locally.
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November 2006
The progress made
ENGINEERING CASE STUDY
by engineering
The technological progress
made by engineering
T
he evolution in world markets, the birth of the internet,
numerous partnerships, the
abundance of information,
etc. have made the world change. To be
competitive in this new, ever-changing
world, companies have to take the time
to analyse all these changes.
The electronic networks, the integrated
computer tools and the common working tools have significantly improved
project management; these tools have
enabled us to improve response time
and efficiency in terms of accuracy of
the operations, and particularly of the
calculations.
The crossroads for Algerian companies
Today, Algerian companies have a big
decision to make: either they stay
behind and therefore experience development tomorrow or, on the other
hand, they accept that it is time to make
the great leap towards reality and the
future. This reality is summarised into
tools and models that enable project
management and information to be
improved.
Asking ourselves about what engineering does is and must be developed
given that it represents one of the fundamental factors of the domain of project management. This leads us to these
questions: should we be content with
excelling in the tools and processes
acquired since the creation of our com-
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78
November 2006
Abdelmoumen Ould Kaddour
Chairman & CEO
Brown & Root - Condor
panies or should we regularly make
great leaps towards the future by integrating this technological progress into
engineering? Some of the most important changes are the way in which business is managed and projects are executed.
Today's market is demanding and
requires being fully looked after. Not
only do the aspects of reduced investment & operating budgets and reduced
project executive timeframes remain
crucial points, but we also need to
ensure the respect of the human safety
and environment standards and the
operating of confirmed management
systems.
Hence, all countries or investors are
forced, at a given time, to make a choice between taking account of today's
global market's requirements or else
favouring the welfare of the local economy. The issue, in my opinion, is simple: adopting the "open book” trade
model and favouring the execution of
Figure 1 : Trade model
engineering by local companies are the
key to the evolution sought after.
Engineering represents the fly wheel of
a nation's industrial and economic
development. It is even part of everyone's daily lives. Who has not, at least
once in their life, had to solve an everyday life "concern” by using “ingenious”
approaches most of which are innate?
Optimising storage space, for example.
Engineering Case study
The new
management tools
These last few years, the oil and gas
industry has undergone various evolutions. Today, there are numerous
design tools to carry out engineering
studies such as the simulation of processes, computer aided design (2D,
3D) and database systems.
In fact, by mentioning engineering, we
make allusion to “design”. The latter is
only the transcription of an “idea” into
plans, data, etc. Once determined, this
“idea” is deemed to be shared. Now,
how do we share it? Initially we need to
create a common operating environment. Then come the definition and
putting in place of common favoured
methods and tools.
Figure 2 : Computer aided designs
Figure 3 : A network of users using software applications whose versions
are different (see the number of stars) thus making exchanges and transfers
of data difficult.
This approach which favours the coordination of the multidiscipline design
enables engineering to establish a better monitoring of the execution of the
project.
Figure 4 : 3D design model
The drawings below illustrate the
manufacturing model of the Hassi
Berkine project. It is important to point
out that the sharing of information on
this project is done between different
sites, namely Houston, Algiers, Hassi
Messaoud and Hassi Berkine.
☞
Figure 5 : Example of a manufacturing model
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November 2006
ENGINEERING CASE STUDY
☞
The traditional project interfaces are
broken down as follows: the design,
the FEED, the estimate, the EPC, the
commissioning and the operations
(maintenance).
In fact, just a few years ago, the execution of the projects followed a sequential process based on the production of
documents (see figure 6).
This process successively went from
one phase to the next, according to the
rule: the end of phase “i” announces
the start of phase “i+1”, as illustrated
in figure 6.
Hence, in this approach, the project’s
planning depended on the completion
of the documents to be produced.
With the technological progress made
in engineering, project management
evolved towards an integrated management system. In fact, nowadays, it is
possible to execute various and even
almost all project tasks in parallel.
After defining the design elements, the
studies, the procurement and construction are initiated at the same time,
thus reducing the execution time frames. This so-called “Fast Track”
approach is based on the concept of
sharing information which, obviously,
requires perfect knowledge of all information and human resources used in
the project (ref. : figure 7).
In the 1970s, the engineering systems
were specific applications installed in
large systems. Almost 20 years later,
these systems evolved and were replaced by mini-systems, then by stand
alone systems (PC & networks) to
finally lead to integrated systems using
integrated databases. The introduction
of integrated systems, to the great
satisfaction of clients, led to the optimisation and added value of their project. Indeed, such systems enabled the
Energie & Mines
80
November 2006
Figure 6 : Sequential process
Figure 7 : Fast Track
Figure 8 : Progress of assembling and manufacturing a given project’s zone
on a specific date.
Engineering Case study
single entry of data and integrated all
persons involved in the project. They
enable the operating of a conventional
environment, the integration of other
modules – depending on the business
sector – required for the execution of a
project and, finally, the operating of a
global network (the internet).
The choice of such management tools
has a positive impact on the mobilisation of a project's workforce. With a
smaller number of people in charge of
executing the project, the deliverable
products (documents and others)
are drawn up in a shorter timeframe;
we therefore talk about optimised
mobilisation.
Figure 9 : Impact on the mobilisation of the workforce
Consequently, the adoption of integrated procedures and a common
operating environment enable a significant reduction in costs, as shown in
figure 10.
Figure 10 : Cost reduction
The information in a project represents
the essential link, indeed the decisive
one. Its volume increases during the
execution of the project to reach a peak
during the construction phase (see figure 11).
Figure 11 : Information flows and needs
☞
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ENGINEERING CASE STUDY
☞
The management of this information,
particularly in this critical phase, is
complex and requires, therefore, a specific approach.
Hence, to overcome this, we needed to
put an Information Manager in the
organisation of the information management for each project. This new
player enables the reduction of the
effort to be provided as well as better
reliability.
To facilitate the fluidity of the transfer
of information, we have adopted a tool:
COE
(Common
Operating
Environment). This solution is an operating environment which :
• procures a common operating environment;
• standardises the operating tools;
• enables the quick transfer of data;
• manages the software licences;
• shares the resources (human, etc.);
• enables network-based operating;
• enables employees to access the network throughout the world, regardless
of their geographic position.
The engineering activities have multiplied over time and have become more
complex. All these integrated systems
and all these shared resources have
improved project management.
The activities are accomplished in less
time and with more precision and
accuracy. The success is mainly due to
the latest tools, communication systems and to the technological watch.
Engineering is part of this conception
of globalisation to which the current
tools enable access.
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November 2006
Figure 12 : Common operating environment
Engineering Case study
Role of Education, Science, Engineering
and Technology in Developing Countries
TURKEY
A. Bilsel and Ö. Oral
This paper emphasizes
the importance of a
science policy which
assigns the highest priority to stimulating and
supporting science education and research. The
impact of such a policy
on economic growth is
discussed, and in this
context, the policies of
developed and developing countries are compared. Strategies and
policies for developing
countries are compared.
Strategies and policies
for developing countries
are recommended. The
state of engineering education in Turkey is summarized and compared
with the American curriculum, as exemplified by
electrical engineering.
Eastern Mediterranean University
Gazimagusa, North Cyprus (via Mersin 10, Turkey)
Introduction
There are significant social and economic
differences between developed and developing countries. Many of the underlying
causes of these differences are rooted in
the long history of development of such
nations and include social, cultural and
economic variables, historical and political elements, international relations, geographical factors. These, however, do not
tell the whole story.
The differences in the scientific and technological infrastructure and in the popularization of science and technology in
the two groups of countries are the most
important causes of differential social and
economical levels. An essential prerequisite to a country's technological progress
is early recognition of necessity of a good
educational system. This was one of the
key factors that contributed to Japan's
economic success [1]. The role of
Technion, the Hebrew University of
Jerusalem and the Weizmann Institute in
Israel's rapid development cannot be
underestimated [2], [3].
In this paper we shall emphasize the
impact of scientific and technological
infrastructure on economical growth of
developed and developing countries.
Recommendations for developing countries on necessary policies that they
should implement will be discussed. The
state of engineering education in Turkish
universities will be summarized and compared with the American curricula.
Science and Technology in Developed
and Developing Countries
As Abdus Salam, the Nobel Laureate in
physics in 1979 observes, in the final analysis it is basically mastery and utilisation
of modern science and technology that
distinguishes the South from the North
[4]. Some developing countries have
made important contributions to the
development of science and technology in
the past and some even served as the
cradle of human civilization. But the flowering of science and technology that
began in Europe in the 17th century was
used to advantage by only a relatively
small group of nations [5]. This situation
created not only a difference in material
aspects of cultures, but also a difference
☞
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ENGINEERING CASE STUDY
☞
in the social climate of the two groups
of countries. The practical use of science through technology created the climate for ever increasing emphasis on
the pursuit of science and education in
developed countries, where funding
scientific enterprises is widely accepted
as a vital and long-term investment. For
example, federal funding alone provided
for non-defense basic and applied
research in the States, was $7.9 billion
in 1985-and more than half of this kind
of support is given to the universities
[6]. Contributions of industry to national expenditures on research and development are about twice this amount
[7].
Today, in developed countries basic and
applied scientific research is an essential
investment in the long-term welfare [8].
In the universities, they assign highest
priority to stimulating and nurturing
scientific and technical talent, and to
the concomitant training of students.
What is emerging from this priority is
the close association of education and
economical growth. Accelerating the
rate of growth and rate of productivity
can basically be accomplished by stimulating and supporting scientific education in universities.
Salam [9] states that science in developing countries has been treated as a
``marginal activity'' and perceived even
as an ``ornament.'' Indeed, most of the
developing countries do not realize that
their situation can only be rectified with
the infusion of modern science and
technology into their societies.
Although some of the developing countries are aware of the importance of
science and technology, this awareness
does not necessarily make it easy to
develop, and popularize science.
Inadequate scientific infrastructure is a
critical factor which creates strong barriers to the path of advancement in
developing countries.
The critical size of human resources
and infrastructure, and the amount of
investments in these areas, illustrates
how science and technology are of
neglected importance in developing
countries. Industry and universities in
Turkey face shortages of researchers-10
for every 100,000 of population compared with 280 in US, 240 in Japan, 150
in Germany, 140 in the UK [8]. In
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1984, in Turkey non-defence research
expenditures were 0.20%of GNP [10],
while in the US they were 2.74%,
2.65%in Japan, and 2.54 %in Germany
[8]. Thus, developing countries have
principal shortcomings in their funding
and supporting scientific infrastructure.
Another indicator of how science is of
neglected importance in developing
countries is that most of these countries
fail to stress that, for long term effectiveness, technology transfer should
always be accompanied by science
transfer. From the simplest to the most
highly complex industrial products are
based upon the rapid advances and
accumulation of scientific knowledge in
various related areas.
Compared to technologists, economists,
and planners, the extent to which scientists are allowed to play a role in nation
building is another important problem.
Few developing countries have formulated such a policy of allowing scientists
to play their roles [11].
In summary, the social and economic
growth of the developed countries is
dependent on an essential emphasis on
education, science, and technology. The
basic problems of developing countries
are the weak educational and scientific
infrastructure, and a lack of appreciation of the importance of science as an
essential ingredient of economical and
social development.
Strategies and Policies
for Developing Countries
Modern science permeates every aspect
of economic and social life. For this reason education, research and technology
as instruments for accelerating development should receive special attention in
national planning in the developing
countries. One of the major factors for
marginal science and technology development in the most developing countries is the lack of planning and management of these activities. Thus far,
only a few developing countries have
attempted to formulate and adopt a
national policy [11], [12].
In order to make a realistic plan, not
only a vision, but also scientific leadership, and investment in scientific enterprise both by government and private
sectors are required. Short-term finan-
cial considerations in investment decisions, that have been observed so far in
developing countries, will always be
more costly and time consuming.
The institutions for scientific education
and research oriented, professors, wellequipped laboratories, modern libraries
and archives within these institutions,
constitute the minimum requirements
of a scientific infrastructure any developing country must provide for. In order
to establish this infrastructure then, the
support and funding for universities
should be increased. The science policy
in a developing country should be
determined in collaboration with the
government, universities and industry.
This collaboration should take into
account technological needs, resources
and practices. For this purpose, government efforts must be addressed to establish an industry-university cooperation
to communicate technological advances
to potential users.
As Salam [9] says, developing countries
which plan to have a rapid economic
growth, should first consider if they
have provided ideal opportunities for
their high-level scientists and nurtured
their talents for the nations' well-being.
Furthermore, these countries must
ensure the economic and social wellbeing of their scientist and provide an
attractive and well equipped research
environment to their migration to countries with enriched scientific and social
opportunities. Science and technology
based industry should be identified as a
major source of economic growth and a
means of addressing important social
problems as well.
In conclusion, developing countries
should be committed to retaining highlevel scientists, stimulating them, and
providing funds and other support to
encourage and maintain their productivity.
Engineering Education
at Turkish Universities
Higher education in Turkey is developing very rapidly. The average annual
growth rate of students in higher education in Turkey during the period 198085 was one of the highest in the world:
14.1%as compared with 7.8%in
Canada, 5.0%in the UK, 1.4%in Italy,
0.2%in the US, -0.2%in Hungary, and 5.3%in Poland [13].
The number of students enrolled in
engineering is high: 18.33%of the total
enrollment as compared to 8.20%in
Italy, 7.90%in Austria, and 3.29%in
France. The relatively low enrollment in
natural sciences, mathematics and computer science, however, reflects the
``marginal activity,'' attitude of developing countries: 5.46%as compared to
15.58%in France, 10.10%in Italy and
9.20%in Austria [13].
Turkish universities require four years
of study for the completion of an undergraduate degree in engineering. Turkish
industries expect engineering graduates
to have the current know-how to solve
immediate problems. This expectation
is often reflected in university curricula:
there is a tendency to teach as many
courses as possible in the core subject.
As a result, the total credit-hour requirement is considerably higher than that
required at American universities. The
mean number of credit-hours required
for the BS degree in Electrical engineering at eight established engineering
schools (Bilkent, Bogaziçi, Çukurova,
Technical University of Istanbul,
Karadeniz, Middle East Technical
University, Selçuk, and Uludag) is
161.3. It ranges between 146 and 211.
According to the results of a recent
questionnaire completed by 125 electrical engineering departments in the
States, the mean number of credit hours
required for the BS degree in American
universities is 133.5 [14].
The mean number of semester credithours of electrical engineering courses
required by Turkish universities is
100.9. The range is between 77 and
166. Even at the three universities
known to be closest to the `American
model' the number of required electrical
engineering credit hours is high:
Bogaziçi 77, Bilkent 78, Middle East
Technical 83. The corresponding mean
number of required credit hours at
American universities is almost half of
this: 52.9 [14].
The emphasis on mathematics and
basic sciences (with the exception of
chemistry) is strong. The mean number
of mathematics credit-hours is 22.7,
compared to 17.8 at American universities. The mean number of required physics credit-hours (11.9) is higher than
the American mean (10.9). The chemistry mean (3.9) is, however, lower than
the American mean (5.1) [15].
Engineering Case study
The increase in the number of core subject courses in Engineering curricula
has occurred at the expense of general
liberal arts education courses. Thus, for
example, the mean number of credithours in general humanities courses
available to engineering students in
Turkish universities is 3.8, as compared
to 18 credit-hours in American universities. This presents another dilemma
which must be resolved for the university in a developing country, if the aesthetic, psychological, sociological, and
other cultural relations and consequences of scientific and technological development are to be taken into account.
Conclusion
In developing countries economic
growth can mainly be enhanced by a
science, and technology policy.
However, science and technology can
play their role in development only
when the integrity of the whole enterprise-research institutions, universities,
publications research priorities and
emphasis and the education of creative
scientists, as well as those active in
science is preserved. Thus, the simplest
strategy in developing countries is first
of all, to increase the percentage of
GNP that is to be devoted to universities and research institutions.
Developing countries should understand the fact that perceiving investment
in sciences as a time-consuming, wasteful and costly activity will bring further
limitations on their economic growth.
In conclusion we believe with Salam [4]
that it is a political decision on the part
of those who decide on the future of
developing countries to take proper
steps toward creating, mastering and
utilizing the resources of science and
technology.
References
1. Shishido T. Japanese Industrial
Development and Policies for Science and
Technology. Weekly Science, 219, 21
January 1983
2. Troen S.I. Higher Education in Israel:
An Historical Perspective. Higher
Education, 23, 45, 1992
3. Wechsberg J. A Walk Through the
Garden of Science. London: Weidenfeld
and Nicholson, 1967
4. Salam A. Notes on Science, Technology
and Science Education in the
Development of the South (Prepared for
the 4th Meeting on the South Commission,
10-12 December 1988, Kuwait). Trieste:
The Third World of Academy of Sciences,
1988
5. Sharafuddin A.M. Science
Popularization: A View from Third World.
Impact of Science on Society, 14, 347,
1988
6. Keyworth G.A. Four Years of Reagan
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7. Ruskenveld Y.V. Partners in Innovation?
Science and Public Policy, 15, 19, 1988
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pp 441-450, 1987
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10. Sinclair C. Science and Technology in
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11. Choi H.S. Science and Technology
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12. Ramanathan K. Evaluating the
National Science and Technology Base: A
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13. Nicolae V., Smulders R.H.M. and
Korka M. Statistics on Higher Education.
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14. Aspnes J. A Summary and Analysis of
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(unpublished)
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ENGINEERING CASE STUDY
Ressources
Humaines
In India, Engineering Success
T
he classroom of the future
will feature electronic white
boards. The teachers of the
future will write equations on
these boards with electronic pens. And
the students of the future won't have to
choose between concentrating on the
teacher and scribbling the equations
into notebooks.
They will devote all their energy to listening, then download the equations
straight into the laptops they've plugged into their desks. Okay, that isn't
quite right. The classroom I'm describing is not some figment of the future.
It's the reality I visited a month ago at
the Vellore Institute of Technology.
The what ? Vellore is a small town in
southern India, poor enough for some
of its buildings to have thatched roofs
rather than the rain-proof metal sort.
Until a few years ago Vellore was notable only for its large Christian medical
center, erected with the help of foreign
money. But now it has sprouted this
9,000-student technical college, complete with a sports stadium, an incubator for start-up high-tech businesses
and a bio-separation lab. Everywhere
you look, fresh buildings are under
construction: over here a new laboratory complex, over there a gleaming student hostel with its own swimming
pool.
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November 2006
Sebastian Mallaby
[email protected]
The college started out in 1984 with
just 180 students, and its extraordinary
growth is a symbol of the modern India
as much as forts and palaces symbolize
the India of old. Its success is part of
the explosion of technical schools all
across this country, which in turn is
part of India's technology-fueled economic miracle.
In 2005 India produced 200,000 engineering graduates, about three times as
many as the United States and twice as
many as all of Europe. But the really
astonishing statistic is this: In 2005
India enrolled fully 450,000 students in
four-year engineering courses, meaning that its output of engineers will
more than double by 2009.
As striking as these numbers is the way
India is getting there. What's made this
engineering takeoff possible is not an
increase in the supply of universities
financed by taxpayers or foreign
donors; it's an increase in demand for
education from fee-paying students a
demand to which entrepreneurs naturally respond. More than four out of
five Indian engineering students attend
private colleges, whose potential
growth seems limitless. In 2003 the
Vellore Institute of Technology received
7,000 applications. In 2005 it received
44,000.
Something similar is happening to the
Indian school system, which has experienced a huge growth in private provision. Since the early 1990s the percentage of 6-to-14-year-olds attending
private school has jumped from less
than a tenth to roughly a quarter of the
total in that cohort, according to India's
National Council of Applied Economic
Research.
And this number may be on the low
side. James Tooley of the University of
Newcastle in Britain has found that in
some Indian slums about two-thirds of
the children attend private schools,
many of which are not officially recognized and so may escape the attention
of nationwide surveys.
The causes of this private-school explosion shed interesting light on debates
about development, not just in India
but throughout the poor world. The
standard assumption among antipoverty campaigners is that education
leads to development; if you supply
classrooms and teachers, progress will
follow.
Up to a point, India's success in brainintensive industries such as software
and pharmaceuticals lends substance to
this theory: India's government has
long invested in a few elite engineering
schools, whose graduates are at the
Improving
the human potential
Engineering Case study
heart of the country's high-tech success. But it's also true that this elite
pool of engineering excellence counted for little so long as statism stifled
India's economy. It was only after
market reform began in the 1990s that
high-tech India took off.
Meanwhile, the recent private-education boom in India shows how causality can also flow the other way.
Education may or may not spark development, depending on whether economic conditions favor it, but development certainly can spark an educational takeoff. Since India embraced the
market in the early 1990s, parents
have acquired a reason to invest in
education; they have seen the salaries
in the go-go private sector, and they
want their children to have a shot at
earning them. Private elementary
schools improve kids' prospects
because they teach in English, the passport to India's modern sector.
Colleges such as the Vellore Institute
of Technology promise the qualifications needed to work in the auto
industry or in software. Once parents
understand that education buys their
kids into the new India, they demand
it so avidly that public money for
schoolrooms becomes almost superfluous.
Of course, India's progress isn't simple. The best engineers get snapped up
by industry, so it's hard to find decent
teachers to staff Vellore and other
engineering schools. As a result, many
of the new colleges teach kids little of
value, and some science graduates end
up unemployed. But the story of
Vellore points to an important lesson.
Apparently unconnected development
policies - cuts in tariffs and oppressive
business regulation, or projects to
build roads and power grids - can
sometimes stimulate new educational
enrollment at least as much as direct
investments in colleges or schools.
“The companies that will
succeed tomorrow will be
those that know how to
coincide their strategic
project and the skills of
their employees.”
The approach which consists of acquiring technologies through turnkey
contracts making use of foreign companies and experts has reinforced the
technological and economic dependencies of the developing countries. It has
generated few employment opportunities in favour of the latter whilst maintaining a maximum cost in the acquisition of technologies.
A large proportion of the country's
main industries with a high technological component has been made through
international consultancy and engineering organisations. These behave like
black boxes. There is no connection
with the local consultancy, engineering
and research and development organisations. As long as these links are not
established, they will not be able to
contribute to the country's scientific
and technological development.
The experience of B&R-C
is enlightening in this matter
Brown & Root-Condor (B&R-C) was
born from the desire to associate an
Algerian company whose assets are
knowledge of the local environment,
the existence of a potential in terms
of engineering and an international
company Kellogg Brown & Root
possessing the know-how and the
technology.
One of the objectives of creating B&RC is to break the rationale of “black
boxes” and manage to create, in
Algeria, the conditions that enable
engineering to develop with all the
consequences it generates in terms of
creating wealth and developing human
potential.
Malika AMARA
Abdelhamid YELLOU
Yes, we do have human potential in
Algeria. What we need is to develop it,
train it, provide it with the same conditions and bring it to work with the
same standards as international companies. Starting from a core of twenty
engineers covering a restricted number
of disciplines, within the space of fourteen years it finds itself with more than
950 engineers and technicians who
cover a much larger and increasingly
complex range of disciplines and specialities. Some of them did not exist, or
barely existed in Algeria.
It needed a great amount of effort to
develop what particularly affects the
high technology disciplines and project
management techniques such as
controlling costs, planning, project
estimation, etc.
How has the company
developed ?
As the personnel are the company's
main capital, their training and development have been one of the company's major preoccupations. This action
has been more crucial for B&R-C given
the fact that the Algerian universities
and business schools train engineers
with a theoretical syllabus base which
does not enable them to become immediately operational. For some specialities, there is practically no compatibility between the training of students and
the needs of the job market. To remedy
these insufficiencies, the training
method used in B&R-C has been one
☞
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ENGINEERING CASE STUDY
☞
of “Mentoring” and the total immersion of employees in the realisation of
the projects acquired by the company;
furthermore, a large number of engineers and executives have benefited
from related and intensive actions,
given through the company's learning
centres and national and foreign organisations, to upgrade their knowledge,
teach them or improve their English as
well as for vocational re-training targeting modules focused on technical and
management aspects.
The company has organised mixed
teams comprised, on the one hand, of
employees of B&R-C and, on the other
hand, experts and engineers from its
KBR shareholders.
These teams have worked together
throughout the duration of the project,
from its estimate until its implementation and delivery to the client. Hence,
for example, parts concerning the engineering studies or even the supervision
of the realisation of the projects are
entrusted to the B&R-C personnel
who, working closely with the engineers and experts of its partner KBR,
access a complete arsenal of procedures, standards, software and knowhow.
To develop the managerial skills and
create a pool of Algerian managers, the
employees with high potential have
mirrored the foreign managers in the
different central departments of the
company.
Hence, the company's local personnel,
whilst gaining knowledge and skills,
actively participate at the operational
level in the realisation of projects and at
the supervision level in the support and
supervision of these projects.
This is a long and expensive process
which requires a lot of effort both from
the personnel concerned and from the
company as, in addition to the development of its own personnel, this must
create a common operating environment with its clients and its local subcontractors to enable them to be at the
same level in terms of standards and
qualifications.
Thanks to this approach, B&R-C has
managed to master certain domains
such as civil engineering, mechanics,
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structures, but there is still a lot to do
here, for example, in terms of process,
instrumentation, project estimation,
project management (control of costs,
planning).
The company has thus become,
through the strength of things, a “teaching” school. Dozens of engineers
have been able to develop their skills at
an international level. Their qualifications are recognised throughout the
world since, unfortunately, a good
number of them have been recruited to
job positions, some for manager positions, with renowned foreign companies.
Attracting and developing the
skills is all well and good, but
we still need to be able to
retain them!
This is why B&R-C has set about offering, absolutely, motivating working
conditions. There are two types of
these: the working environment and
professional development.
The working environment: this means
making available to the employees all
the tools and technologies required to
enable them to work with the same
means as those of our international
competitors. The company must be
able to offer the same services at the
best costs, quality and timeframes.
Hence, the immediate circulation and
exchange and sharing of information
flows through adequate and personalised Information and Communication
Technology (ICT) supports are one of
the essential components of the challenge of competition.
This is why the company has set up an
effective information and telecommunications system. This consists of a
network of information and telecommunications with access, on the one
hand, to the intranet developed by the
company and, on the other hand, the
internet which enable the company's
different sites and the different users to
connect with each other, wherever they
may be in the world. It mainly enables
the resources to be shared, whether
hardware or software.
These are the same basic applications
which must be used by almost all
employees. It has given the employee
the same working environment and
enables him/her access to its data,
regardless of where they are in the
world. It particularly enables a quick
and voluminous flow of data to and
between the different sites, which
favours a better realisation of projects.
In addition to this common operating
environment, each employee is given a
PC and has access to the tools and
applications related to their speciality
and authorised by the company.
Professional development: this is done
at two levels. The first consists of the
personnel development of the
employees. To enable their full development and better understanding of the
different problems they are faced with,
programmes for cognition and management of situations inherent in the
company's life and even in their private life are given to the employees. These
must lead to a balance of professional
and private life and, consequently, to
better performance from employees.
The second concerns the employees'
career. In addition to putting in place
skills appraisal and salary policies
based on the performance of each
employee, the company offers very
interesting career prospects insofar as
it offers new jobs in relation to the jobs
linked to the project management, procurement and construction activities
and which give them a certain amount
of added value.
Conclusion
The experience of B&R-C shows that
it is possible to create Algerian engineering companies that are capable of
breaking the rationale of “black boxes”
by creating an Algerian entity and personnel for turnkey projects, from their
design to their commissioning. Given
its size and its youth, the company
B&R-C alone can only satisfy a small
part of the market with regards the
country's development plan.
This fact must lead the State to encourage the emergence of other national
engineering companies as these will
provide added value in terms of
growth, acquisition of know-how and
the creation of jobs. To do this, it has
to give Algerian companies the means
of their policies as Passion, alone, is
not enough to achieve Excellence.
Likewise, it must adopt policies in the
domains of Training, Sales and
Information and Communication
Technologies (ICT) aiming at putting
in place a viable environment that is
favourable to the evolution of this type
of company which is the spearhead of
powerful economies such as the
United States of America, Japan and
the United Kingdom.
The State must also put in place new
socio-economic game rules aiming to
favour knowledge and technology
through teaching and quality academic
development that is in line with the
needs of the market. It must take
incentive measures to stimulate the
investments in the field of engineering
and its corollaries which are research
and development.
Last but not least, this means developing and putting in place, supported
by the ICT, network bases in view
of benefiting from our national knowledge bases and adopting policies in
terms of technology to enable a strong
growth rate to be supported along with
a major technological acquisitions
rate.
Skills management
Engineering Case study
A
Martin KILMURRY
Operations Director
Pygmalion Corporate Limited
lot of company heads are
naturally inclined, and this is
their mission, to supervise
the daily operations of their
respective companies. This is a normal
situation, except that, in the years to
come, one of the major competitive
advantages of a company will be its
capacity to attract, develop, encourage
and retain skills. Some company
heads, who have already taken the
decision to manage the skills, have
quickly understood that their companies will need to improve the methods
of managing these skills.
The obligation of becoming a talented
manager requires a fundamental change in the way in which the company
heads perceive their role as well as a
significant commitment over time.
Most large companies consider skills
management as being part of their
general strategy.
This is an essential way of securing,
developing and motivating the
employees with the appropriate skills
and approaches to achieve the company's objectives.
But how many of our strategic objectives have been fully achieved by our
competent employees? Very often, we
notice that we do not have the right
people available to take responsibility
for a shortcoming when it arises or that
we are unable to keep the people we
want. Even worse, the competent people can be quite simply under used.
So, what can we do to seize these missed opportunities? I think that the
greatest and the only challenge is to
achieve a real synergy between the
Skills Strategy and the Company's
Strategy.
A lot of processes concerning personnel are often put in place without
taking account of a clear correlation
between the final objectives and the
corporate culture.
Thinking about recruitment, management and development of performances, means asking oneself how much
we establish processes based on a clear
analysis of skills and qualifications
which the employees must possess to
be operational at a higher level.
To what extent to we develop their abilities and their motivations to respond
to the needs of the company in the
medium term ? It is absolutely vital to
give a clear definition of what the word
“skill” means for each company. The
question is simple : are people with
these qualities achieving the targeted
results ?
Each company must have a very clear
sense of its future strategic direction. It
must also, however, invest in the development of its personnel in terms of
feedback and coaching, not only targeting the strengths of each employee but
also identifying their specific qualities
which the company might need in the
future.
Fundamentally, this process is not
done in one stage - the results are linked to the way in which the people are
managed, trained and motivated and
their direct impact in the company ☞
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ENGINEERING CASE STUDY
☞ must be identified and analysed. It is
this connection quality which makes a
significant difference - by linking the
company's strategy to the everyday
experience of its employees.
It is absolutely important that the individual ambitions and the company's
objectives converge towards the same
goal. All too often they are perceived as
being unequal partners. However,
companies that actually set about discovering the innate talents of each person tend to succeed.
We have to outline different paths for
employees to enable them to make progress and develop, otherwise we will
only have access to a restricted category of people. This approach requires an
open mind and questions such as
“How can we use the skills and energies of this person?” “How can we
organise our work differently?” or “Are
we targeting the wrong things?” But if
these questions are actually asked, a lot
of objectives can be achieved.
“Alignment” is another key element of a
successful Skills Strategy. When we
select or train employees, most companies insist on the skills, the knowledge,
the experience and the behaviour
required for the job. Some companies
are starting to become interested now
in the behaviour required to execute the
job efficiently in a team or a specific
culture. We need to understand the
relationship between the personal motivations and the types of corporate cultures in which they will develop.
To achieve significant results each
manager – whether a president of a
division, a director of a department, an
operational director or a section manager – must reinforce the skills of their
direct employees. The managers of
large companies – and the company
head in particular – have the additional
responsibility of ensuring that all the
skills of the companies are continually
reconstituted and reinforced. It is
essential that the boards of directors
play an important role in the management of skills by :
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• setting up a skills committee comprised of managers with the best provisions;
• ensuring that the company has a
skills appraisal process solidified by
measurable plans and actions;
• making regular reviews to examine
the strength of the company's pool of
skills;
• facing up to the complex task of
managing incompetents.
What is Skills Management ? This
should be everything which would
make the company successful through
the understanding of the concept of
skills and in the way in which they are
used in view of achieving the company's specific objectives.
It also means ensuring that we give
their correct value to the innate talents
and the aspirations of our employees,
that we identify the obstacles which
may spoil our efforts and, finally, the
way in which the personnel management procedures are applied which
must be linked not only to each other
but, also, be very closely linked to the
company's
objectives.
Skills
Management is, at the end of the day,
understanding how to manage the
employees in terms of alignment and
aptitudes. If we adopt these approaches, not only will the company succeed, but we will thus have personnel
who give satisfaction and are efficient.
The strategic positioning
of the HR function (*)
Engineering Case study
Omar BOUKHEDIMI
In this report, we
will try to highlight
the need to renew
the view and perception of HRM by the
company's directors.
A
t a time of profound changes
in our national economy,
confronted with the hard reality of the market economy, it
is essential to identify the strengths and
weaknesses of human resources management to understand the large axes on
which we should intervene in order to
improve productivity and take up the
challenges of economic globalisation.
Nowadays, the most important factor
of success relies on what has perhaps
been the most neglected or overlooked
up to now: HR. Efficient HR management is therefore deemed the source of
a key competitive advantage for
Algerian companies. The winning companies will be those which are able to
better manage their human resources,
i.e. better take up their challenges.
The part taken by the dynamic of developing intellectual capital (intangible
assets) in the battle for competitiveness
is today a determining factor when we
examine the recent evolution in the
field of strategy which, beyond the
paradigm of the competitive positioning of the 1980s, has granted increasing importance to the internal resources of which the intellectual capital is
one of the most important. Indeed, this
capital gives a company a competitive
advantage as it possesses the following
Director of Administration and Insurance
Brown & Root - Condor
characteristics : it is a valuable, rare
resource that is difficult to imitate and
cannot be replaced.
Given a strategic dimension, the
human resources function therefore
imposes itself today as a fundamental
function of organisations.
HRM : a revamped
and valuable function
If we judge it by a certain number of
reflections on the future of human
resources management, the latter tends
to access the rank of a real strategic
function inside companies which have
discovered within their personnel one
of the greatest unexploited deposits of
competitiveness. The recognition of the
social imperative in the battle for competitiveness does, in fact, constitute a
historic opportunity for a revamped
and valuable HR function. This change
in the status of the social function inside the company has in real terms resulted in the following two forms :
• the actual integration of HRM in the
overall strategic reflection, whether, for
example at the level of future investments, redeployment and the diversification of activities or the development
of new products,
• the adoption of reasoning and operating methods by HRM within the framework of a really strategic approach.
For the social function, this means
being more consistent and above all
pre-active (anticipatory approach,
being prepared for expected changes)
and pro-active (provoking the desired
changes) in terms of the main missions
given to it.
(*) Report presented during the Third Energy Week in Algeria
The integration of HRM
in the company's strategy
In our opinion, there is no strategy if
only one dimension is taken into
account. What is important to enable
HRM to be really integrated in the overall strategic reflection is that the function actually participates in drawing up
and implementing the strategy; this
implementation is however only possible if the personnel is perceived no longer as a cost that has to be minimised,
but rather as “the resource of resources” that must be optimised. This
implication can be solidified by the fact
that the HRM managers are full members of the strategic planning bodies
which are the company's “strategic
cores”. Humans are always at the centre of the difference between companies that win and those that lose.
Indeed, an American manager (Henry
Ford) said: "If I were given the choice
between losing all my equipment, all
my clients or all my personnel, I would
not hesitate to choose to select the
human potential with which I can
conquer everything”. In other words,
the company must ensure it has quality
human resources, the best suited to its
needs, and whose cost is in line with
the creation of value they induce. The
creation of value precedes its distribution in this sense that the company cannot distribute wealth that it has not yet
created.
Evaluation of HRM
A large part of the contemporary challenges of HRM directly results from the
changes that have taken place in the
external environment of companies.
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☞ In the current context of the Algerian
company, particularly in the perspective of membership to the WTO and the
Euro-Mediterranean
partnership,
already exacerbated by the characteristics of the environment (globalisation,
uncertainty, innovation, competitiveness, etc.) which will profoundly modify the context in which our companies
continue to act, it becomes imperative
for the HR function to be judged on its
efficiency with regards the numerous
partners (or "stakeholders") with which
it is interfaced (shareholders, suppliers,
creditors, directors, personnel, unions,
competitors, clients, media, authorities,
host countries and regions, various
partners, etc.) and with regards its
contribution to the company's performance and mission.
However, each of these partners has
their own reference and its own criteria
for evaluating efficiency (quite a complex concept), the managers - including HRM - are solely responsible for
the consistency and dynamics of the
entire company, and it is incumbent
upon them to evaluate the performance
of the company's human resources.
The "human resources value" is a crucial dimension of the organisational
efficiency, which implies a shared
responsibility of HRM between the
players of the organisation to evaluate
this efficiency. The revamping of HRM
and its future challenges impose correcting the lack of visibility engendered
by numerous errors and inconsistent
approaches characterised by the quest
for short term financial gain and the
reduction of costs. The company's
human development is a main source of
the creation of value and long term
competitiveness.
The challenges of HRM
In light of the experiences gained and
successes elsewhere, analyses of specialists and professionals of the HR
function, account taken also of a change from a traditional paradigm to a
revamped paradigm of HRM, and
taking inspiration from the works of JM Peretti, particularly, we have used
one of the key trends or major challenges of HRM: a more strategic management. Undeniably, the "human resources" dimension must be taken into
consideration in the formulation of the
company's vision, the mission and the
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strategy. A strategic "human resources"
function therefore implies an ability to
influence, a priori, the business decisions and the strategic management
practices as well as an ability to align, a
posteriori, the measures related to
human resources.
The role of HRM is no longer solely
administrative, i.e. focussed on the
activities, but increasingly strategic,
focussed on the human factor. As
management is above all managing
humans.
The HRD must not be frightened of
resourcing and must endeavour to
make the ever-changing HR function a
real development tool for the company
in terms of performance and quality.
Faced with these problems, the HRD
must invest more in the dynamic of
perpetual change being experienced by
our companies. The resources must
quickly adapt to the expectations of the
market and therefore permanently
adapt.
Conclusion
The raw material of a company is its
grey matter. In fact, the success of a
company today has more to do with its
intangible assets - namely its intellectual and organisational capacities than its intangible assets. Gosselin
(1996) emphasises the urgency of
“considering employees as a strategic
resource”.
In reality, in the context of the Algerian
company, it should be noted that the
main factor of success in the immediate future corresponds to what has been
overlooked up to now : human resources Given the stakes, with regards the
global movement, and faced with the
considerable technological progress,
Algerian companies must refocus on
the most valuable capital they have :
human capital. As a strategy can only
be “good” with a human dimension
and component.
The recent changes in HR management
- the theories on administration by
skills, organisational learning, management by skills and particularly conducting change - reposition the HR function at the centre of the changes being
experienced by companies due to the
quick technological developments, the
growth in competitiveness and the glo-
balisation of exchanges. Insofar as the
entire HR landscape has changed,
human resources management must,
today, take up new challenges as the
competition does not forgive those that
do not adapt.
References
[1] A. Gosselin, Réaliser la stratégie :
avant tout une question de ressources
humaines, dans T. Hafsi, J-M.Toulouse et
autres, La Stratégie des organisations :
une synthèse, Montréal, les Editions
Transcontinental, pp.295-300 (1996).
[2] G. Hamel & C.K. Prahalad, La
Conquête du futur. Paris, InterEditions,
(1995).
[3] Le Monde, Les experts en management redécouvrent le facteur humain,
(22/10/1996).
[4] M. PORTER, ''L'avantage concurrentiel'', (Paris InterEditions, 1986).
[5] J-M. Peretti, Gestion des ressources
humaines, Vuibert Entreprise, (8E éd.,
1999).
[6] O. Boukhedemi, Les Défis actuels de
la fonction RH dans le contexte de l'économie algérienne : le cas de la société
Brown & Root-Condor, mémoire MBA
(ISG Alger, juin 2003).
Impact of the workforce
and of the growth
in the oil sector
Engineering Case study
Ian FORSYTH
Aberdeen Press & Journal
The world's oil and
gas industry is in
a stagnation phase,
unless urgent measures are taken to
resolve an increasing
recruitment crisis.
T
he latest warning on the
negative impact of skills'
shortages today comes from
3i, the first company
in Europe specialised in the capital
investments in partnerships and joint
ventures.
Graeme Sword, a partner at 3i based in
Aberdeen and president of its oil, gas
and power department, indicated that
the governments, the educators and the
representatives of the industry must
now join forces to encourage the injection of new blood into the ageing workforce if we do not want to face the
consequences.
His comments come further to the
publication, by this company, of its
third annual report on the state of the
world's oil and gas industry.
The document analyses the main trends
which, today, have an impact on business. It identifies four main opportunity and challenge generating points for
the energy industry and investors :
• The growing demand for oil, in spite
of its high prices, particularly in China
and India.
• The changing relationships between
international and national oil companies
• Supply chain resource constraints,
reserve replacement challenges and
mature field decline rates.
• The chronic shortage of skilled personnel in the industry's sector and the
way in which this shortage can be
resolved.
Mr Sword stated : “For years, we
thought that capital was the main constraint of the projects undertaken, but
now it is deemed that this constraint is
more the workforce. Through their
boards of directors, companies say they
might operate a lot better if only they
had more personnel.
He also said : “Oil companies must
find fresh crude reserves to replace
declining production output from existing fields. The supply chain is at full
stretch, with a chronic shortage of people and an ageing workforce; prices are
high and demand continues to rise.
However, all these challenges provide
opportunities for the industry which
must take advantage of the momentum
of change. To succeed in the future,
innovation and development of new
business models will be more important
than ever.”
Everyone seems to recognise that this is
a really big problem, but the question
asked is: what are we doing about this?
Industry must improve its way of intervening on the job market. We have to
improve the training and development
of personnel through the boards of
directors, implement cultural change
far from the expansion-slowdown mentality so that employees feel more
confident in committing to long term
careers.
Mr Sword added that the entire oil and
gas industry was in the process of dealing with a period of spectacular change which might lead to a restructuring
and to a shake-out on a massive scale.
Energie & Mines
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November 2006
ENGINEERING CASE STUDY
Transfer of technologies
and internationalisation process
P. JUDET
Institute of economic research and planning
University of Social Sciences, Grenoble
The transfer of technologies :
a new way ?
The transfer of technologies has, over
the last few years, been the subject of a
great deal of literature. Literature
which was soothing for a long time
insofar as it led people to believe that it
was enough to simply establish the
connection for the transfer to be made
between industrial countries and countries deciding to become industrialised.
This transfer constituted one of the
aspects of the bilateral or multilateral
“aid” - aid in which there was no hesitation in including all private industrial
investments.
Since the failure of the "first decade of
development" had to be admitted, it is
difficult to escape a certain amount of
realism. Everyone recognises today that
the transfer of skills comes up against
obstacles, poses problems, it is not
automatic, it is random and it is onerous. The modern technologies are not
a free good; they are appropriated,
negotiated and sold; the patents'
mechanism contributes to creating a
rarity which entails the establishment of
a price system.
The transfer of technologies takes place
within the framework of a market.
Some people emphasise today that this
is a completely unequal market,
controlled by the large multinational
firms and the engineering companies
linked to them.
“Most patents are in the hands not of
individual inventors but of large transnational companies… The monopolistic control of the market and the
concentration are reinforced by a
mutual licence granting system between large companies, which has the
effect of transforming the oligopolistic
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November 2006
structure which exists at the world level
into a monopolistic structure at the
regional level” (1).
"Transfer of technologies and large
multinational firms” is in fact one of
the heated points of the current discussion.
For numerous economists and businessmen, the positive role of the large
multinational firm is obvious. It is a
sort of postulate. "We initially assume
that the multinational company contributes to global welfare because it
favours international communication
through the transmission of knowledge
and resources. Part of this growth
affects the installation countries; the
rest is distributed between the corporate directors and the suppliers, on the
one hand, and the American consumers
on the other hand” (2); a postulate
which is verified through the technological adaptation capacity of the large
firms: "The adaptation of technological
transplants to the resources and capacities of developing economies is perhaps the largest contribution which
multinational firms can bring to these
economies…” (3).
“The international organisations implicitly adopt this way of seeing, by organising meetings between large firms
selling technology and private or public
industrialists belonging to developing
countries. After numerous failures, this
is the new way proposed for transferring technology to the developing
countries” (4).
It is true that the large multinational
firms manufacture technology: the
research budget of the largest of them
is higher than the research budget of
any developing country. Their systematic patent buying and exchanging policy ensures them a stock of technologies
that is largely superior to the product of
their research. Thanks to a global network of employees, the large firms
practice a policy aiming to prevent and
discourage any invention impacting the
exclusivity of the processes and products they intend to reserve for the current or future market. The large multinational firms, directly or through their
satellites, then propose negotiating a
licence or know-how transfer agreement: they have brought together all
the assets beforehand to negotiate in a
position of strength; their services are
hence expensive.
This is indeed a “new way” as the technology has fallen into the hands of the
large multinational firms - more subtle
than the “concession” imposed by force
or the 100% owned subsidiary - an efficient arm, both at the front line of
penetration and later extracting of
defence : “This is the dawn of a new era
characterised by the exploitation of
technology and no longer as before by
the, often abusive, exploitation of a
country's natural resources” (5).
This new way is only, definitively, a
renewed form of dependence that has
become less visible since it can survive
the nationalisations and it is likely to
infiltrate into apparently more autonomous companies. Furthermore, you
simply need to go through the publications of the large firms themselves to
get information on the objectives and
the means of their policy (6). Here we
will simply mention a few aspects
after placing the phenomenon of the
large multinational firms within the
framework of revolution of the global
economy.
Internationalisation process
and large multinational firms
It should be noted, beforehand, that the
approach by the multinational firm is
likely to mask the fact that it claims to
draw up, i.e. the internationalisation
process which entails the new industrialisation practice (7). The analysis by
the firm, in fact, is not adequate to
understand the internationalisation
process. However, the economic category of branch or of industry, such as a
relationship system between productgoods, production process and circulation process, enables the internationalisation movement itself to be understood of three components which define
the branch :
• internationalisation of the productive
process,
• internationalisation of the goods produced,
• internationalisation of the circulation
process.
We note that the main characters of the
industrial system are changing, that a
new type of industrialisation is progressively being put in place in favour of the
most advanced countries and that the
large multinational firm is only the
result and the agent of the process.
The analysis in terms of branches and
of their components reveals the following characteristics of the current
internationalisation process.
A trend towards the
supremacy of a technological process imposed by the
large multinational firm(s)
dominant in the entire
global branch.
• We note, for example, in the steel
industry, the supremacy of the steel
industry “on water” linked to the international standards in terms of ores
(content of over 60%), new procedures
(oxygen steel works), installed capacity
(5 million tonnes) :
– The construction of large petrochemical plants always under the remit of the
same large international engineering
firms, Lummus, Kellogg, Power-Gas,
Snam Projetti, Technip, which ensure
the reproduction of the technologies of
large multinational firms and, hence,
their domination.
Engineering Case study
The transformation
of a “product” strategy
into a “set of goods”
strategy.
Whereas the "product" is a good which
results from an operation or after
manufacturing operations without a
direct relation to the market, the
"goods” and the “sub-unit” or the “set
of goods” is a complex of goods and
services which corresponds to a market
and this is where the law of value is
exercised like a system transforming
the value into production price. The
observation reveals today that the large
firms, but also the not-so-large firms,
are in the process of abandoning a
“product” strategy to adopt a goods
strategy and, above, all, sub-units or set
of goods. We no longer produce just
pipes, but we sell piping units; we no
longer produce just furnaces, but we
sell the thermal treatment process; we
no longer produce just the alternator,
the transformer, but we "sell” a plant…
These groups of goods need an international area to be realised; the multinational firms are, at this level, the
instrument to highlight the value of
products in the form of goods.
We have seen a general downstream
"descent" towards the market; the oil
companies are going into petrochemistry, then the production of synthetic
fibres up to tending to control the production chains which lead to the final
market (clothing). The movement
which goes from the product to the
goods and whose end process is the
delivery of the “turnkey” factory is closely linked to the internationalisation
process and also to the game of multinational firms.
tional game dominated by the multinational firms (8).
Through numerous examples, we note
that it is not the technological branches
which dictate the structuring of the
firm and of the industry which is being
internationalised but the desire to
control a market, to tend towards the
final valuation of the product in the
form of goods or sets of goods. The
restructuring line of the firm and of
the industry corresponds to what can
be called an economic branch insofar
as it routes towards the control of the
market.
We will also emphasise within the framework of this process the role played
by the engineering companies, whether
or not they belong to the multinational
firms. The missions of these companies
are, in fact :
• to ensure the supremacy of the technological processes developed and
owned by the large firms;
• to ensure the transformation of the
production into “sets of goods” in the
form of plants, “turnkey” factories, etc.
A few consequences
of this process
A few aspects highlighted by this process are particularly important and
must be emphasised:
The technologies are not freely offered
on a market where everyone has access;
the technologies are guided and, to a
certain extent, imposed by the large
multinational firms. In this sense, the
power of the large firms limits the choice of the technologies and introduces
rigidity.
☞
The importance of international commercial companies
Insofar as they reveal the importance of
the international product circulation
networks, these networks are owned by
the multinational firms; they design
their strategy. Access to these networks
is very often the necessary condition of
the transformation from “products”
into “sub-units” or “sets of goods”.
This has the effect of including apparently independent firms in an interna-
Energie & Mines
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November 2006
ENGINEERING CASE STUDY
☞
Up to the 1970s, for example, the
direct reduction of iron ore, through
natural gas in particular, was a technology set apart by the desire of the large
steel companies in favour of the reduction of coke.
On the other hand, there is a single
production technology for aluminium:
the one which is implemented by the
world's large producers. Other processes exist for processing the current ore
and other ores; they are owned by the
same producers that refuse to disclose
them, as they want to continue to
impose their technology.
Today we question the interest of large
capacity steam cracking (4 to 500,000
tonnes) plants constructed by the large
firms in the last few years.
We may ask ourselves if, in this domain
as in others, the race to the large
dimensions initially proceeds from a
financial calculation, economies of
scale or even the desire of large firms to
increase their (global) market share by
reducing the share of their competitors
(9).
The large firms are linked to the main
engineering and technology consultancy companies; they inspire the specialised press; they use the services of the
best universities and brilliant economists; they are capable of making the
technology market.
10 years ago, we repeated in the
congresses and seminars that planning
the direct reduction of iron ore through
natural gas was unreasonable. Today,
all countries wishing to produce aluminium must go through the conditions
of Alcan, Alcoa, Kaiser, Reynolds or
Pechiney. Everyone is impressed and
accepts as a dogma the need for economies of scale. The technologies' market
is prepared in such a way that the choice of players is limited to ratifying the
choice already made by the vendors.
The "rigidity" which characterises the
supply of technologies is, above all,
sensitive in the domain of so-called
basic industries: metallurgy, chemistry,
petrochemistry. On the contrary, it
seems to make room for certain flexibility when we go downstream to the
transformation of these basic products.
At this level, the manufacturing activities of the large firm appear in perpetual
and
rapid
evolution.
Energie & Mines
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November 2006
Decomposition of the production processes, delocalisation of part of these
processes, pure and simple abandoning
of other parts of these same processes,
transformation of new, less capitalistic
technologies into more capitalistic
technologies, but also the opposite
movement from highly capitalistic technologies to less capitalistic technologies.
The activity of the large multinational
firm is translated by a perpetual composition and recomposition of its production processes, depending on the
global market; the restructuring line of
the firm and of the industry corresponds to what we may call an “economic branch”; depending on the
opportunities offered by the multiple
combinations of factors available
throughout the world. In a few months,
Burroughs transfers its manufacturing
of simple calculators from France to
Brazil, Rolleiflex its production of
cameras from Germany to Singapore,
Dim its hosiery productions to Israel
and South Korea.
In the framework in which the large
multinational firms move, there is no
longer any preference, a priori, for the
new “capital intensive” technologies or
for the “labour intensive” technologies.
Both can correspond to an optimal
combination depending on the multitude of possibilities to which a global
horizon enables a large multinational
firm to access.
This is inserted in the prospects of a
new international division of labour
presented by some as the "new orthodoxy" (10) or the "new frontier" (10)
which do not really affect the old industries, textile, leather, clothing, so much
as the components, sub-units and
assembly-based electronic and electric
mechanical industries. The power of
the multinational firms relies on their
ability to compose or recompose the
technical lines and identify the activities
likely to correspond here or there to a
favourable combination of factors… "in
the short and medium term, the identification of labour intensive activities in
view of their transfer will be the first
driving force of research and development in terms of a labour intensive
manufacturing activity. When new
labour intensive technologies are created, they will probably be created where
the skills exist, as the R&D is itself an
activity requiring highly skilled workforce. They will be created and will therefore be the property of the same large
multinational firms which today own
the “capital intensive” technologies that
are available" (11).
"The large multinational firm is therefore in the process of appearing as the
large supplier of "labour intensive"
technologies as well as "capital intensive" technologies: hence the real problem with the technology, its ownership
and the price to be paid to get it is
clearly highlighted” (12).
The loop tends to be complete: from
the most capitalistic technology to the
least capitalistic technology: the large
firm, thanks to its global horizon, plays
on the largest range of technologies it
selects, integrates by taking possession.
At the same time that it understands the
control of large multinational firms
over the various technologies, the internationalisation process puts the place
of technology into perspective. The
global horizon of the large multinational firms is initially a market horizon;
the initial preoccupation of the large
multinational firms is the exchange
value of the product, i.e. the goods (the
transformation from the product to the
set of goods) and its realisation on the
market. In this perspective, the technology loses its absolute nature; it is subordinate to the market; it is therefore
adapted in accordance with the market.
In a recent publication, Business
International describes how the production and technology of South
American industrialists have been
remodelled: manufactured products
modified or totally refocused in accordance with suggestions from trading
companies or chains of stores.
On the other hand, a new investment in
Yugoslavia has given the opportunity to
the large firm Dow Chemical to explain
that "selling licences is a thing of the
past - at least for the most modern
technologies - and that, consequently,
the company is not interested in only
selling its process know-how” (13).
The managers of the company Dow
emphasise the fact “Western technology is the only thing that counts. A company with the best technology might
not be profitable unless its technical
know-how is combined with the excellent science of conducting business
(business management)” (14).
We could go on and on about this leadership of the market and on the
consequences resulting from it: the
large firms are enlarging their control
of the market and remodelling in
accordance with this market (economic
lines) the technical lines which they
have or which they monopolise, we
imagine from their weight on the
consumptions structure and on the distribution of income; we also imagine
through a new technical division of
labour that they are putting in place
their influence on the social division of
labour. There is nothing clandestine in
this, though, since a new international
division of labour is the objective that is
very clearly proposed.
The current practice constitutes a good
comment on the statement often repeated, according to which “technology is
not neutral" (15).
Research routes
and directions
The problems mentioned above deserve a finer and more strongly argued
analysis. Here, we will simply quickly
mention a few research routes.
A clear position
The refusal of the international division
of labour and development based on
international subcontracting: at least
the position is clear in Algeria: it has,
on many occasions, been mentioned
and put into practice by the leaders of
this country, that it suffices to recall
here the speech made by Mr Liassine
before the Arab Economists Congress
in October 1970: "A certain notion of
the economy would always tend to
show us that it is healthier never to
invest, always immediately consume
our potential surpluses and remain a
few more decades excluded from the
modern world…” (16)
A recent publication by T. Vietorisz
upholds this position : “The comparative advantage results from the general
level of the technical evolution of
advanced and backward countries.
Keeping the trade trends on this track
is the best way of perpetuating the division between rich countries and poor
countries. The development-related
decisions must break the framework of
the comparative advantage and not
Engineering Case study
reinforce it... The enormous weight of
the economic tradition which supports
the principle of the comparative advantage is opposed to the definition of
valid criteria of the success of technology transfer projects… The technology
transfers recommended from the traditional point of view are likely to perpetuate the dependence rather them enabling it to be broken…” (17)
We cannot underestimate the efficiency
or the subtlety of the action of large
firms to maintain their domination
beyond the barriers of taking majority
stakes and even total nationalisations.
This surprising capacity of recuperation of the large multinational firms
appears through the integration in their
network of the Indian engineering activities. “A recent study has shown that
India has numerous technical personnel with good qualifications who, probably, are paid the lowest salaries in the
world. It may therefore be astute to use
Indian firms (as subcontractors) to
carry out projects and also control the
work site. The use of Indian teams both in India and abroad - on vast projects may produce the sufficient margin
required to be awarded a contract.
The international companies may thus
make savings and substantial gains…”
(18).
The international division of labour is
not linked only to certain types of products or to certain movements of the
production process: it tends to a relationship of strength which is established initially at the market level from
which all the recoveries are possible,
including the design and construction
units of the engineering companies.
From the current practice of the large
multinational firms a lesson of relativisation is learned :
• relativisation of the technology in
relation to the market;
• relativisation of the type of technology used: there are modern technologies
and old technologies; capital intensive
technologies and labour intensive technologies. The optimum is not linked to
one type of technology rather than another; it depends on the extent of the largest range possible on which we can
play simultaneously.
Algeria resolutely refuses to import
out-of-date technologies at the same
time as worn out or obsolete machines
and installations. In the context where
Algeria is situated, this refusal is a
rational position. In this domain, the
context is determining: the transfer
from France to Brazil by the company
Burroughs of its simple calculator production workshops (worn out installations) or the sale by the Lyon-based
industrialists to private Algerian industrialists of their textile workshops do
not all have the same meaning as the
transfer of worn out machines by the
large Chinese national factories to the
district factories or popular commune
workshops. In the first two cases, this
is a relationship of domination; in the
last case, on the contrary, of a contribution to an integration process. At
best, all the technologies are positive
when they participate in the integration
of an independent system.
The key problem, in fact, is that of the
integration and, finally, the technological independence; T. Vietorisz emphasised this by remarking that “increasing
complexity is of no use if the structure
is not suitably integrated.
From the point of view of its technical
capacity, a country can be considered
as integrated insofar as it is capable of
independence at the technical level. In
fact, one of the best definitions that can
be given to underdeveloped countries is
based on their inability to create their
own technology” (19).
Algeria is situated in this integration
perspective; numerous initiatives testify
to this; development of engineering
capacities ("prime contractor" research
firms, project engineering (proper)
then execution research firms) development of traditional and non-traditional forms of vocational training,
development of the first research centres, awareness of the central and regional authorities of the constraints of
industrialisation… The path which
leads to the constitution of an independent technological base is long; its
length cannot be shortened by a choice
in favour of international specialisation, as the specialisation, according to
Vietorisz, is “only a complement, not a
substitute of national independence on
the technological plan”.
☞
Energie & Mines
97
November 2006
ENGINEERING CASE STUDY
☞ We therefore need to implement dyna-
mic independent sequences, focus
almost exclusively on the national market. It is possible to list the first elements of this in Algeria; for example :
setting up of a prime contractor
research firm – encouragement to
manufacture (SN Metal) speed reducers, rollers, crane bridges of larger
dimensions, setting up of SN Metal
engineering – design and construction
of handling facilities, etc.
There are other examples revealing the
transformation that has been in progress since a one-off initiative to a complex action, producing, in the end, the
setting up of an independent and integrated technological base.
The power of the large firms is coextensive to the current internationalisation process. The large firms have
access to the global market: the flow of
information which reaches them is perpetual; in the space of three months
they succeed in transferring a complete
factory from one continent to another.
Each of their representatives is “overloaded” by a multitude of other potential representatives that can be immediately updated. “Their multilaterality”
is their wealth; it enables them to play
on a multitude of possible combinations of factors. The weakness of the
underdeveloped countries is to tend to
be fenced into bilateral type relations
where the pressures may be exerted
in enclosed spaces without lateral
openness.
The problem of the countries which are
industrialising is the information, the
knowledge of the available knowledge,
access to the market. Today we speak
of the technologies' markets; in fact,
the underdeveloped countries have no
access to this market; their sole access
is through the openings we want to give
them or that they succeed, at a high
cost, in gaining through their own
efforts. They have to create, if we can
say so, their own “multilaterality”. The
refusal of the international integration,
subcontracting and specialisation goes
through the implementation of solidarity between countries which are industrialising. This solidarity is built both
on the trade relations, the industry
construction level, coordinated and
Energie & Mines
98
November 2006
progressively integrated, but also at the
level of the construction of independent
and integrated technological bases.
Apart from this progressively implemented solidarity, it does not seem that
there is today, for all dominated countries, possible access to the market, i.e.
both to the goods, the information, and
to the largest range of technologies
available. In any case, as long as the
large multinational firms keep their
hands on, without positive alternative,
the transfer of technologies, the power
of the dominators over the dominated
can only be prolonged and even reinforced.
References
(1) Etude effectuée par la commission de l'accord de Carthagène pour l'UNCTAD, pp. 24-25,
cite par Jim. Coekcroft : Technological dependence An analysis with special reference to
patents, transnational corporations in Chile.
Rugers University, New Brunswick.
C. Vaitsos fait remarquer que les créateurs du
produit ou du procédé ne percevaient que 1 %
du droit de brevet total. Les 99 % restants
étaient repartis entre les successeurs des producteurs commerciaux (52 %) et les firmes l'engineering (47 %). Négociation et distribution des
revenus dans l'achat des technologies par les
pays en voie de développement. IDEP, Dakar,
décembre 1971, p. 3.
(2) R. Vernon. - Les entreprises multinationales.
Cmann-Levy, p. 241.
(3) B. Bomx. - Grandes entreprises et diffusion
internationale des innovations, p. 17.
Conférence au Colloque de Rennes, septembre
1972.
(4) C'est le titre d'un article de Business
International. Novembre 1972, n° 45, p. 361.
(5) Business International Corporation nationalism in Latin America. 1970, p. 21.
(6) En particulier les publications de Business
International Corporation.
(7) Cf. pour tout ce développement C. Palloix,
en particulier la note intitWee : Grandes Firnzes
multinationales et transfert des technologies.
IREP, Grenoble, roneotee, novembre 1972.
(8) Il est intéressant à ce propos d'observer la
stratégie du groupe japonais Mitsui s'organisant
autour de son axe commercial Mitsui and Co,
fer de lance de l'expansion du groupe. Au
Japon, les 9 premières sociétés commerciales,
dont Mitsui and Co, Mitsubishi Corp., Sumitomo
Shoji... effectuaient, en 1970, 46,7 % des
exportations et 59,7 % des importations japonaises, cf. Japon Economie, e 44, 5 octobre
1972.
(9) Cf. un article récent de Chinzie Actualité
mettant en question la rentabilité effective des
steam craking de grandes dimensions.
(10) G. K. Hellfiner - Manufactured exports from
less developed Countries and multinational
firms. The Economic Journal, mars 1973, p. 22
et 31.
(11) G.K. - Op. cite, p. 33.
(12) G.K. Heilleiner - Op. cite, p. 31.
(13) Eastern Europe Report, 21 septembre
1973, p. 273.
(14) Eastern Europe Report, 21 septembre
1973, p. 273.
(15) A ce propos, il est intéressant (et un peu
étonnant) de lire dans le journal polonais Zycie
Warszawy l'appréciation suivante : «Ces sociétés (multinationales) affirment souvent qu'elles
jouent un rôle d'incitateurs au progrès et de
messagers de paix. Il y a là un peu d'exagération. Ces pouvoirs sans frontières, ainsi que
quelques sociétés multinationales aiment à
s'appeler, sont les produits du capitalisme
moderne... Toutefois, tout en gardant un œil sur
leur rôle négatif, il est impossible d'ignorer leur
influence positive dans le monde... Dans le
cadre d'une économie planifiée, les sociétés
multinationales ne peuvent faire de mal, comme
cela se produit à l'Ouest».. cité par Eastern
Europe Report, 21 septembre 1973, p. 275.
(16) M. Liassine. Une sidérurgie en Algérie.
Pourquoi ? Communication reproduite dans
I'Acier Arabe, n° 2, janvier 1973, p. 15 à 23.
(17) T. Vietorisz. - Diversification,
Interconnection et Intégration, orientation de la
politique technologique des pays en voie de
développement, p. 16, OCDE, Séminaire de
Schloss. Herinstein, 5-8 juillet 1973.
(18) Business Asia. - Foreing firms save money
by using indiatz engineers, p. 255, août 1972.
Dans la même ligne des ingénieries et des
sociétés de construction roumaines travaillent
en Allemagne fédérale.
(19) T. Vietorisz - Op. cit., p. 11.[20]T. Vietorisz Op. cit., p. 21. L'exemple bulgare enseigne que
tous les produits de l'industrie bulgare, faisant
l'objet d'une spécialisation internationale (chariots-élévateurs, palans électriques, certaines
machines agricoles…) constituent un des
moments d'une séquence autonome dynamique.
Relocation or how
to do more with less ?
Engineering Case study
R. G. GONZALEZ
“More productivity
and efficiency with
fewer employees”
H
ow many times has this slogan been repeated, whether
in the industrial sectors of
oil refining or those of
other business activities?
In spite of the relatively accentuated
differences observed over the last two
years in the petrochemistry sector, the
changes which have occurred since the
decline that put pressure on personnel
remain considerable.
The severity of the majority of these
changes is illustrated, as an example, by
the relocation of the R&D centres
and central office engineering support
offices.
A reduced number of engineering personnel were given more responsibilities
to the detriment of their participation
in training courses, symposiums or
trade fairs.
This is noted from the simple comparison of the number of company representatives participating, nowadays, in
conferences on the industry's sector,
such as ERTC, ARTC, AIChE and
NPRA, to the number of employees
who, a generation ago, attended this
type of events.
The internal culture of the company
consisting of training young engineers
throughout a professional career of
twenty years culminating with the title
of manager or executive director has
been replaced by relocation.
This "transformational relocation” is
indeed well in place in other industries
which employs highly skilled technical
professional personnel.
However, a lot of supporters of relocation emphasise that relocating the
workforce and skills is not only a question of reducing the unit cost per
employee of the payroll composed of
salaries, benefits and responsibility
bonuses.
According to Daniel Marovitz, Director
of Technological Management for
Global Business in Deutsche Bank
speaking about relocation: "The problem is that if you don't do it, you will
not survive.”
In the industry based on the transformation of hydrocarbons' products, the
relocation of the work flows of the typical functions of companies, such as
human resources management and
information technology is already well
in place.
up of business reports, thus enabling
them to devote more time to looking
for modern innovative methods to
make the factories run efficiently.
If this should happen, other employment opportunities for professional
personnel and highly qualified personnel would be created in the future.
That said, a large proportion of the largest gains in efficiency and innovation
is the fruit of close partnerships between the personnel working in the
company and the technology suppliers.
These suppliers, located in different
regions of the world, encompass the
organisations which supply, under
licence, a large range of technological
services and services that support the
petrochemical industry and those
which offer great expertise in terms of
the domain of specific process applications.
It is perhaps even premature to be able
to predict the extent of the influence of
relocation on the operations' engineering expertise and process activities.
The relocation of this type of activities
towards the graduates of business
schools in developing countries, which
are legion here, will certainly be continued in the coming years, whether or
not they continue to incur gains in efficiency, innovation and profitability.
Other supporters of relocation see in
this the best means of freeing up the
highly paid experts of developing countries from their routine tasks, such as
the updating of sheets and the drawing
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99
November 2006
ENGINEERING CASE STUDY
Engineering in India and China
Nasser IGUERTSIRA & Adel ZAIM
Brown & Root - Condor
1980s. However, the Indian diaspora is
a lot more dispersed in the world and
relies a lot less on the large industrialists. Furthermore, the constraints and
the administrative slowness are less frequent in the Chinese administration.
W
ith their own engineering
sections, the western
companies master the
design, the manufacturing and installation of particularly
competitive production plants that are
capable of satisfying their economic
and social requirements. This certain
technological advantage, along with the
current economic context related to
globalisation, leads them to opt for
strategies that are capable of managing
the opportunities and the constraints
offered by the emerging countries,
more particularly China and India.
With giant demographics, China and
India had a relatively minimum percentage of the world's trade and economy.
The modern aspects of India were
totally unknown. The only images driven on India were those of castes, whereas it was the world's number two
industrial power in 1950. China started
to timidly open up around 1972-1973.
Rather than mentioning a reform, it
would be fitting to talk about a Chinese
revolution, given the profound changes
that have occurred since the end of the
Mao regime. In fact, reforms have been
made in the domain of education and
the distribution of campaigns.
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November 2006
The transportation and electricity
infrastructures were nightmarish in
China between 1993 and 1996. The
situation in India was hardly better maybe even worse. The Chinese built
over 30,000km of motorways to ease
the congestion of the ports and railways. The Indians, on the other hand,
only built 10,000km.
In India, however, the institutions are
rooted and are not disputed. This
confers certain stability to the Indian
political system.
Can China and India be compared or
not? These countries are two megademographies and two mega-economies. India and China are no longer
seen as constraints but rather as opportunities. In fact, both countries offer
the two aspects at the same time, which
now accentuates the debate on the
relocation possibilities of western companies and firms.
China and India are highly decentralised. However, this decentralisation is
an obstacle to relocations and causes
very strong local protectionism. This
decentralisation and protectionism
induce considerable over-investments
(both local and foreign), both in property and in the building up of trade
networks. These weaknesses are common to the two countries, but they are
more accentuated in China.
The large Chinese diaspora settled in
South East Asia and East Asia constituted, up until recently, two-thirds of
foreign investments in China which
was in an economic boiling zone in the
Of all China's industrial sectors, it is
the electricity industry that has experienced the quickest development. In
2004, the national installed capacity
reached 440 million kW and electricity
production rose to 2,187 billion kWh,
which places China in second placed
globally. Almost 120,000MW were
added to the network in the two years
2004-2005 alone. The construction of
electric networks also entered a period
of rapid development; the large electric
networks cover the cities and most
Chinese rural regions. India is currently pursuing a policy to modernise its
electric power distribution and production capacities. The results of this policy will be noticeable in the coming
years. In short, the electric power deficit is more accentuated in India than in
China.
Unlike India, foreign direct investments are higher in China. With
regards international trade, China's
trade level far exceeds India's trade
level. China's position in world trade is
not comparable to India's position. The
assembly industry represents a Chinese
specificity and now constitutes 30 % of
Chinese exports. In fact, the companies
of South East Asia import components
from their parent companies and have
them assembled in China.
North American and European countries now operate in the same way.
This industry cannot be conceived for
the time being in India given the lack of
an Indian “Hong Kong” or an equivalent diaspora. However, India largely
wins in the domain of IT and high technologies. In fact, it took India only one
decade to win the contract in terms of
subcontracting IT, communication and
high technology services. Furthermore,
the new technologies' sector is a new
sector for which the lack of infrastructures is less important and the access
conditions easier.
The socio-economic characteristics of
India and China show the limits of a
comparative approach of these countries. We initially note transitional type
limitations. China's growth is driven by
the exports and investments. As for
India, its growth, on the other hand, is
driven by internal consumption and the
volume of subcontracting. Chinese
growth may be voluntarily slowed
down by the authorities unlike India's
growth which is likely to suffer a slowdown. The limits of the comparative
approach of these two countries are
structural. The economies of India and
China exhibit three notorious structural
differences. The first concerns the
structure of the economy, the second
results from the fact that the Indian
economy is a lot more closed than the
Chinese one. Finally, the third is
expressed by a greater social maturity
of China.
The limits of the comparative approach
of these two countries are strongly
expressed by very different international integration strategies. China has a
GDP of 4% of world GDP compared to
1.5% of world GDP for India. This difference is even more accentuated in
terms of international trade where the
Chinese dynamics largely support it in
spite of the opening policy of Indian
directors since the start of the 1990s.
The industrial sector in China is as
open as in India, but its role is greater
in China than in India. As compensation for the weakness of the industrial
sector in India, the services sector there
is very important and represents 50%
of added value. This sector has been a
driving force of Indian growth since
Engineering Case study
1990, the date from which this sector
diversified and modernised by encompassing transport, banks, communication, IT, high technologies, research
and development and various aspects
of engineering, education and health.
Furthermore, we note a contrasted
industrial specialisation. The accelerated diversification of Chinese exports is
mainly due to the international subcontracting and assembly activities. Indian
exports are dominated by textiles.
China has chosen an integration route
into the global economy that is different from the one chosen by India.
China has played the globalisation
card, whereas India has opted for a less
aggressive strategy, highlighting the
progress on which its internal capacities depends. The integration strategy
in China gives increased dependence to
the Chinese economy with regard
foreign technologies and capital.
However, in India, the integration strategy has led to a lot more spectacular
performing accomplishments in the
domain of services where it represents
1.5% of global service exports.
In the short and medium term, China
will undoubtedly continue its current
direction, but it is difficult to give an
opinion on the long term. China is
experiencing great difficulties in terms
of training executives and managers.
Relocation in China of engineering
activities seems, for the time being,
very uncertain. However, with regards
executives, India has an Anglophone
population and a very elitist, effective
education system, comprised of world
rated technical and business schools.
India has a pool of qualified graduates,
perfectly able to assume high level jobs
at a lower cost. This pool of skills has
attracted to India a major relocation of
activities in terms of engineering.
Unlike China, India is a favoured destination for relocation. In India, since
the start of the 1990s, we have seen an
intense relocation of services (outsourcing), engineering and even research
and development activities. Indeed, a
good number of large American companies, pushed by the profitability, have
transferred their call centres or data
input centres and information management activities there whether they are
internal to the company (accountancy,
computer maintenance) or external to
it (insurance processing, bank transactions, credit card statements, etc.).
Over the years, the multinationals have
pushed relocation further by creating
Indian subsidiaries.
Furthermore, they have counted on the
local research centres and engineering
companies to develop new products
there. The number of software technology applications has flourished in
eighteen cities of the country. Mumbai,
Bangalore, Delhi and its surroundings,
Hyderabad and Chennai have all become important IT centres where originally national companies that have
become multinationals such as Infosys,
Satyam, Wipro Technologies and Tata
and the Indian subsidiaries of multinational companies are side by side or
else tangled together. According to the
firm Deloitte Research, two million
jobs will be relocated from western
countries to India by 2008, a good part
of which will be qualified and specialised in the service “business”.
To conclude, the relocation in the
world of technologies, including engineering, has a name: offshore. It has a
protagonist that draws towards it 80%
of contracts: India. It has a history:
40% of American companies can't get
enough of offshore.
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November 2006
ENGINEERING CASE STUDY
Projects
Technology projects and the need for control
T
echnological projects may, at
first sight, seem to obey a
logical process with a set of
physical rules and clear solutions. This is far from the truth for
those that are involved in this type of
project. All technology projects imply a
complex mix of human
thought, effort, aesthetics,
multidiscipline technical skills
and resources management in
view of a common objective.
This process is very complex.
Paul CHAPLIN
Business Unit
Brown & Root - Condor
The control management process basically requires leadership qualities.
Leading requires taking decisions, and
making the right decisions depends on
the availability of good information in
They do not represent a central process in themselves, but
a link supporting the main
activities during the life cycle
of a project just like the central
nervous system in the human
body providing the information to make decisions in
the brain.
To succeed, the basic processes
for evolving the idea, its detailed development and then its
transformation into reality that
require a control structure.
The development of these
controls, a process which is
constantly picking up speed,
has been caused by the history
of the industrial revolution in
Europe and then in the USA.
The sophistication and influence of
these controls have been initiated by
the developed economies of the Far
East and are currently the main driving
force of success for the developing
countries - the third generation is constantly evolving.
It is certain that, without these control
elements, chaos would reign, with
negative impacts on the timeframes and
costs without ever achieving a quality
product.
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November 2006
which the project can prosper and
make an interface with the commercial
environment and the client's environment. The project control tools procure a logical, structured and discipline
support for the basic technological activities. These tools are integrated with
the programmes collecting the
corporate data and regularly
provide data on the history,
the progress and the future
forecasts.
appropriate time. The data required for
the development of the strategy and the
decision making in technology projects
is collected and made available to the
directors through several key tools :
• Planning, cost control, risk analysis
and management - these provide concrete data and information.
• HSEQ (health, safety, environment
and quality) provide data on the quality of the working environment and the
quality of the product.
• Contractual documents and the strategies provide a structure of rules in
At the end of a project, the
data collected can be analysed,
compared, lessons can be learned from
it, and the information is put into the
next generation of technology projects.
These control systems also provide data
to the company's systems such as
finance, cost estimation, human
resources and, of course, the client at
the end of the day. Without these
control systems, the accepted principles that we use in the planning and
development of new projects would
cause unacceptable risks.
Engineering Case study
In the perpetual search for better information, specialists in each discipline
are required; cost engineers, planners,
contract managers, etc. These specialists are not necessarily training engineers.
However, the technical skills such as
mathematics, IT and operational
research are an ideal base for such professionals. Most are recruited from
amongst engineers and financiers.
The developing countries have, by definition small markets in full growth. To
get bigger, the local companies must
compete on the international market.
This provides the foreign currency
required for the country and the markets enabling the expansion of the company.
The management control tools are the
minimum required to reassure the
international clients. It is very difficult
for these companies to acquire these
tools to become rivals internationally
without being penalised on the national
market given the additional costs required to maintain such tools when they
are often not required. To raise the
standards of a national commercial
environment, it is important to encourage the development of control tools
within the framework of granting
contracts and selecting contractors.
All these control processes require high
levels of experience and the involvement of a considerable number of
employees. This obviously causes an
increase in the price of the final product.
However, this additional cost can be
compensated by the respect of the
completion dates, a reduction in accidents and protection of the environment and finally, a better quality product. They also provide better visibility
of the progress of a project beyond
physical evidence, whilst reassuring
that the quality and costs objectives are
achieved.
To conclude, it is obvious that the
control of complex engineering projects imposes additional control tools.
Efficient project management combined with appropriate control tools provides the data required for making
decisions.
This thus procures a support for
making progress towards international
markets whilst consolidating its position in the development of local markets. Such tools offer transparency to
the client and to the contractor, whilst
reducing the risks associated with such
performances.
It is only with such tools and human
efforts that a developing country can
impose itself on the global scene.
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November 2006
ENGINEERING CASE STUDY
Evolution of techniques
and technologies
Nasser IGUERTSIRA
Director of Engineering
Brown & Root - Condor
History
The term engineer comes from the old
French word engigneor, which meant a
constructor of war engines. In its old
meaning, this term therefore means the
person who constructed or invented
war machines or designed and carried
out fortification works or strongholds.
Beyond these historic origins of a military essence, the engineer appears, in
its modern version, mostly from the
19th century onwards, where it is
confirmed as a front line player in
industrial and social development.
The engineering of industrial systems
was born at the start of the century in
the United States in the context of the
annual conference of the American
Society of Mechanical Engineers which
was held in New York on 6 December
1912. This is the industrial engineering
concept that appeared at this time.
The first definition established in 1955
and reviewed in 1985 by the Institute of
Industrial
Engineers
specifies:
"Industrial Engineering” means the
design, improvement and putting in
place of integrated human resources,
materials, equipment and energy systems.
It uses the skills and know-how in
mathematics, physics, social sciences,
as well as the design and analysis
methods and principles of the engineering profession, with the aim of forecasting and evaluating the results we
can expect from such systems.
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November 2006
Definition of engineering
The term engineering, built on the term
of engineer, combines the solutions'
investment and technical coordination
methods and processes enabling –
through successive summaries and a
multidiscipline approach – complex
technical objects to be achieved.
Engineering consists of applying the
results of sciences to concrete, industrial or daily problems. Engineering
combines all the technological, economic, financial and human aspects related to studying and realising a project,
whether industrial, scientific or social.
Engineering studies, designs, accomplishes activities whose purpose is the
rational and functional design of
works, the drawing up of the project,
the coordination and the control of the
construction. Engineering may make
use of only a part of these services, for
example, the design studies or monitoring the construction works.
The engineer is specialised in a technical domain and mainly works at the
development and/or manufacturing
level of products by the companies. He
provides his technical expertise, often
transforming the problems into opportunities. The engineer in charge of the
project can use tools and machines, but
also, calculations, software applications
and simulation tools.
The engineer quite frequently participates in the scientific research, either
by initiating and steering research projects related to an industrial domain, or
by working on concrete aspects of the
research. Fundamental discoveries have
enabled and still enable cascade evolutions in the technologies.
In the primary sector which concerns
the collection and direct use of natural
resources (mines, and energy), these
new technologies accelerate, or even
authorise, the resolution of certain problems posed to the engineer.
Evolution of techniques
and technologies
Etymologically and historically, the
word technology means the study of
techniques. Increasingly, this word
designates a set of methods and techniques around industrial realisations
forming a consistent whole. We then
talk about a technology. We call technology the techniques whose whole
creates a new and specific industrial
domain.
The confusion between technique and
technology is common and is often due
to an incorrect interpretation of the
English term "technology". In fact,
technology covers all manufacturing,
maintenance, management, recycling
and even waste elimination processes
which use methods taken from scientific knowledge or even simply methods
dictated by the practice of certain jobs.
We can then talk about art, in its initial
sense, and applied sciences in the
second.
Engineering Case study
The technique is often underestimated,
but it is one of the great components of
the craft and industrial know-how. It is
the product of all humanity's history,
with every person and every era providing its skills. The technique has developed with humanity and is part of it.
The appearance of the world "technology" came about at the start of the 17th
century where it meant the "useful
arts". It wanted, in fact, to suggest the
convergence which took place at the
dawn of the industrial revolution between arts and science; a convergence
which up to then was compromised by
the impossible articulation of fragmented scientific knowledge and arts
necessarily enclosed in a tradition. The
industrial revolution is a process that
began at the start of the 18th century
and which shook up the production
techniques.
We went from an artisan, manual production system, in dispersed places, to
a production making increasing use of
energy from machines, large series production, centralised production, using
norms or standards to obtain the same
quality products. The transformation
from domestic work to an increasingly
specialised work radically changes
ways of living. The technologies shaped
the everyday life and the representations of our modern society.
We distinguish several industrial revolutions, with a cluster of technical innovations corresponding to each one. The
first industrial revolution is linked to
steam and the progress of the textile
and metallurgic industry. The second
industrial revolution is characterised by
the boom in electricity, oil, mechanics
and chemistry. Finally, a third industrial revolution would be marked by
energy, the latest technologies and IT.
The lack of regression makes this last
revolution easier to ascertain.
Considerable progress has been made
since the 1970s in terms of calculation
and design technique in the field of
engineering (development of proprietary simulators such as IFP's PGGC, BP's
Genesys and BASF's Chemasim); engineers drew up calculation notes
manually and used design tables to
reveal their engineering plans. It goes
without saying that the time it took to
realise a study had repercussions on the
timeframes and, consequently, on the
costs.
The oil boom of the 1970s as well as
the major progress made in the field of
IT in the 1980s-1990s has had the
advantage of pushing the oil companies
to invest in research and development
and design, in partnership with the largest universities, static and dynamic
simulation software applications of the
processes such as Aspen+ developed
by the MIT (Massachusetts Institute of
Technology) and Hysys developed by
Hyprotec Limited as well as Invensys'
Simsci and a lot of others in the field of
processes and the abandoning of proprietary simulators.
These developments have revolutionised the engineering studies such as the
calculations of materials and energy
balances, provisioning of equipment,
optimisation of chemical and petrochemical processes, calculation of pipeline
networks and lines. This has contributed to a very large diffusion of Cape
(Computer
Aided
Process
Engineering) in the industry.
These tools and software certainly
contribute to the development and to
the reduction of the costs of engineering. Their association with performing
management software applications
enable the realisation of projects to be
optimised in terms of timeframes, costs
and quality.
In its capacity as an engineering company, Condor Engineering, which then
became B&R-C, has taken on all the
modern technologies through different
large-scale projects accomplished from
1992 to present day. In the same way
as the largest engineering companies,
B&R-C testifies to the advantage drawn
from sophisticated technical means in
the design of projects.
This undeniable experience has enabled
engineers and other employees of
B&R-C to capitalise on a large amount
of know-how and generate significant
added value.
By focusing on the daily use of technical objects, we have very quickly forgotten the etymology of the notion of
technology which fundamentally clarifies the hopes aroused since the industrial revolution by all the scientific discoveries and the technical progress
made. Technology and Technique therefore appear from the start and for
ever intrinsically linked.
This progress has been achieved thanks
to computer aided design tools with the
aim of optimising and simplifying the
work of designers for the realisation of
different diagrams (PID, PFD, and
UFD). We can cite Microstation and
PDS developed respectively by Bentley
and Intergraph. These highly performing tools will be used to visualise
industrial, oil and/or gas plants in three
dimensions. Interfaces have been made
between all these tools. The same
applies for the calculation software to
be able to integrate all the design elements.
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November 2006
ENGINEERING CASE STUDY
Realisation of a “Fast Track”
project using “Front End
Loading” FEL
Amokrane ALLACHE
Project Manager
Brown & Root - Condor
T
he desire to quickly accomplish projects entails
sources of pressure for each engineering phase of
these projects. The responses to this challenge
consist of improving the productivity, reducing the
costs of the materials or using more efficient construction
and manufacturing techniques. However, a domain favourable to the reduction of timeframes is the design phase; often,
this phase takes up to 50 % of the duration of a project. At
first sight, this appears to be an attractive proposal.
Nevertheless, it requires in-depth consideration and clarity in
the strategy to succeed in the project.
From this graph, it is obvious that it is during the first design
stages that the opportunity is presented to the management Contractor and Client - of influencing the result of the project. Progressively, the design is solidified into a detailed
design, this influence decreases and therefore the final project phases are fixed towards a solution which can only be
revised with great risks.
By focusing on the initial engineering phases, we can draw
the following benefits :
• the client can develop the EPC (Engineering, Procurement,
Construction) lots together with the contractor;
• focusing on the Client's objectives and the requirements of
the market;
• targeting the Client's profitability and not the contractor's
costs;
• critical decision-making;
• increasing the project definition and, hence, reducing the
changes during the EPC phase;
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November 2006
• identifying the alternatives to the basic schedule, the extent
and design of the project.
The value improvement process (VIP) should be one of the
tasks undertaken in the initial phases of a FEL project. The
actions undertaken from these studies may include :
• Specialised investigations into the critical aspects of the
project
• Cost reduction process with challenges
• Technical and financial audits
The VIP techniques may be focused on :
• The selection of the most appropriate technology
• The simplification process
• The use of a design standard
• The waste management
• The responsibilities evaluation process
Engineering Case study
BP: "FEL is the work provided in view of developing a detailed definition of a project… which minimises the total cost of
the project, by preserving the operability and the “maintainability” whilst minimising the changes to the project's scope.”
Shell: "FEL is a development process from the business
objectives to the final acceptance of the definition of the project scope, which minimises the cycle and reduces the costs
of the projects towards the lowest initial capital cost of the
project which satisfies the business requirements”.
• The adaptation of the standards and specifications
• The provisional maintenance
• The constructability
There are several examples of VIP and these may be adapted
and developed for the specific projects and the client's requirements.
The FEL process, also known under the name FEED (Front
End Engineering Design) may be defined as being the process through which a detailed definition is established of the
project to respond to the Client's objectives. This notion has
been developed and promoted by the American company
Independent Project Analysis Inc. (IAP).
Considerable efforts are required to motivate and keep the
engineering team focused on the FEL objectives and avoid
moving towards the traditional approaches. The result of
such a process is to launch an engineering project with more
clarity, more definition and earlier. Consequently, the costs
will be reduced with the project being completed before the
deadlines and a more motivated engineering team that is aligned with the Client's objectives.
It is obvious that the FEL process will need to be completed
even before the authorisation and financial approval of a project. For this reason, its execution is independent and its deliverables are specific. These latter will be more developed,
more accomplished and will carry fewer risks of changes
than deliverables from a conventional design. The result will
be a basis for a detailed engineering phase during an EPC
contract. The key elements of a FEL process are the following :
• A set of engineering documents integrating the specific
conditions of the site
• An estimate of the cost +/-10%
• The project's execution schedule
• The alignment of all the project's functions on the objectives
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November 2006
ENGINEERING CASE STUDY
P
Definition planning
and its role in the complex
engineering projects
lanning is an activity which we
do every day and in most of
our tasks. We all have personal
agendas and we live with all
the constraints of life such as working
hours, school hours and the structure
of working weeks. We plan on a daily
basis, even if it is in our heads and not
committed
down
in
writing.
Consequently, it is not surprising that
the execution of engineering projects
requires rigorous planning.
However, the extent, the levels of detail
and the complexity of the data comprising such planning is more important.
Planning always has an immense
influence on the results and the quality
of the product supplied.
The use of calendars and other techniques and tools to measure and record
the passage of time has been known for
centuries. They are a comprehensive
part of human history, and the first use
of schedules was probably made by the
military. The organisation of troops
and weapons as well as the logistic support during military campaigns represented one of the most obvious uses of
the planning tool. Nowadays, the
assembly of complex products from
parts manufactured in the world requires the use of such detailed schedules.
Our current society is structured and
ordered in time intervals, which are
more demanding than any other period
in humanity's history. This trend will
probably continue and will be undeniably more accelerated.
The basic tools for planning a project
or manufacturing a project consist of
listing activities and timeframes; in
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November 2006
Mustapha SADOUKRI
Engineer
Brown & Root - Condor
addition, we need a representation of
these two overall elements. More complex schedules may contain, in parallel,
the resource requirements, the progress
milestones of the key stages and indications on the flexibility on the specific
planning elements.
Planning is, undoubtedly, at the centre
of any good project management, with
indicators on the progress made, the
history of this project and forecasts and
future challenges in view of completing
the project. This is a project management tool which integrates all the phases and all the activities of a project.
The development of a schedule requires
the creation of the list of activities,
often described as the work breakdown
structure (WBS). This structure may
be unique for one project or may be
developed as a standard for a series of
similar projects. The level of details of
these activities may be considerably different, depending on the size and the
complexity of the project. The structures may cover the teams’ tasks or the
strategic plans of the company, up to
covering the individual activities of a
single person, often called the "last
planner”. All other activities are there in
support of this last planner.
The WBS may be complex and is often
the subject of data collection with processing and storage in database computerised systems. The latter may be
independent, shared by other systems
or integrated in planning applications.
The WBS may obviously be used for
other functions such as procurement,
human resources, cost control, etc.
After determining the work to be done,
the order in which it will be done will be
established. The critical elements which
are related according to logic or which
are sequentially followed are in general
the easiest to place in order. They must
follow a strategic management schedule or the order established. Therefore,
the reference, the collection of information and the discussions on this
sequencing is an essential part of the
process.
The process is presented as a natural
cycle of tasks consisting of : planning executing - studying - improving and
where the individuals create the simple
structures to discuss them and then
progressively improve them as the
information comes in and the level of
details is distinguished.
Once the critical elements are established (those which cannot be compressed over time are related in order), they
become collectively distinguished as
being “the critical path”. It is the association of activities which steers the
overall duration of the project. The
activities which are not on this path are
those which associate flexibility over
time and order.
The room for flexibility, called the
“float”, may be used as a means of
levelling off the resources required or
of relaxing timeframes in view of reducing costs. It is obvious that all activities have a start date and an end date.
However, the activities associated to
the float have early and late start dates
Engineering Case study
and early and late end dates; the analysis of these days will enable the establishment
of
flexibility
in the schedule and will help the decision-making when levelling off the
resources.
Regular reviews and updates of the
schedules are required in order to
ensure that they reflect the data in real
time and the guidelines provided by the
managers. For most construction projects, the reviews and updates are
carried out on a monthly basis. The
schedule is an organic structure which
will be developed throughout the
project and in accordance with the
information available over time.
It is possible to put in place different
schedule levels, citing the example of
the project design phase where the zero
level may contain 20 to 30 activities
which present the highest level. Once
the design has been done and the type
of the product becomes obvious, the
level 1 and level 2 schedules will be
developed with the increase in the
number of activities which goes up to
hundreds, thus reaching level 3. These
schedules will reflect the levels of
details which the individuals or the
teams would like during a defined project phase - such as the procurement
lots, the extents of subcontracting services, the specific activities of the site or
the engineering activities.
At the end of the design phase with the
availability of all deliverables - plans,
specifications and quantities - the sche-
dule may be more amply developed at a
higher level. The establishment of
quantities and the sequential order at
this level of details may then determine
the resources required, the number of
people, the equipment for each month
or for a defined work period, the
support equipment and the amount of
power or fuel needed.
The uses for which these schedules are
put in place are considerable. It is relatively easy to collect and use this data
provided it is stored appropriately in
the database systems, maintained and
updated with the input of the latest
information.
A considerable number of software
applications are available in the field of
planning;
Primavera,
Artemis,
Microsoft Project, Powerproject are,
however, the four that are best known.
They all present the same basic elements - the ability to input data directly using the keyboard or through the
database systems, the Gantt graph (a
graph representing the tasks in horizontal bars depending on the specific
timeframes) or another graphic task
representation method and the ability
to analyse and rearrange the different
levels and the elements of the schedule.
These lots of applications are connected to other systems in order to provide
the functions with data such as procurement, cost control, finance, etc.
These tools have been available in their
most basic form for 20 to 30 years;
however, they have become a lot more
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☞
sophisticated as a consequence of the
development of computer technology
and the flexibility of the transfer of data
between different applications and programmes. A large number of software
designers have opted for the development of a group of programmes, integrating all the management elements of
a company.
With the aim of presenting a general
overview of the current situation of a
project, historic reports are drawn up,
presenting the actual progress of the
activities or a part of the activities compared to the planned progress. This
progress implies examining the physical
progress and measuring the associated
quantities or progress made. It may
also require progress information
coming from different sites or subcontractors hired in the works. For an efficient collection of this information and
to maintain its integrity, it is preferable
to store the data in databases on compatible systems that are able to communicate with each other electronically.
As we move forward in the general
schedule, it is obvious that the focal
point will be the respect of the nearest
deadline. This is why look-ahead schedules are developed to analyse only the
sections of the schedule which are
coming up.
These look-ahead schedules may be
used for concentrating the teams'
efforts in view of accelerating certain
activities. This may be possible by
mobilising more resources on the critical activities or decreasing the efforts
when sections of the schedule are awai-
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ting materials or have become critical.
These are often part of the essential
points during review meetings and may
be used as a discussion tool to prioritise one contractor or another in an
overcrowded site.
The current level of progress is often
expressed by a percentage of the overall
duration. A report on the planned percentages in relation to time is known as
being the S curve (making reference to
its general appearance). This curve
takes its “S” shape after a slow startup, speeds up in the middle and slows
down towards the end of the project.
The representation of optimistic results
highlights an optimistic curve. If the
expected results are, on the other hand,
pessimistic where the project has had a
late start-up, the curve will be pessimistic with a more sloped S. In theory, the
project must progress between these
two curves, unless an unforeseen event
arises and influences the course of the
project.
The final objective, which is fixed for all
suppliers involved
in a project, is to
use the same systems in view of
developing a completely integrated
schedule, covering
all aspects of the
project. In practice, this may be difficult to achieve as
the
contractors
will have preferences for specific
applications justifying themselves by
the experience of their personnel, the
hardware and the links with other integrated applications. This remains a
main objective for the client during
contract negotiations and may be a differentiating element between the different tenderers.
Contracts are won or lost not due to
the price. Often, the schedule proposed
is taken as being an important criterion, thus confirming the old saying
"time is money".
Probably, we should all consider the
importance, even, of defining a realistic
and detailed schedule the next time we
take another look at such documents.
Hassi Messaoud field
management and information
system
Engineering Case study
Nazim D'BICHI & Christopher BROWN
Introduction
The Hassi Messaoud field is Sonatrach's largest oil production capital. As its reserves are proven, Sonatrach aims to
increase, by 2010, its annual production by at least 75%
compared to today's level of 400,000 barrels per day (bpd).
To reach this objective, Sonatrach has allocated a large budget for the launch of several projects to develop the Hassi
Messaoud field.
In this context, on 27 July 2004, Sonatrach signed with
Brown & Root - Condor a master agreement entitled
“Study and assistance to the optimisation and exploitation
of the Hassi Messaoud field”. The agreement should emerge with the optimum technical solutions defining the
exploitation improvement opportunities of the field's facilities enabling, in the short term, the current production of
the field to be improved and, in the long term, the optimum
production management tools to be put in place.
To respond to this objective, B&R-C undertook the development of a real time operating system for the Hassi
Messaoud field which was agreed to be called the Field
Management & Information System (FM&IS).
Project objective and execution strategy
Project Managers
Brown & Root - Condor
- The ValueFinderTM exercise: this is a preliminary diagnosis and evaluation process of the current operating status of the Hassi Messaoud field on three major sectors:
technological, organisational and operational. The results
of this exercise will enable us to better ascertain the priorities and the opportunities which the FM&IS must offer.
The final report of this stage was given to Sonatrach in
April 2006. All the skills and knowledge accumulated have
been requested in order to design a system adapted to the
Hassi Messaoud field.
- Development of an integrated off-line model for the Hassi
Messaoud field (phase 1 of the FM&IS): the integrated
model built will be used to simulate the operating of the
field in its current status which will constitute a tool to help
Sonatrach's decision-making in the short term. During this
phase, the web platform which has to support the FM&IS
and all the real time applications will be developed.
The off-line model is comprised of main sub-models as
illustrated in the diagram below:
Figure 1 : Components of the FM&IS optimisation off-line
model
One of the main ambitions of the project is to identify and
implement optimisation opportunities for the entire Hassi
Messaoud field production chain, covering the reservoir,
the wells, the oil collection system, the gas injection and
compression systems and processes. This would require an
integrated model of the entire chain, whose process may
encompass all the aspects of the problem whilst ensuring
long term efficiency.
Our strategy to help Sonatrach is to start with the development of an off-line model for the entire Hassi Messaoud
field operations system whose simulations will enable
immediate production improvements to be identified. The
final intention of such a system is to build this model in a
real time system which will enable both the everyday decision making and the development of robust strategic plans
for the long term.
The development of the FM&IS goes through three main
phases :
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ENGINEERING CASE STUDY
☞
- Gas-lift system model: this includes all the gas-lift producing wells as well as the gas-lift and gas injection installations
and networks. The model was given to Sonatrach in April
2006.
- Oil production system model: this will be built on the gaslift model by integrating the natural producing wells, the production collection network as well as the major facilities in
the North (CINA) and South (CIS) centres. The model is
currently being built and will be delivered at the start of 2007.
Architecture of the FM&IS system
The FM&IS solution will consist of a platform or a core
structure which provides common structural blocks (access
to data, operations, visualisation, security, browsing, etc.)
and on which all the components of the system are built. The
components of the system are a logical group of several individual applications which will be developed by using the core
structural blocks provided by the platform where they are
hosted. These applications will access the FM&IS data to
provide the field information to the user.
- Deposit model: it will complete the integrated field model
by adding the deposit model which will be developed from
the 3D seismic survey, currently being processed and must
be completed in February 2007. The acquisition of this seismic survey was finalised in June 2006 and the final report on
its quality control will be given to Sonatrach in September
2006.
- Putting in place of the FM&IS system (Phase 2): the offline system will be converted into real time mode by connecting it to the field's telemetric system. This phase will require
the development and the generalisation of the telemetrics,
which only currently cover 25% of the wells, to the entire
field.
Figure 2 illustrates the complete technical approach followed
for the development of the FM&IS.
Figure 3 : Architecture of the FM&IS in the existing Hassi
Messaoud system
Figure 3 shows the architecture of the FM&IS compared to
the existing Sonatrach systems.
Figure 2 : Technical approach for the realisation of the
FM&IS
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The FM&IS structure will be based on the Decision Space
Production Integration Platform developed by Landmark.
The Decision Space Production includes a suite of modular
applications and a common changing integration platform. It
has the capacity of being compatible with the majority of the
applications most used by the oil industry to automate the
flows of data, to support a gradual approach to integration
and to enable the management of a system working through
a completely integrated production operating environment. It
also enables the management of an operating system of a
production network through multiple integrated operations.
The Decision Space Production relies on a philosophy of
maximising the existing resources.
Whereas the core of the FM&IS structure will be built on the
Decision Space Production Integration platform, the components of the FM&IS and their applications will be installed in
the structure and will be customised according to
Sonatrach's specific needs.
The FM&IS solution will also consist of a modelling of the
field and an optimisation application which will be a key
source of the data for the Decision Space Production
Integration. It is the off-line component which will be a part
of the FM&IS core.
The flows of data through the FM&IS
Figure 4 below shows the flows of data through the components of the system which consist of:
Figure 4 : Flows of data through the FM&IS
- Optimisation and modelling application: this enables the
FM&IS to produce optimised operational parameters for the
Hassi Messaoud field.
Engineering Case study
The extension of the FM&IS
to other production fields
The way in which the FM&IS will be developed gives its the
ability to deal with the data from several production fields
with the same structure. The key condition for this to be possible is that the raw data from the new field to be incorporated into the system must be already stored in a database or
even routed to a SCADA system. The second condition is
that the FM&IS hardware is suitably installed in the
Sonatrach network so that the system can access the data
sources of the Production Fields required for it to operate
correctly. The network's infrastructure must also be appropriate to be able to deal with the transfer of data from the different production fields to the data historian of the FM&IS.
The FM&IS must be configured to add each new entity in
the new field (wells, surface facilities, etc.) to the overall hierarchy of all the entities.
An integrated model of the new field to be added in the system must be built to enable the use of the FM&IS' optimisation applications. A simple example which shows how the
other Sonatrach production fields can be integrated in
FM&IS is illustrated in figure 5.
- The FM&IS structure: based on the Decision Space
Production platform and which consists of:
- A real time data history: this enables the FM&IS to access
the field data sent in real time by SCADA or by other telemetrics systems and to store them in a database.
- Database applications: these enable the FM&IS to access
the specific data sent by the structure and by the applications
required for its execution and to store it.
- Server applications: these host the levels of the FM&IS
enabling access to the data and the execution of the different
operations.
- Web Server: this hosts the web interface of the FM&IS
which interacts with the user.
Figure 5: Integration of a new production field in FM&IS.
- The FM&IS applications: these enable access to and the
visualisation of field data in real time as well as corresponding optimal data. These applications are managed by the
FM&IS structure and grouped in accordance with a clearly
defined logic in the system's components.
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ENGINEERING CASE STUDY
☞
There are other means of integrating data from a new field as
FM&IS has the flexibility of communicating with other,
already existing field models, other existing data historians or
other existing sources of field data.
Access to the FM&IS web server for the most remote users
(Algiers for example) will be accomplished simply by configuring a server which publishes on the Hassi Messaoud
Firewall PIX as shown in the figure below.
The FM&IS system will enable Sonatrach, inter alia, to :
- benefit from instantaneous reporting: the FM&IS enables it
to see the production performance of any field in real time
through a personal computer via the internet;
- have better visibility and control the field's production and
actions to be undertaken by the operating team;
- increase the productivity of the operating team;
- forecast the impact of the operations on the field's production (production of wells, decline, recovery of reserves, etc.);
- plan any improvement of the production due to the drilling
of new wells or the application of a development plan;
- minimise the production losses thanks to a better analysis
of the causality of the loss (typically between 2-4% for an
implementation of the off-line model and 4-10% after the
installation of a real time system).
Figure 6: FM&IS Remote access
The advantages of the FM&IS
The FM&IS is a decision-making assistance system based on
a web structure. It provides a clear vision of the total organisation, encompassing the production performances to be
achieved as well as the actions which enable these to become
a reality, at each management level and through all functions.
It enables the way in which the operational personnel visualises, collects and processes the information provided to be
changed by the field and helps it to take high quality commercial decisions. The FM&IS provides a 24 hours a day,
7 days a week, 365 days a year management and control
facility; the managing staff and the operating personnel can
access it at any time and from any place in the world via the
internet.
The FM&IS simplifies the management of complex installations by converting the data into standard, structured
information that can be seen by everyone. To design them
and manage them subsequently, these systems require experienced multidiscipline teams as they cover information
technology (hardware, software, communications and
integration), operational applications (control, interpretation
and engineering) and management and control applications.
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Risk management
at the engineering
project level
Engineering Case study
A
successes.
Paul CHAPLIN
Business Unit
Brown & Root - Condor
ppropriately managing risks is probably one of the
most frequent reasons in the success of complex
type projects. Nevertheless, the positive points in
the opportunity of the risk lead to the greatest
Projects are always subject to a potential change. It is our
reactions to this change which decide its fate.
Risk : “a quantifiable probability of loss” or “a factor, element or action which implies danger”.
Most definitions of the term “risk” have negative connotations due to the use of this term in the domains of finance or
security. Risk analysis in the management of projects has
created focal points for managing the action and the
elements of the project which may provide great opportunities of success.
Undertaking a risk assessment is done at all the important
stages of the development of a project from the tender submitting stage to the delivery and will also be used as feedback
for the next project. The nature of the risks will vary at each
phase; some risks will decrease, others will become aggravated and others will be eliminated or transferred to other
structures.
“Seeing is believing”, identifying the risks often provides
solutions. If you never understand the risks, don’t be surprised to suffer consequences.
Imagine that the black points on the following graph represent the risks.
We think that we can see black points everywhere. However,
when we target them directly, they disappear. This is a good
representation of risks; they are often difficult to ascertain,
We cannot associate all the risks to unsatisfactory results and
consequences. We can risk our lives in looking for an exceptional success. Not all risks have consequences in the future;
we can live at risk at a given time, and the consequences may
be immediate. “Risks are consequences resulting from foreseeable events, which may exceed our capacities.”
The consequences may, for example, exceed our production
capacity, a challenge for not having faced up to a “problem”.
The risk appears in different forms and throughout all stages
of the life cycle of a project. Risks may have an impact on the
schedule or the costs. They may be physical; the soil conditions, problems with the equipment, regulations, as they may
have an impact on the personnel such as the safety or the
availability of resources. One of the main management tasks
is to make an assessment of the risks, document them and
start to analyse their impacts on the project.
Experts are appointed to work on these aspects in order to
identify the majority of the risks and provide solutions whenever possible.
we know they exist, they are a bit subjective, somewhat logical, and often dependent on our point of view of perspective.
They are also difficult to manage.
Once you have identified the risks, several tools are available
to analyse the probability of their appearance and their
impacts: financial tools and safety tools.
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The Pareto principle
This demonstrates that 80% of the consequences are the
result of 20% of the causes.
Now, to obtain 80% positive influence in a project, you
have to reduce 20% of the risks.
It is completely natural that the risks manifest themselves
always in a single event. They may be chained or dependent on other events or risks. In the largest disasters, it is
often a serious of events that are unimportant in appearance, but linked, which end in disaster; cut the chain at
any point and you avoid the issue. It is often possible to
establish phased reactions to the risks or consider the
most extreme solutions.
These tools essentially estimate the probability of the risk
☞ appearing in terms of degrees (high - medium - low) and
their impact on the timeframes, the costs and safety. If we
take account of the opportunities, we can be more positive
and reconsider them in terms of increasing profits, reducing
timeframes and lowering accidents.
To establish certain credibility for what is, in reality, qualitative evaluations, the tools above can be used with a representative sample of internal and external experts to the project.
The resulting information can be analysed by using analysis
techniques based on a statistical theory such as the Monte
Carlo method. We do not need to understand the theory to
use the risk analysis applications and experts in the domain
can assist the project's management if need be. By pushing
these analyses further, we can even establish “What if scenarios”. These analyses enable us to model the impact of specific risks and accumulate all the risks into a graph.
The most familiar graphs of the results are known under the
family of “S” curves of the best or worst scenario. The latter
are used in the establishment of a reaction to a propagation
of the risks.
As an alternative, the Tornado diagrams show a ranking of
risks of the largest positive or negative impact. The latter are
more useful to focus the management's efforts on the risks
which may have the greatest impact on the result of the
project.
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Risks are often precipitated by specific key events – the
awarding of a contract, the result of a topographical
survey or a specific phase of the project. We must be particularly vigilant in these stages, looking for the least risk
and finding the means to avoid it at the desired time.
Therefore, good management of a project is based on the
prevention of the risk, but must also use analysis tools whilst
keeping an eye on the development of events.
In spite of its importance, it is surprising that only a few
projects manage to use risk analysis efficiently. In general, it
is considered as being too complicated or takes up too much
time. If the risk analysis provides you with a list of problems
encountered, if you manage 20% appropriately, you will
ensure the success of your project, so why don't you use it ?
Remember, taking risks must be a decision which the entire
team must take, everyone must be involved and everyone
must take up the challenge. By working together, you
will achieve more success and for those who take the risk,
they will be rewarded proportionally, otherwise, why take
the risk ?
A little bit of uncertainty is good for everyone
Henry Alfred Kissinger - American Secretary of State from
1973 to 1977.
The use of cost control
tools in engineering
Engineering Case study
T
he quick development of
nations in the commercial and
public infrastructure market
requires the manufacturing of
very high quality products and the use
of the latest technology. These are the
key domains of the success of companies working in these developing markets. However, reducing the time and
respecting the timeframes for completing projects entails constraints to the
management systems and increases the
risk both for the clients and for the
contractors.
“Costs soar for London Olympics”
“Shell plans Qatar gas project as Costs
Surge”
“EADS Board meets on costs and
super-jumbo delays”
The impact of soaring costs never stops
being related on the front pages of
international newspapers. The titles of
these newspapers influence the stock
market prices, the careers of managers,
for the good or bad, and undeniably
contribute to the perception of project
management control by the public. But
what does the word “cost” mean, and
how is it estimated and presented to
managers ?
The evaluation of the cost of products
and processes is continuous throughout the life cycle of a project. It starts
in parallel with the development of the
design and the drawing up of budgets.
It follows the development of the engineering phases, plans the manufacturing of products and supervises the
production and construction of the
final product.
Farid BENHOCINE
Project Manager
Brown & Root - Condor
It may also be used in the anticipation
of the costs of maintenance operations
and, at the end of the day, in the
decommissioning and the recycling. It
is a critical factor of the success of a
project.
Historically, the evaluation of costs
finds its origins in the industrial revolution; the costs of the raw material or
transformed material were established
and used in view of putting in place a
sale price. Once the analysis of the productivity of workers became a specific
domain in the industrial processes, and
the production costs became more
significant, the evaluation of the impact
of the costs associated to the improvement of productivity followed.
Simple analysis tools were used to
monitor the evolution of the costs and
report this historic information for the
“after-” event. We can consider this as
a “reactive evaluation” of the costs. In
such a long process, taking into consideration the time between the development and the selling of a product, this
method of establishing the costs and
putting in place a price for a product is
acceptable.
However, this method is completely
out-of-date given the speed and competitiveness with which the current
markets are developing. New dynamic
cost evaluation methods, which accurately forecast the results, have become a
necessity.
Statistical models, complex computer
models, the forecasting of the current
value of a currency, the fluctuation of
the production costs and technological
advances must be tools made available
to managers involved in the new generation engineering projects.
To provide all these means, specialists
are required in each of the domains in
relation to analysing costs. They must
be trained on the very latest software
applications, more involved in controlling costs, more dynamic, suggesting
improvement possibilities and more
able to modify the models to satisfy the
reality of the projects.
The legal contracts and the laws,
encompassing a project's activities, are
the rules around which the conflicts are
resolved, if the discussions and negotiations fail. Together, the client and the
contractor sign these contracts at the
start and commit to respect the rules
throughout the project. When a disagreement on the services or the
responsibilities arises, both parties refer
to the contract; with the aim of solving
these disputes, different information is
provided. Part of this information
comes from archives and correspondence, and to solve the financial disputes most of the information comes from
structures, responsible for analysing
the costs.
The same accurate information is
required to justify the payment invoices
and for the correct keeping of the project's progress reports (monthly in
general). The bulk collection of data is
required from a multitude of sources at
all levels of the organisation; from work ☞
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or projects in the initial phase require
greater attention when establishing the
forecasts and the introduction of the
risks related to the cost is essential for
establishing the final costs. The more
accurate and credible a project's data is,
the more the design and construction
are successful, the fewer risks arise
and, consequently, the contingencies
become minimum.
☞
sites where working hours are accounted, through the procurement department for the invoicing of the materials
received and services provided, up to
Finance to determine the taxes to be
paid and the costs of bank services.
This information must be available with
accuracy and consistency, month after
month, up to the end of the project and
beyond. This is a repetitive process
which uses software applications and
databases; the use of these systems is
closely linked to crossed databases,
audits and reconciliation data which
are required to ensure the accuracy and
the quality of the information.
Once this information is collected, a
more elaborate processing is required
to provide it in a more appropriate
form, which may be digital or graphic,
to be presented in report review meetings. The graphs include the statistical
trend lines and the curves, they use the
models which present the impact of any
modification or display the potential
results of different scenarios.
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People think that the future can be predicted using a crystal ball, however predicting the costs of an engineering project requires a scientific and mathematical approach. The generation of historic data may be used to establish the
trends and the rates of the past, which
may then be used for the future trends.
Of course, this method is founded,
even though outdated. The modern
forecasting techniques require transcending this analogue analysis method
and using the parameters which enable
the reasons which have led to the fluctuation in costs in previous projects to
be studied.
Thereafter, this parametric study needs
to be applied in the future situations so
as to improve the accuracy of the cost
forecasts. The collection of data from
similar previous projects may reinforce
the credibility of the estimates; however, when this is a new development of
a product or a new technology, historic
data is out of the question. The new
generation projects, unknown markets
Without any doubt, the largest challenge for an engineering project is to
manage the repercussions of change. A
change which is not taken into account
and managed appropriately will undeniably affect the costs and the completion timeframes, and the result may
even be catastrophic.
During the life cycle of any project, the
impact of the cost incurred by a change is more important in the final procurement, construction and manufacturing phases. Contrary to this, the changes taking place in the initial phases of
a project have less important impacts;
they will only have repercussions on the
hours worked during the design phase,
which will incur a relatively minimum
impact on the overall cost of the
project.
To avoid all these cost impacts, the
maxims of project management and the
clients must be :
• to study, design and fine tune the
project during its initial design and
development phases, to fix the conception and the basic design;
• to commit the basic design to the
detailed design, to allow change only
where necessary;
• to establish a change control management system and rigorously review it
before authorising them for the final
design and checking the potential that a
Engineering Case study
single change might incur a cascade of
impacts in other domains;
• to discourage engineers from making
minor changes (often superficial and
decorative - engineers like this); there
may be a disproportionate impact on
the costs and timeframes;
• to fix the detailed design;
• to conform to the plans issuing
during the construction / manufacturing stage and avoid changes unless
there were errors, omissions or
modifications in the codes or the legal
regulations;
• to involve the engineers in the construction/manufacturing process to
ensure the feedback and continuity in
the realisation of the design up to the
final design.
Consequently, it becomes more
obvious that the skills need to be trained and developed to reinforce them
with the very latest tools and techniques, and use the data generated to
minimise the cost risks during the execution of these important projects.
The respect of these rules will considerably improve the reduction of the risks
and provide a more rigorous control of
the costs entailed by the changes made
during the execution of engineering
projects.
It is clear that controlling costs in an
engineering project requires a real
organisation along with a multitude of
skills; these needs will only increase
with the objective of shortening the
design development cycles and with the
technological advances made.
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Integrated Project Management
System (IPMS)
Paul H. W.
I
PMS is a mature Project
Management, Supply Chain and
Document Management integrated database using the very latest
WEB (10g) / Windows versions of the
industry standard Oracle database software.
The Supply Chain activities extend
from the interfaces with Engineering all
the way to total Warehouse
Management and Construction and
materials issue at the jobsite.
IPMS has been proven on over 100
major Projects in the last 13 years on
every continent.
These projects have included Oil and
Gas onshore and offshore, Copper
Mines, Dockyards, Military Logistics,
Roads, etc.
The total installed cost (TIC) on these
projects is about $80 Billion with a
spend on materials of about $10 billion
from 13 million man-hours of
Engineering. The system has managed
and workflowed about 3 million
Engineering and Supplier deliverables
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Close Regional Director Procurement & Materials
KBR
on these projects. At the current time
there are 75 Projects globally using
IPMS with about 3,500 direct and indirect users.
The system itself has represented about
$35 million of development investment.
One such project is BP's
ACG Project in Azerbaijan
which started in 2000 and
is continuing with successive phases. IPMS has had
600 users use the system in
this period but over 2000
people on the project in 15
countries were served
IPMS information. Under
BP Management on the
project, the team spent
$1.5 Billion on materials
and issued over a million
documents.
The driving force to develop IPMS was
a pursuit of a single, comprehensive
efficient way of working with high productivity and high automation.
Additionally, IPMS provides a high
degree of audit, tracking and management functions at the very lowest level
of details. Much of the functionality in
IPMS is concerned with forecasting
and this is in the belief that with accurate forecasting, IPMS can predict
future impacts to cost or schedule.
With that knowledge it puts informed
decision making into the hands of
Project Management team so they have
the ability to mitigate risk and take
actions accordingly.
IPMS is electronically and seamlessly
interconnected by a wide variety of
interfaces into a user's other systems
such as CAD software, EDMS
(Electronic Document Management
Systems), Planning, Cost, Engineering
databases, Accounting etc.
It comes with an interface management
system that contains every interface
technology it could ever need, from
simple text file sharing to the latest
WEBDAV, BPEL and SOAP methodologies. All these interfaces are available
for internal or external systems and as
the user executes projects with a variety of different clients, these interfaces
will be switched on or off as required. A
distinct advantage can be obtained
when the user operates IPMS with the
same package of systems i.e. that they
all share the single Oracle database.
Engineering Case study
also, such as logistics simulation software to model difficult logistics tasks,
an eProcurement tool so that all
Requisitions and Bidder negotiation
and collaboration takes place on the
WEB and RFID, where radio frequency tracking is used to automatically
receive and trace materials at the
Construction site.
The system contains exceptional reporting systems that are considered industry leading and include :
IPMS contains security systems which
comply with various protocols and legal
requirements (such as Sarbanes Oxley)
and work regardless of whether you
come into the system from inside the
company network of from some external WEB user.
It encourages wide read-only access to
all the data to facilitate status and visibility on each project – often through
the interactive WEB Dashboard so
people with no IPMS training, or need
to, can use the system can still access
all the data.
The system contains a multi-discipline
automated Material Coding system that
has taken 36 man-years to build out
and provides consistent material descriptions and codes that prevents duplicated expenditure, overages and minimises surplus.
The user can deploy IPMS for normal
execution E, EP and EPC type projects
where they have the Supply Chain and
Document Management responsibilities but can equally use IPMS as a
EPCm scope of work managing complex projects and partners, JV's etc so
that the overall project is centrally
reported and managed.
The system can store the data in the
database by a Sub-Project feature that
lets the user manage in a single database all the different scopes of work for
different clients and yet by sharing the
common material catalogue across
them all can move surplus and shortage
situations around to maximize construction and decrease costs.
One such project in Kazakhstan using
IPMS now has 42 EP and EPC
Contractors in separate SubProjects
for a project CAPEX value of over $12
billion.
There are several features in the system
orientated around HSE matters such as
disposal management, reduction in
paper, Safety Issues Tracking etc.
One of the most powerful features of
IPMS is Workplanning. In IPMS, the
database has data relating to all of
Engineering and is tracking and managing materials and quantities through
all aspects of the Supply Chain - for
example on Requisition, Purchase,
Expediting, Inspection, Logistics, and
Warehousing etc. With an electronically imported Construction Plan, IPMS
has all the details necessary to report
exactly - based on material availability
and document status and construction
priority – what can be built now,
tomorrow, next week etc.
The outputs of this process at the jobsite provide exceptional capability to
eliminate idle time, plan work, re-package work and document deliverables
etc. It is reported that this feature can
save upto 5% of Fabrication costs.
IPMS also has peripheral capabilities
using integrated proprietary software
• standard reports to printers or email
as Adobe Acrobat files
• EXCEL templates report from every
part of the system on demand and in
real-time
• email alerts where IPMS automatically alerts you to events or circumstances in the database
• An interactive, graphical "Dashboard"
based on all of IPMS with links to the
surrounding systems that allows drilldown from high level analysis and summary for Management to lower, successive levels of detail.
• Business Objects software
IPMS is organized as a set of integrated applications. They are as follows:
Reference Application
The Reference Application within
IPMS controls most of the common
codes used throughout the system.
Project, Subproject, Work Breakdown
Structures (WBS), Organizational
Breakdown Structures (OBS) and
standard code values are maintained.
BRC Corporate standard codes are
populated as part of the project startup process and some can be edited for
project specific requirements. These
code attributes are stored in one place
and referenced throughout the system
for consistency, efficiency and control.
Document Application
The
Document
Management
Application performs two major functions, document registration and document workflow transmittal.
The
application
maintains
all
Engineering, Supplier and General
document references, revision histories, and document cross references.
All other IPMS applications utilize this
central repository to perform any
☞
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ENGINEERING CASE STUDY
☞
portion of their work associated with
documents. This system includes
document registers, engineering documents, supplier documents, transmittals, and document associations.
Material Requirements
Planning Application (MRP)
The Material Requirements Planning
Application performs the following
general functions: Glossary Material
Coding, Material Catalogue; Material
Design Specification, Material Takeoff
(MTO) and Material Requirements
Planning (MRP).
This latter function involves the use of
the IPMS Material Summary system
that automatically synchronizes the
MTO and purchasing side of the system so that surplus or shortages are
quickly identified and acted upon before they impact the project.
This module is also the home of several
major Engineering interfaces with the
CAD Model, the Engineering Material
Specification and the Engineering
P&ID and Tagged Equipment databases.
Procurement Application
The Procurement Application consists
of the pre-order functions of
Requisitioning, Inquiry (Request of
Quotation) and Award. The Post-PO
functions include Expediting, Traffic
and Inspection capabilities.
All Procurement Documents such as
The Requisition, Purchase Order, and
Shipping Instruction etc, are issued
directly
from
IPMS.
Material
Operations is, therefore, fully automated. The Procurement operational processes and documents are associated to
the IPMS Workpackage and Tracking
utility, and automatically update procurement status and projections as a
result of the work performed. Through
this mechanism, all affected disciplines
are alerted to the relative impact as the
work progresses. If there are specific
review and approval milestones for any
of the procurement processes, the
Tracking utility can be invoked to track
and control these activities.
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Site Control and Construction
Support Application
The Site Control / Construction
Support Application consist of 4 general functions: Receiving, Warehousing,
Site
Support
and
WorkPlan
Evaluation. The Work Planning feature
involves assessing the document and
material availability through all the
parts of the procurement cycle
(Requisition through to Inventory) and
allocating materials and forecasting
shop fabrication and erection against
the MTO. The system uses a priority
coding system or date identified by the
Fabricator.
IPMS "Dashboard" Summary
"It is our evaluation that the KBR
Dashboard technology is 2 years minimum ahead of the competition"
Conclusion
The supply chain market is becoming
increasingly aggressive as companies
compete for capacity, resources and
materials; therefore, it is critical they
effectively and efficiently manage each
Project Supply Chain. IPMS is a proven system, delivering quantifiable
improvements to its users enabling
them to take a leadership position inn
the market. There is little doubt that
IPMS represents a new era in Project
Management.
Integration of Health, Safety
and Environment (HSE) aspects
from the design phase
Engineering Case study
Youcef AOUISSI
“Survival is not about
maintaining profits but
restricting losses.”
Peter Drucker
Manager of Health & Safety
Brown & Root - Condor
Through experience, we have been able
to observe that, in most cases, the
preoccupation with preventing occupational accidents only started to appear
with the construction start-up or, more
serious, after an accident. Safety does
not only, then, rely on the constructor,
with the results we know.
Studies have, however, highlighted
that, in the life cycle of a project, the
possibility of influencing the safety
decreases as the schedule advances and
the designers have been, for a long
time, identified as members of the project team and have a significant
influence on the safety of employees
(2) (Fig 1).
Other studies have shown that a considerable percentage of accidents could
be eliminated, reduced or even avoided,
by making the best choices during the
engineering/design phases and a project's schedule.
This article, inspired by different
research works, briefly describes the
current status of this concept of integrating safety in the construction, the
application difficulties and the efforts
to overcome them.
☞
Introduction
Construction has always been the
industrial sector that has been the most
affect by accidents in the world. It
records the largest number of fatal
accidents and its frequency rates are
among the highest.
As an example, in Algeria, for the year
2004, it recorded, all sectors combined,
31,776 accidents with stoppage of
work, 742 of which were fatal. The
building and public works sector,
alone, recorded 7,294 accidents with
stoppage of work, 241 of which were
fatal. One of out three deaths concerned this sector (1).
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ENGINEERING CASE STUDY
☞
NB :
1. In this article, and mindful of being
accurate, when we speak about “integrating safety into the construction”,
this will mean the safety of the workers
during the construction works and not
the safety of the facility handed over to
the client.
2. Designers : Organisations or individuals that design the facilities before
their construction. This may include
the architects, the engineers, technicians, etc.
Integrating safety into the design phase
is a familiar concept of Health, Safety
and Environment (HSE) professionals.
In the hierarchy of risk control measures, priority is given to the control measures falling within the remit of engineering which find their origin in the
principle of design safety. The use of
ergonomics in the design of certain
tools or workstations to reduce, or even
eliminate the risk factor of an accident
or occupational disease, is an application example of this integration
concept. Traditionally, the designers'
efforts focused on the safety of an
installation as the final product to be
delivered (application of anti-seismic
standards, fire safety, emergency evacuation, etc.). These efforts barely touched the safety and health of workers
who work there or of the maintenance
workers for the future maintenance
works.
Indeed, workers in the construction
sector, which is by far the sector that is
most affected by occupational accidents, have only very rarely benefited
from the benefits of this concept of
“integrating safety during the design
phase”.
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Research works had identified a certain
number of barriers to the lack of involvement of the designers in the safety of
the construction workers. In general,
the designers emphasised their lack of
training, as well as the lack of a guide
or database and other information and
documentation systems in the domain
(3).
The lack of definition of the roles and
responsibility of the clients, designers,
planners, subcontractors, etc. was also
another barrier.
The European Union recognised this
problem by promulgating, in 1992, a
Directive on the “Control of risks in
temporary and mobile construction
sites” (4).
National laws applying these directives
followed, such as the CDM
(Construction,
Design
and
Management) Regulations of the
United Kingdom, which define the
roles and responsibilities of the
client/owner, designers, planners and
subcontractors for all issues of preventing accidents from the design phase to
the execution phase (5).
These efforts made by Europe were the
result of studies on the causes of accidents and injuries which highlighted
that a large proportion of these accidents were caused in the upstream, i.e.
during the planning, scheduling and
design stages. These analyses also
revealed that 60% of accidents in the
construction sector could have been
eliminated, reduced or avoided if they
had been taken more into consideration during the design phase (6).
Although it is still too early to measure
the actual impact of these laws and
regulations on the safety results, a certain improvement of safety performan-
ces in the construction sector has,
however, been noted as well as a positive change in the profile of designers
with regards HSE issues.
It is important to note, also, that, in
parallel to these laws and regulations,
numerous research works were carried
out in universities to develop and make
available to designers the tools enabling
them to integrate the problems of safety into the design.
As an example, we cite the “Design for
Construction Safety Tool Box” application – an item developed within the framework of a research programme by
the University of Washington and
financed by the Construction Industry
Institute (CII) (3). This interactive and
flexible programme can also be used
for training purposes.
Finally, for the reader, we add a few
examples of potential dangers which
the designers can integrate as of the
design phase (Fig 2).
Conclusion
Many countries have recognised and
introduced this concept of integrating
safety into their legislation and established norms and standards. They have
also defined the roles and responsibilities of all people involved in this
process. In Algeria, the legislator has
built this requirement into a decree on
specific health and safety guidelines
applicable to the building, public works
and hydraulics sectors, through two
articles (7).
The application of the texts does however remain subordinate to making
available to designers the knowledge
enabling them to get involved and
appropriately assume their roles (safety
standards and norms, risk technical
Engineering Case study
Dangerous activities
Works on elevated structures
Falling of horizontal roofing
Falling through light, fragile roofing
Works inside
or near an excavation
Examples of intervention
Examples of dangers
Dangers of collapsing
Non-resistant flooring
Flooding, asphyxia, etc.
Contacts with contaminated substances
from designers to control risks
Provide a parapet or barrier. Provide reservations
to facilitate the installation of ramps or temporary
balustrades.
Not specifying fragile materials. Identifying the
existing elements which are fragile. Positioning the
ventilation and extraction equipment so as to avoid
movements on the roofing.
Providing adequate information on the type of soil
and on the positioning of utilities (gas, water, electricity pipes, etc.) in relation to the depth of the
excavation.
Works near a worksite
Impact and crushing by vehicles and
Positioning the structures so as to enable:
- Secure access and exit to the public roads.
- Restriction of reverse manoeuvres.
- Isolating pedestrians from vehicles.
(Protected paths)
Concrete plant
Soil pollution
Choice of positioning of the plant
(avoid the proximity of streams, trees).
Provide a cement settling tank.
Require MSDS sheets from the builders.
and vehicles
engines moving in the worksite
control and identification guide, database and other computer tools).
The designers must also be trained in
identifying the dangers and preventing
the risks related to construction works.
They must listen to the constructors.
In terms of responsibility, it should be
noted that there has been a major
development in the laws in certain
industrialised countries with the involvement and the legal accountability of
all persons involved in the project other
than the constructor, i.e. the client,
architects/designers, planning engineers, etc. in the issues of health and
safety of workers (8).
The dialogue between client/prime
contractor, architects/engineers and
constructor must be encouraged
(fig. 3) as of the design phase to protect an irreplaceable resource: human
beings and their know-how.
References
1. Source Caisse nationale des assurances sociales (CNAS) - 2004
2. Linking Construction Fatalities the
design for Construction Safety Concept
Behm, M. Safety Science 43 (2005)589 611
3. A Tool to Design for Construction
Worker Safety. J Archit Eng ASCE
3(1):32-41 (1997). Gambates, J. A.;
Hinze, J. W.; Haas, CT.
4. Council of the European Communities:
Council Directive 92/57/EEC of 24 june
1992 on the Implementation of Minimum
Safety and Health Requirements at
Tempory or Mobile Construction Sites.
European Commission, Brussels, Belgium
(1992).
5. Construction (Design and
Management) Regulations: SI 1994 nº.
3140. HMSO, London, UK (1994)
6. Research into Management,
Organizational, and Human Factors in the
Construction Industry, HSE Contract
Research Report 45/1992 HMSO, London
UK (1992).
7. Décret exécutif nº 05 - 12 du 8 janvier
2005 relatif aux prescriptions particulières
d'hygiène et de sécurité applicables aux
secteurs du bâtiment, des travaux publics
et de l'hydraulique. Articles 2 et 3.
8. Research into Management,
Organizational, and Human Factors in the
Construction Industry, HSE Contract
Research Report 45/1992 HMSO, London
UK (1992).
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ENGINEERING CASE STUDY
Protecting the present
to guarantee the future
T
o protect the future, humanity must deal with major challenges: understanding and
anticipating the climate
changes, slowing down desertification,
remedying the loss of biodiversity of
ecosystems, avoiding the pollution of
the air-water-soil environments, compensating for the increase in waste,
covering the drinking water requirements and guaranteeing a viable future
for the future generations. All activities
have an impact on the environment and
all companies must integrate this fact
into their development strategy.
They must ensure they apply an integrated pollution prevention strategy to
the processes, products and services
with the aim of reducing the risk for
humans and the environment, by
increasing the competitiveness and
guaranteeing its economic viability.
Sustainable development is considerably enlarging the area of responsibility
of the organisation by integrating the
social and economic impact with the
environmental impacts. This concept
implies a different and innovative
approach in products and services,
requires new production and service
modes and concerns all functions of
the company and requires quality dialogue with all parties concerned.
The objective is, whilst protecting the
environment, maintaining it as best as
possible to improve the competitiveness, and transforming what appears to
be a constraint into a progress factor.
The evolution of products and techniques is now accompanied by the
taking into consideration of environment-related risks.
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Environment
Nora SI CHAIB
Environmental Manager
Brown & Root - Condor
Controlling these risks and preventing
them requires identification, an evaluation and a proposal of solutions to the
decision-makers as well as participation in the implementation of the measures selected and, therefore, responsible management of the environment
and a change of attitudes.
Scientific and technical knowledge
enables the phenomena of risks to be
analysed and prevented for man and his
environment.
To efficiently integrate the management
of the environment which combines the
technical and scientific data, legal and
economic aspects, social relations and
historic factors, ambitious objectives
must be adopted by introducing new
instruments such as the IOS14001
standards which aim to take all the
measures to prevent all the forms of
harm or pollution linked to the activities and projects of a company, to use
integrated process modification solutions to reduce the environmental
impacts rather than corrective technical
solutions from the design to the realisation of the project.
- To this end, the design of a clean and
environmentally respectful project integrates the environment in all the planning actions, hence the realisation of
the
ENVID
(Environmental
Identification Impacts) to take account
of all the provisions in terms of protecting the environment and the regulations in force in engineering, namely:
- Saving on raw materials, water and
energy.
- Eliminating, reducing or substituting
dangerous materials.
- Reducing the quantity of emissions
and polluting waste.
- Recommending recyclable materials
or reducing the environmental impacts.
- Reducing the provisioning of equipment.
- Selecting low energy consumption
technologies.
- Integrating waste, waste water and
gas emission treatment facilities (purification plants, incinerations, filters,
etc.).
- Preventing products at risk (MSDS).
- Designing procedures that restrict to
the minimum the gaseous emissions
(CO, CO2, NOx, SOx, COV, etc.) into
the atmosphere.
- Recommending recycling, recovery
techniques.
At the regulatory level, the projects
must take account of the requirements
of the Algerian regulations (laws and
decrees), the recommendations of the
prime contractor (standards and
procedures). All new classed installation projects are subject to a prior
environment impact study (EIS), in
accordance with the law 03/10 of
19 July 2003 on protecting the environment within the framework of sustainable development.
Tomorrow, it is our capacity and our
desire to innovate, to create new user
concepts alongside our clients which
will guarantee our growth whilst
respecting and applying the progress
commitment to protect the environment and the environmental standards.
Creativity & Quality
Engineering Case study
The secrets of success
Aïssa AIDEL & Mohamed Kheireddine
BENCHARIF HSEQ Department
Brown & Root - Condor
“In the race for
quality, there is
no finish line.”
G
David Kearns
iven its direct impact on the
results of the project
concerned and therefore on
the engineering company
itself, engineering cannot be done
nowadays where there is no quality.
Indeed, engineering, which is involved
in all phases and disciplines of the project, requires an organisation and procedures which enable the team in charge of the study to make harmonious
progress through a review process at all
levels.
The current basic engineering job
consists of solving problems of a technological, concrete and often complex
nature, linked to the design, the manufacturing and the implementation of
products, systems or services. It is done
thanks to a rational attitude, an ability
to analyse, a force of proposals,
methods to solve the difficulties, insurance in conducting the production and
projects and a correct management of
information systems.
This aptitude results from a set of technical, economic, social and human
knowledge, relying on a solid scientific
culture which has to ensure the control
of costs, timeframes, safety and quality.
Today, these elements are one of the
best guarantees of the continuity of the
industrial company. The shortcomings
in the management of these requirements are largely responsible for the
costs of non-quality.
The quality activity occurs and is exercised everywhere… It mobilises men
and technical and financial means, it
provides an economic and social sanction by its enrolment and associates to
its purpose concerns about protecting
the realisation of the product whilst
worrying about the involvement of
man, life and the environment and,
more generally, collective welfare.
Engineering's quality process, when it
is part of a Quality Management
System (QMS), enables the engineering term to get involved in the company's development strategy, integrate all
the requirements (explicit and implicit)
of the client and achieve/exceed the
objectives
fixed
in
terms
of
quality/reliability of the installations,
and also in terms of controlling costs
and the completion timeframes. It also
gives the client the assurance of having
made the right choice whilst being
regularly informed and consulted as the
study progresses. The quality engineer
must ensure the application of a quality policy by all ranks of the design, studies, manufacturing of all its aspects
solidified by tests, interpretations, definition, certifications and procedures.
The involvement of quality is extremely
varied, since, regardless of the business
sector and/or the speciality, it is part of
the various phases of a complex process which goes from the understanding and formulating of questions, the
design and the drawing up of solutions,
to the realisation or the control of the
production, including the multiple related tasks such as maintenance, purchasing and logistics.
But it should also be emphasised that
quality is not easy and, depending on
the circumstances, it must coordinate,
motivate and gain the commitment of
employees and integrate them in a team
combining complementary profiles and
skills.
Engineering's Quality process, which
initially relies on experienced and rigorous men, also requires the implementation of procedures adapted to the
company and specifications specific to
the project which integrate the client's ☞
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ENGINEERING CASE STUDY
☞
requirements as well as the regulatory
ones.
Given this, it is obvious that at the engineering level, the quality engineering
must ensure that these interventions
are integrated in all the projects, studies, choice of equipment, and the realisation of the construction so that they
conform to the regulatory requirements, to the national and international
standards and, above all, to the client's
needs and to its satisfaction which is
the first requirement of the standard
ISO 9001.
If the clients do not have requirements,
they cannot make the distinction between the high quality products and
lower quality products, and “Gresham's
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Law”, a proposition according to which
“bad money chases after good", shows
the damage which can be caused to the
business activity when the clients are
disconcerted and unable to evaluate the
quality before making their purchases
and arriving at the least expensive
option. An example in terms of
“Gresham's Law” is the presence of
“bad” products on a market and the
client's inability to distinguish, a priori,
a good product from a bad one meaning that the supplier of quality goods
removes its products from the market
because it is deemed too expensive.
If these quality standards are correctly
understood, the client can then confidently make the distinction between
standard and the certification that
all traded products conform to this
quality.
high quality and lower quality before
making a purchase, and the vendor of
high quality products can, for its part,
maintain a price for its superior quality
product.
This is only possible if there is total
confidence in the product that is the
subject of trade. This assumes the existence of a quality of a clearly defined
then makes the objective positive in the
direction of “zero fault”. It is, in fact,
the weaknesses or the faults ascertained that we tend to correct, diminish or
remove. But there can only really be
“zero fault” when this qualitative objective also becomes a global, social and
political objective. Hence, a positive
spiral may be started where the failure
of the failure will not fail to lead to the
success of the success. We remember
the quality a lot longer than the price.
Gucci
The statement according to which the
client has no contribution to make to
the quality process provides a bad framework for the current context as, in
an interactive science, technology and
market model, the market always has
something to say on the subject of quality and clients have a preponderant
role to play in the manufacturing of the
quality approach process.
In reality, the Quality approach is
nothing other than a regression from
the regression, a failure from failure to
failure, a negation of negation which
Engineering Case study
ACEA skills strategy
Australia
ACEA policy
BACKGROUND
Skills shortage in Australia is not a new
phenomenon. For example, in 1942 the
Australian Government introduced a
programme of financial assistance to
students in some faculties at universities to overcome a shortage of graduates, particularly in science and engineering (DEET 1993). ACEA became
aware of critical skills shortages is certain areas of engineering as early as
2003. ACEA believes that both urgent
and strategic action is required to relieve the current skills shortages in
consulting engineering.
Following extensive consultation with
members, ACEA believes that the position is as follows:
• Engineering design skills in consulting
engineering firms are in short supply
• A significant number of specialist
engineering skills are in critically short
supply
• Project work and infrastructure development nationally will suffer from
delays and cost blowouts; some projects will be unable to go ahead
• Critical shortages will extend over the
next 5 years at least
• General shortages may last 5 years
and beyond
ACEA believes that a two part strategic
approach is required to ensure that the
demand for consulting engineers is met
now and in the future.
SHORT TERM STRATEGY INCREASING SKILLED MIGRATION
ACEA's short term strategy is geared
towards enabling firms to bring talent
in from overseas more readily to cope
with the immediate crisis. A number of
initiatives have been pursued including;
• Working with government to expand
the Department of Employment and
Workplace Relations (DEWR) Skills
Shortage List and the Department of
Immigration and Multicultural Affairs
(DIMA) Migration Occupations in
Demand List (MODL) lists to better
reflect current skill shortages and to be
more explicit about the detail of skills
required, and ensure these lists are
updated on a regular basis.
• Working with DIMA to streamline
entry processes for internationally
recruited staff through an out posted
DIMA Officer (IOO) to ACEA.
• Working with the ATO to investigate
providing relief on FBT related to the
Living Away From Home Allowance
(LAFHA).
• Improving education regarding the
Government Information Portal.
LONG TERM STRATEGY INCREASING HOME GROWN
ENGINEERS
ACEA recognises that shortages in our
industry are affected by cyclical
influences. Given that, and what is
known now of current and proposed
demand, ACEA believes that the current cycle will mean shortages for at
least 5 years and beyond.
However ACEA is concerned that the
fall in engineering graduate numbers,
and the dispersal of design engineers
across a broader range of commercial
organisations not actually delivering
engineering design and development
services, may constitute structural
changes in the education and business
environment rather than cyclical ones.
If this is the case, and if the current or
even similar level of demand to the current continues, consulting engineering
firms may have a problem which
extends out beyond 5 years, and longer
term assessment and development of
strategies is required.
SKILLS MAPPING
The Federal Government's Audit of
Science, Engineering and Technology
(SET) Skills has provided more detailed information on the skills crisis to
ACEA, our member firms and to the
public and more importantly for the
SET skills shortage issue to be placed
on the public record. ACEA applauds
the skills audit and encourages continued research in this area.
However, ACEA sees the audit as a
useful starting point, and would like to
see government expand research into
long term professional skills availability
by introducing a skills mapping program, such as that suggested by
Professions Australia (PA). The program would facilitate information collection and dissemination on supply
and demand issues affecting the professional workforce in Australia.
☞
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ENGINEERING CASE STUDY
☞ Canada has established a unique skills
mapping program and it is ACEA's suggestion that this be investigated as a
possible template.
The Skills Mapping program would
review the supply of consulting engineers and engineering technicians
through the education system and
through immigration, assess the
demand for consulting engineering services,
whether
this
has
increased/decreased and what factors
have influenced the demand, and forecast future supply and demand needs
for consulting engineers, through
ongoing comprehensive and ongoing
strategic skills mapping against
demand. As well as being useful to
industry for programming of activity,
such information could also feed into
government expenditure and policy
decisions.
EDUCATION
Education has a profound impact on
the long term skills shortage crisis currently facing the consulting engineering
industry. The ACEA encourages
government to develop and maintain
strategies to ensure that consulting
engineering remains an attractive
career for graduates and young people,
as well as ensuring that Australia
remains an attractive destination for
skilled job seekers and encourages the
return of expatriates.
Primary Education
ACEA recognises the need for more
attention to maths and science in the
primary schooling years. Developing
an interest in science and problem solving in the early years is fundamental to
attracting young Australians into engineering careers. ACEA recognises that
the teaching of science in primary
schools is lacking due to teacher competency in this area and required syllabus. This is echoed by the DEST SET
Skills Audit.
ACEA supports government initiatives
to up skill primary teachers and provide more and improved resources to
enable them to teach a broad and engaging science syllabus. This would include measures to enable more experimental science which is more interesting. ACEA would encourage the introduction of a fast-tracked education
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November 2006
diploma to enable retired engineers to
teach in primary schools. ACEA would
also seek to ensure that a more stringent requirement for teaching a minimum amount of science be introduced
into all primary school syllabi.
Secondary Education
ACEA supports Minister Bishop's June
2006 announcement to introduce a
standardised Australian Certificate of
Education in all states and territories
across Australia. ACEA applauds a unified Australian Certificate, however we
feel that this would be conditional on
minimum requirements in the core
subjects of English, Maths and Science.
ACEA believes that these core competencies are fundamental to a well rounded and capable workforce (in any
occupation) and provides expanded
choice for school leavers to enter a
technical (e.g. engineering) career.
ACEA also recognises the need for
more secondary school science teachers, and better resources to enable
them to excite students by teaching
science in an interesting and engaging
fashion. We will be engaging with the
Maths
and
Science
Teachers
Associations to further investigate
needs in these areas. ACEA would
encourage the introduction of a fasttracked education diploma to enable
retired engineers to teach science subjects in secondary schools.
Tertiary Education
ACEA supports government initiatives
aimed at increasing the number of students studying engineering at university. Engineering graduates are in high
demand, not only from the traditional
markets of consulting, manufacturing,
mining and the public sector, but also
from new and emerging fields such as
the ICT industry, financial services,
project management, management
consulting etc. This means that the
overall pool of engineering graduates
needs to be increased to feed into the
growing career paths in various industries. ACEA members have some
concerns about the number and quality
of university entrants into and graduates from engineering courses. Further
investigation in this area is currently
being pursued through the appropriate
stakeholder bodies.
ACEA recommends that consideration
be made to further discounting HECS
fees for students in engineering and
scientific disciplines of critical shortage. ACEA further recommends that
the FBT burden be removed for firms
who wish to make a contribution to an
employee to be used to pay off their
outstanding HECS fees.
PROMOTION
ACEA recognises that much of the problem lies in the lack of and/or inaccurate knowledge around the consulting
engineering profession. There is a huge
need for the consulting engineering
industry to better educate itself, teachers, careers advisers, students, education departments, politicians and
media about the industry, how large it
is, what impact it has on society and
how exciting and interesting it is. There
needs to be a proactive marketing campaign and education about engineering. The ACEA marketing campaign
for consulting engineering is to be
directed to students in years 9 through
12 of secondary schools and university
students. Initiatives are briefly detailed
below.
Secondary School Promotion
• Consulting Engineering DVD
• Promotion of Cadetships with member firms
• Attendance at school Careers Fairs
• Information to be distributed through
the Australian Network of Industry
Careers Advisors (ANICA)
• Participation through ACCI in the
implementation of the Australian
Technical Colleges
• Providing opportunities for members
to speak at schools
• Direct programs between member
firms and schools (e.g. Connell Wagner
Bridge Building Challenge)
University Promotion
• Consulting Engineering Guide for
students
• ACEA Student Award for Excellence
• Guest lecturing by ACEA members
• Attendance at university Careers
Fairs
Information
Engineering Case study
systems in engineering
Common operating
environment (COE)
T
oday, the agility in decisionmaking and the ability to
interpret and respond to the
conditions of the market are
required for companies to survive.
Rather than adopting the strategy
which reigned in the industrial era and
which consisted of following the market and selling, today's performing
companies, in the information era, are
focussed on “feeling and responding”
to the client's needs which are constantly changing. The information technologies have enormously contributed
to this profound change, by greatly
reducing the constraints in terms of
time and space related to the acquisition, the interpretation and the action
on the basis of the information.
The decisions are the essence of management itself. The managers at all hierarchical levels of a company spend
their days making decisions on the
basis of information which come to
them from different sources and in different formats.
The information must be appropriate,
timely, correct and verifiable.
Ahmed TOBBECHE
Director IT-Sales
Brown & Root - Condor
In response to stressful needs in terms
of collecting, processing and communicating information, the companies have
set up information systems which are,
essentially, aimed at making the busi-
purposes of sharing and consolidating
the information.
The roll-out of a CEO platform
responds to:
- the needs to access and exchange information in real time at the
company level and with the outside world;
- urgent needs to consolidate the
information in support of the decision-making process and drawing
up a timely and reliable report;
- technical requirements required
for the roll-out of business and
corporate applications such as
ERP.
ness applications work which are specific to them.
These companies have, over the years,
found themselves in possession of a
myriad of systems and independent
computer applications and it is often
difficult and expensive to make them
communicate with each other for the
The COE aims to gradually update, at the technical level, the different
sites and units by putting them at the
same technological level through the
standardisation of equipment and basic
applications such as the desk-top and
portable computers, the servers, the
network equipment, the email and
office automation applications.
☞
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ENGINEERING CASE STUDY
The roll-out of a CEO platform requires the putting in
place of three layers :
1. A “basic infrastructure"
layer which ensures:
- the transport of data through
all the segments of the sector's
network
- the interoperability of the
network's components
2. An "application infrastructure" layer (servers, operating
systems, data storage bays)
which ensures:
- The availability, the integrity
and the saving of the data.
☞ Furthermore,
this platform has the
objective of ensuring the interconnection of all of the company's sites
through a standard computer network
that is stable, robust, secured and easy
to maintain, being mindful of facilitating its interoperability, reducing its
maintenance costs and ensuring it provides the best performance and a transformation speed to the very latest technologies.
The COE also targets the putting in
place of a corporate policy in terms of
managing and protecting the information and the IT assets. This implies the
application by all sites of the same procedures, produced from management
and control.
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3. A “common applications”
layer (office automation, emailing
applications, collaboration tools, etc.)
which ensures :
- The production of information
- The exchange of information
- Access to the information
Each layer supports the layer which is
directly above it. It should be pointed
out that the “COE” concept was initially developed and applied by the US
Department of Defence in 1993
(www.sei.cmu.edu/str/descriptions/dii
coe.html) and had the aims of :
- guaranteeing the interoperability of
the systems belonging to the different
structures of the department.
- ensuring the reusability of the applications and application modules in the
different structures' level.
- ensuring the correct operating of the
applications in the different installation
sites.
- improving the operational performances (personnel and systems).
- reducing the development and rollout timeframes of the applications and
systems.
- reducing the training needs and costs.
- reducing the acquisition and operating costs of the systems and applications.
The American Department of Energy,
for its part, adopted the COE in 2003
(http://cio.doe.gov/Conferences/AIT
C/presentations/errington.ppt) and it
was then adopted by several companies
operating in different business
domains.
Information and communication
technologies
Engineering Case study
Amel KASDI KHEDDACHE
F
Director of Communications
Brown & Root - Condor
or a few years now, various
technological innovations have
integrated the majority of our
companies' business areas.
These changes have progressively led to
a transformation of behaviours. In fact,
and to only cite this invention, after the
Fax which, back then, enabled an enormous leap towards the development,
the arrival of email revolutionised the
exchanges of information.
Information and communication systems : a strategic tool
In any organisation, the management
works to procure the environment, all
the tools, the methods and appropriate
processes enabling the cooperation of
all players concerned by a common
objective.
Such an expectation is possible. We
simply need to take advantage of the
technologies by installing an information and communication system.
Providing such a system to ones
employees provides them with a dynamic management, cooperation and
decision-making tool.
We cannot claim that these solutions
have been, as of their discovery, hastily
used; users, who are not necessarily
specialists, had expressed various and
sometimes hostile reactions.
The information and communication
technologies have also faced various
obstacles. They had been developed to
compensate for the problem of managing know-how, time and knowledge;
their appearance generated systems
whose contributions we propose describing and highlighting.
In fact, an information and communication system is a system comprised of
human resources, physical resources
and procedures. The latter enable the
acquisition, the storage, the processing
and the circulation of the company's
information: this process represents the
"nervous" system of the company. It is
the central axis around which, in real
time, the company's activities take
place.
This way of exchanging and sharing
skills relies on the putting in place of a
common and shareable platform fed by
a network that put individuals in
contact with each other so they can
succeed in a common project.
Each user of the system has an individual and collective role to play. Now,
they must centralise, share and communicate with their team. The new way
of conceiving reality enables efficiency
to be achieved. What is important to
remember is that communication is
bilateral compared to information
which is unilateral.
☞
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ENGINEERING CASE STUDY
The best practices of conducting an
engineering project
☞
“The more information there is, the
greater the chaos”.
bing are the lack of communication and
coordination. It is important to determine the one-off consequences linked
to this risk in terms of financial impact,
impact on the timeframes and/or
impact on the quality.
To compensate for such dangers, the
“information and communication system” solution is proposed to the company heads. The latter concerns the
putting in place of:
- a common platform,
- efficient and performing infrastructures,
- and an applications' environment.
This particularly enables the communication of an engineering project to be
managed. We all know that the studies
and documents produced within the
framework of such a project involve a
large number of people from all types
of specialities.
Such a need for exchange and understanding is only likely through the
implementation of an information and
communication system that includes
the different circulation methods,
depending on the people involved.
This system must, at all times, enable
the people involved in the project to
have all information sought after in real
time and in its final revised version.
Re-engineering of the information and
communication system
To successfully carry out an engineering project, good methodology is more
than necessary. In fact, understanding
the project to be carried out, qualifying
the resources to be used and identifying
the practices and traps are primordial.
These phases lead to the drawing up of
a master plan and an action plan for the
project. But don't we say that defining
things is all well and good, but achieving them is better?
An engineering project is a challenge to
be taken up and management must
take up these challenges.
Among those which we suggest descri-
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November 2006
Having an information and communication system in ones company is a
very good asset, but how do you decide
on it and how do you convince others
that this is the right system to use?
What must be known is that as technologies are developing, systems must be
capable of adapting to this.
Hence, all applications developed must
imperatively respond to requests.
However, the old design of information
systems has demonstrated their rigidity
and their compartmentalisation.
Currently, recomposition is imposed.
The time has come for new interactive
and integrated tools.
But the fact to be remembered today is
that the strategic importance of information and communication systems
seems to be an asset.
Economic intelligence
Engineering Case study
Abdelmoumen OULD KADDOUR
Chairman & CEO
Brown & Root - Condor
“Economic intelligence
consists of controlling and
protecting the strategic
information of any economic player. This is accomplished through three
means, namely industrialbased competitiveness,
safety of the business
economy and reinforcement of the influence
which our country has.”
R
Alain Juillet
esearch and the interpretation of information accessible
to the public have become
very important with the revolution of the new information and communication technologies. In reality, this
approach, or rather this intellectual
position, is nothing other than the
cognitive and functional expression of
human beings faced with financial gain.
In fact, calculated on the example of
how the central nervous system operates and interprets the information
received thanks to external sensorial
stimuli, economic intelligence helps the
company to use the information available to become and remain profitable.
The end of the Cold War caused an
evolution in the definition of national
security. During the Cold War, the
threat from the Soviet Union was the
focus of interest for national security,
and the secret services focussed their
efforts on its surveillance. Currently, in
the post-Cold War “new world order”,
national security is more considered
from an economic and vitality point of
view than in terms of pure military
competences.
Furthermore, the threats against our
economic welfare are numerous. In the
“global economy”, it is no longer practical or useful to make a difference between national economic relations and
international economic relations. Most
national economies, such as the United
States' economy, are no longer in a
vacuum where the results are imposed
by the domestic preferences alone. An
example is the devaluation of the
Mexican peso at the end of 1994 which
threw the United States' financial markets into disarray.
We live in a world in which the economic health of nations and the competitiveness of companies are largely determined by the ability to develop, sell and
seize the economic advantages resulting from scientific and technological
innovations. The internet and the technological advances continue to remodel
our way of managing companies (business) at the governmental and industrial level; competition and economic
pressures are creating quicker and
more efficient ways of managing business and white collar crimes have
increased and have become a reality
with a serious impact.
Connection to the internet has made
the concept of borders and jurisdictions in terms of combating this problem obsolete. Organised crime groups
can easily commit their crimes and
avoid the provided sanctions through
what were clearly defined jurisdictions
in the past. This has made increased
international cooperation necessary
between the organised crime fighting
agencies.
A greater understanding of the interactions between technology, competition,
regulations, legislation and globalisation is needed to successfully manage
the equation of competition between
economic progress and criminal opportunities. The extent of criminal sanctions has increased in the world of
technology. The technological information revolution has fundamentally
changed society and will continue to do
so in the future. The development of
information technology has caused
unprecedented social and economic
shake ups.
The latter also have their dark side. The
new technologies defy the legal
concepts in place.
Information and communication more
easily circulate around the world
without any border restrictions. More
and more criminals are committing
their crimes from other places which
are very far from those where these crimes have an impact.
The present information era requires
companies to compete with each other
globally, sharing sensitive information
with the appropriate parties, whilst
protecting this very information from
competitors, vandals, suppliers, clients
and foreign governments. The legislators are making increasing use of criminal codes to establish economic and
social policies within the framework of
using and circulating technology. A lot
fear that technological progress is facilitating industrial espionage and the
theft of “intellectual capital” and
making new technologies less expensive. In a global economy, there is less
distinction between the need to protect
the interests of the State and the need
to protect trade interests.
The state of a nation's economy is a
large part of its national security.
This economic status depends on this
nation's ability to compete efficiently on
the world market.
☞
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ENGINEERING CASE STUDY
☞ Crimes
attacking intellectual property
are serious crimes, not because of the
injuries or deaths caused to the person,
but rather because they steal the creative work from its owner. The theft of
intellectual property is in the process of
creeping up in stealth; hence, the companies, governments and departments
in charge of the application of the law
find difficulties in controlling its enormous impact on profitability whose
effect on the national economies does
not need to be mentioned.
Although the civil systems can compensate the intellectual owners, criminal
sanctions are often justified to punish
and prevent these contravening activities. In fact, breaches of the intellectual
property rights often imply no loss of
physical assets and, as for forgery crimes, require no direct contact with the
owner. The latter, often, does not realise it is a victim until the contravening
activities are specifically indicated and
investigated.
Economic espionage and the theft of
industrial secrets are often considered
as white collar crimes. This term was
invented in 1938 by Edwin Sutherland
during a speed he gave to the American
Sociological Society.
Sutherland defined this term as a
“crime committed by a person of
respectability and high social status in
the course of his occupation”.
Although there have been debates on
what can be defined as a “white collar
crime”, nowadays the terms generally
covers a variety of non-violent crimes,
usually committed in business situations in the interest of financial gain.
It is particularly difficult to take legal
proceedings against these white collar
crimes given that the perpetrators are
criminals with sophisticated processes
trying to dissimulate their activities
through a series of complex transactions. According to the Federal Bureau
of Investigations (FBI), it is estimated
that white collar crime costs over 300
billion American dollars annually in the
United States. However, the protection of industrial secrets is considered
increasingly essential in the competitiveness of the global industrial sector.
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November 2006
In parallel, the world has undergone an
information technology revolution.
Since, at least, the start of the 1990s,
the power of information technology
has increased exponentially resulting in
increasingly powerful means for stealing and transferring protected information. This technological evolution in
open societies encourages the appearance of certain types of criminal and
subversive activities, such as economic
espionage.
Economic espionage has become an
important business. As at the end of
the Cold War, a certain number of factors, such as the increased access to
and use of computers, greater profitability and the lack of resources in companies to investigate and take legal proceedings against such thefts, has
contributed to the increase in the theft
of industrial secrets in the last few
years.
The major growth in economic factors
linked to the definition of a nation's
security has the result of generalising
the theft of patented information in the
form of industrial secrets. The level of
theft of industrial secrets seems to have
quickly increased over the last few
years.
Economic espionage particularly threatens intellectual property rights (IPRs)
which have become the most valuable
assets in world trade. The IPRs may be
owned or stolen for a profit and are a
vital issue in today's competitive economy. The IPRs have become a field of
international interest and a controversial subject due to the increase in the
rates and costs of technological progress and increasingly transparent national borders. Intellectual property refers
to the legal rights corresponding to an
intellectual activity in the industrial,
scientific and artistic domains. These
legal rights, generally in the form of
patents, registered trade marks and
copyrights, protect the moral and economic rights of the creators, in addition
to the creativity and circulation of their
work. Industrial property, which is an
integral part of intellectual property,
extends the protection to industrial
designs and inventions.
The numbers will tell us whether or not
economic intelligence in the post-Cold
War era is a success. Are companies
continuing to earn money because of
their intelligence efforts? If not, is the
number of cases where foreign governments make use of corruption to obtain
contracts abroad decreasing? Is the
money lost because of industrial espionage declining? In the same perspective, has the number of industrial espionage cases in America decreased?
Economic espionage is not simply a
problem of intelligence; it implies fundamental questions linked to a nation's
economic interests which, in their turn,
are part of its national security.
References
B. Raman - Directeur, l'Institut des études
tropicales, Chennai
S. Gregory - L'Intelligence économique
dans l'ère de l'après-Guerre froide.
Snyder - La réforme de l'Intelligence dans
l'ère de l'après-Guerre froide
H. Nasheri - Les Dimensions de l'espionnage économique et la criminalisation du
vol du secret industriel.
Rapport annuel du Congress sur les collections économiques étrangères et
espionnage industriel.
L'Intelligence économique- Université de
Lyon
Intellectual property rights
Engineering Case study
M
arket economies require a
rule of law. A society
without state protection of
individual rights, especially the right to own property, would not
build private long-term assets, a
key ingredient of a growing modern
economy.
Since its early stirrings in eighteenthcentury Britain, modern economic
development has been characterized by
an ebb and flow in the intensity of state
involvement in shaping the economic
environment. According to the legends
of the early American West, the only
law west of the Pecos River was administered by Judge Bean. I am not sure
how much law that was, but I do know
that much protection of property in
sparsely settled western communities
just after the Civil War had to be privately provided.
Understandably, trade was limited in
such an environment. Economic
growth was greatly facilitated by the
emergence of civil government, which
provided, among other things, consistent and predictable enforcement of
property rights.
More recently, the states of the former
Soviet Union suffered for a time many
of the alleged characteristics of the
American Wild West--legal chaos, rampant criminality, and widespread corruption. This difficult period of transition in the Soviet satellite countries followed four decades of central planning
in which the arbitrary enforcement of
an inefficient set of rules resulted in
Alan GREENSPAN
massive economic failure. With few
exceptions, the new leaders of these
countries recognize that their future
economic success will depend on an
efficient and predictable rule of law.
A tension has always existed between a
desired continuity in the laws and regulations governing trade and business
practices and the necessary updating
that is required to keep pace with a growing and, hence, changing economy.
Uncertainties that stem from the arbitrary enforcement of the body of prevailing rules result in higher risk and an
associated elevation of the cost of capital, which in turn inhibits economic
growth.
Implementing an effective rule of law,
however, has its own difficulties. One
key component, a law of contracts,
governs the resolution of certain disputes between parties. Yet if adjudication
were requested for more than a very
small fraction of contracts, our court
system would be swamped into immobility and the performance of our economy would suffer. Thus, if our market
system is to function smoothly, the vast
majority of trades must rest on mutual
trust and only indirectly on the law.
A more general concern is that laws can
never be fixed in perpetuity. As societies and economies evolve, the details
of the law, though generally not its fundamental principles, need to change.
But any uncertainty about the clarity
and fixity of the law adds to the risk of
trade, which as I noted, is reflected in a
higher real cost of capital.
We in the United States endeavored to
lessen legal uncertainty by embedding
our most fundamental principles in a
constitution, which we made difficult to
amend. The commercially and economically salient specifics are typically
expressed in federal or state statutes. In
general, this arrangement seems to
have provided us with a healthy balance of continuity and predictability and,
yet, also the requisite flexibility to
respond to evolving economic and
societal circumstances.
Reflecting that flexibility, the direction
and the emphasis of legislative revision
over the generations have mirrored the
changing structure of our economy. In
recent decades, for example, the fraction of the total output of our economy
that is essentially conceptual rather
than physical has been rising.
This trend has, of necessity, shifted the
emphasis in asset valuation from physical property to intellectual property and
to the legal rights inherent in intellectual property. Though the shift may
appear glacial, its impact on legal and
economic risk is beginning to be felt.
Over the past half-century, the increase
in the value of raw materials has
accounted for only a fraction of the
overall growth of U.S. gross domestic
product (GDP). The rest of that
growth reflects the embodiment of
ideas in products and services that
consumers value. This shift of emphasis from physical materials to ideas as
the core of value creation appears to
have accelerated in recent decades.
☞
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ENGINEERING CASE STUDY
☞ Technological
advance is continually
altering the shape and nature of our
economic processes and, in particular,
is promoting the trend toward increasing conceptualization of U.S. GDP.
The size of our radios, for example, has
been dramatically reduced by the substitution of transistors for vacuum
tubes. Thin fiber optic cable has replaced huge tonnages of copper wire.
New architectural, engineering, and
materials technologies have enabled the
construction of buildings enclosing the
same space with far less physical material than was required, say, 50 or 100
years ago. More recently, mobile phones have markedly downsized as they
have improved. The movement over the
decades toward production of services
requiring little physical input has also
been a major contributor to the marked
rise in the ratio of constant dollars of
GDP to ton of input.
This dramatic shift toward product
downsizing during the past half-century stems from several causes. The challenge of accumulating physical goods
and moving them in an ever more
crowded geographical environment has
clearly resulted in cost pressures to
economize on size and space.
Similarly, the prospect of increasing
costs of discovering, developing, and
processing ever-larger quantities of
physical resources has shifted producers toward downsized alternatives.
This shift appears effectively to have
answered the dire concerns that were
expressed, in a report from the Club of
Rome three decades ago, about the
prospects of running out of the physical
resources that allegedly were necessary
to support our standards of living.
Another cause of product downsizing is
that, as we moved the technological
frontier forward and pressed for information processing to speed up, the
laws of physics required the relevant
microchips to become ever more compact.
More generally, in the realm of physical
production, where scarce resources are
critical inputs, each additional unit of
output is usually more costly to produce than the previous one; that is, production, at least eventually, is characte-
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rized by increasing marginal cost. By
contrast, in the realm of conceptual
output, much of production is characterized by constant, and perhaps even
zero, marginal cost.
For example, though the set-up cost of
creating an on-line encyclopedia may
be enormous, the cost of reproduction
and distribution may be near zero if the
means of distribution is the Internet.
The emergence of an electronic platform for the transmission of ideas at
negligible marginal cost may, therefore,
be an important factor explaining the
recent increased conceptualization of
the GDP. The demand for conceptual
products is clearly impeded to a much
smaller degree by rising marginal cost
than is the demand for physical products.
But regardless of its causes, conceptualization is irreversibly increasing the
emphasis on the protection of intellectual, relative to physical, property
rights. Before World War I, markets in
this country were essentially uninhibited by government regulations, but they
were supported by rights to property,
which in those years largely meant phy-
sical property. Intellectual propertypatents, copyrights, and trademarksrepresented a far less important component of the economy, which was
mainly agricultural. One of the most
significant inventions of the nineteenth
century was the cotton gin. Perhaps it
was a harbinger of things to come that
the intellectual-property content of the
cotton gin was never effectively protected from copiers.
Only in recent decades, as the economic product of the United States has
become so predominantly conceptual,
have issues related to the protection of
intellectual property rights come to be
seen as significant sources of legal and
business uncertainty.
In part, this uncertainty derives from
the fact that intellectual property is
importantly different from physical
property. Because they have a material
existence, physical assets are more
capable of being defended by police,
the militia, or private mercenaries. By
contrast, intellectual property can be
stolen by an act as simple as broadcasting an idea without the permission of
the originator. Moreover, one indivi-
Engineering Case study
tection inevitably entails making some
choices that have crucial implications
for the balance we strike between the
interests of those who innovate and
those who would benefit from innovation.
In the case of physical property, we
take it for granted that the ownership
right should have the potential of persisting as long as the physical object
itself. In the case of an idea, however,
we have chosen to strike a different
balance in recognition of the chaos that
could follow from having to trace back
all the thoughts implicit in one's current
undertaking and pay a royalty to the
originator of each one. So rather than
adopting that principled but obviously
unworkable approach, we have chosen
instead to follow the lead of British
common law and place time limits on
intellectual property rights.
dual's use of an idea does not make that
idea unavailable to others for their own
simultaneous use. Even more importantly, new ideas--the building blocks
of intellectual property--almost invariably build on old ideas in ways that are
difficult or impossible to trace. From an
economic perspective, this provides a
rationale for making calculus, developed initially by Leibnitz and Newton,
freely available, despite the fact that
those insights have immeasurably
increased wealth over the generations.
Should we have protected their claim in
the same way that we do for owners of
land? Or should the law make their
insights more freely available to those
who would build on them, with the aim
of maximizing the wealth of the society
as a whole? Are all property rights
inalienable, or must they conform to a
reality that conditions them?
These questions bedevil economists
and jurists, for they touch on some fundamental principles governing the
organization of a modern economy
and, hence, its society. Whether we
protect intellectual property as an
inalienable right or as a privilege
vouchsafed by the sovereign, such pro-
It is, thus, no surprise that, as a result
of the increasing conceptualization of
our GDP over the decades, the protection of intellectual property has become
an important element in the ongoing
deliberations of both economists and
jurists.
Of particular current relevance to our
economy overall is the application of
property right protection to information technology. A noticeable component of the surge in the trend growth of
the economy in recent years arguably
reflects the benefits that we have derived from the synergy of laser and fiber
optic technologies in the 1960s and
1970s. This synergy has produced very
little that is tangible in information
technology. Yet the information flow
that it facilitates has fostered the creation of vast amounts of wealth.
The dramatic gains in information
technology have markedly improved
the ability of businesses to identify and
address incipient economic imbalances
before they inflict significant damage.
These gains reflect new advances in
both the physical and the conceptual
realms. It is imperative to find the
appropriate intellectual property regime for each.
If our objective is to maximize economic growth, are we striking the right
balance in our protection of intellectual
property rights? Are the protections
sufficiently broad to encourage innovation but not so broad as to shut down
follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and
the cost of capital? How appropriate is
our current system--developed for a
world in which physical assets predominated--for an economy in which
value increasingly is embodied in ideas
rather than tangible capital? The
importance of such questions is perhaps most readily appreciated here in
Silicon Valley. Rationalizing the differences between intellectual property
rights as defined and enforced in the
United States and those of our trading
partners has emerged as a seminal issue
in our trade negotiations.
If the form of protection afforded to
intellectual property rights affects economic growth, it must do so by increasing the underlying pace of output per
labor hour, our measure of productivity growth. Ideas are at the center of
productivity growth. Multifactor productivity by definition attempts to capture product innovations and insights
in the way that capital and labor are
organized to produce output. Ideas are
also embodied directly in the capital
that we employ. In essence, the growth
of productivity attributable to factors
other than indigenous natural resources and labor skill, is largely a measure
of the contribution of ideas to economic growth and to our standards of
living.
Understanding the interplay of ideas
and economic growth should be an
area of active economic analysis, which
for so many generations has focused
mainly on physical things. This work
will not be easy. Even as straightforward an issue as isolating the effect of
the length of patents on overall economic growth, a prominent issue recently
before our Supreme Court, poses
obvious formidable challenges. Still, we
must begin the important work of
developing a framework capable of
analyzing the growth of an economy
increasingly dominated by conceptual
products.
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November 2006
ENGINEERING CASE STUDY
Korea - Strategy
for technological leadership
Taoufik FERHAT
Director Oil & Gas - Sales
Brown & Root - Condor
Les potentialités de la Corée du Sud
dans le domaine de la microélectronique ont connu durant ces 25 dernières années une expansion rapide et
remarquable en termes de dimension et
de capacité d'infrastructures, de revenus enregistrés et d'impact sur le marché mondial. La Corée du Sud a construit et continue deSouth Korea's
potentials in the field of microelectronics has, over the last 25 years, experienced rapid and remarkable expansion in terms of the dimension and
capacity of infrastructures, recorded
revenues and the impact on the world
market. South Korea has built and
continues to develop an independent
capacity in a large spectrum of microelectronic technologies, ranging from
the engineering of DRAM, SRAM and
ASIC to electronic equipment, packaging as well as the development of new
IT equipment. The country's current
strategy is to ensure dominance not
only in the manufacturing of electronic
components and products but, also,
innovation in the domain of the new
technologies. South Korea is determined to maintain its competitiveness in
the domain of microelectronics on the
international market in the long term
and it is also ready to commit the
appropriate financing and resources to
achieve this national objective.
SRAM : Static Random Access
Memory
DRAM : Dynamic Random Access
Memory
ASIC : Application-Specific Integrated
Circuit
Energie & Mines
140
November 2006
The Korean manufacturers are dominating the DRAM and household electricals markets. The development of the
semi-conductors industry has been
spectacular. In 1994, after just a decade, the Korean industrial conglomerates were able to take possession of 25%
of the global semi-conductor market.
Today, Samsung is the no. 1 DRAM
manufacturer, hence South-Korean
manufacturers are considered by their
Japanese and American counterparts as
being highly competitive.
Role of the public authorities
The Korean government has spared no
effort in giving priority to the development of local technological capacities,
whilst creating world class industrial
infrastructures, which were in place
even in 2001. It has firmly and proactively maintained this position with
regards the internal development of
advanced technologies. The government supports industry in South Korea
in at least four different ways:
1. It gives the legal and legislative bases
for the development of a highly technological industry through a national banking regulation, low interest rate on
loans, appropriate taxation on selected
imported products.
2. It supports the education and R&D
devoted to the high technology industry
by directly financing institutes and
public schools, universities and other
educational institutions, essentially
through the Ministry of Science and
Technology, the Ministries of Trade,
Industry and Energy; and Information
and Communication. This aid often
implies a partnership with emerging
and experienced companies.
3. It finances the development of
infrastructures, including the motorways and the transport networks, the
popularisation of internet services, etc.
and the construction of “scientific
parks” - the best known of which is the
Taedok scientific park, which is about
40km from Seoul.
4. It uses its authority and influence in
cooperation with the industry, the educational establishments and the media
to promote a sophisticated technological culture in South Korea.
The government's support is expressed
by tax advantages for R&D, the revamping and improvement of the performances of manufacturing plants and
factories and the development of
human resources. The government also
supports and finances countless projects in line with the nation's priorities.
Its support continues to be focussed
today on supporting new priorities
such as the IT sector and the start-up
of a local semi-conductor equipment
industry.
The government and the "Chaebols"
have worked independently and also
together to acquire foreign technologies from industrialised countries
through direct and indirect methods.
However, the final objective for the
country is still to make a transition
from a development system based on
investment to another one based on
innovation in which the competitive
advantage for the country will be translated through its great innovative capacities. This has motivated the industry
to emulate American and Japanese
expertise in the domain of microelectronics. The Koreans are in the process
of improving and revamping their educational and R&D infrastructures in an
almost obsessive way.
A large support from the public funds
for science and education has given
solid foundations for the development
of technological infrastructures. The
educators are focussing on the development of new creative, independent
and cooperative talents within the
population which will be the main
players for self-sufficiency in the
domain of high technologies. They are
thus continuing to upgrade the quality
of technician and engineer training,
making the R&D participate fully.
Engineering Case study
The community culture's
contribution to the economic
success
Nationalisation plays a key role in
Korean culture; there is, among the
workers and professionals, a common
determination for Korea to become an
economic giant on the world market.
The business groups appear to be large
families where the growth of the entire
group is an objective to be achieved
through the growth of the smallest entities. The companies up to a certain
point enjoy the loyalty of employees
and make this well known to them. In
addition to patriotism, mutual management-employees' loyalty and team
work, the Koreans are characterised by
a corporate culture and are known for
being preserving, highly focussed and
passionate workers; they invest 10%
and more of their income in R&D.
Importing technology vs.
building up domestic capacities
Historically, a large part of the microelectronic technologies, the source of
Korea's success, comes from foreign
countries, mainly the United States and
Japan. Having made the decision to
have the objective of self-sufficiency in
technological innovation, Korea has
put in place a strategy so as to remain
competitive on the global electronics
market whilst committing to joint ventures. The consequences of such a policy are the maintenance of a technological link with the world leading companies in the domain, the sharing of the
costs linked to R&D, the attenuation of
the local labour costs, the guarantee of
having more advantageous trade transactions and the contribution to the progress of the community.
The Korean government, the educational institutions and the private companies all collaborate with the foreign
universities. The objective of this collaboration is to train Korean engineers in
the new frontiers of advanced technologies.
Another strategy adopted by the South
Koreans in order to accelerate the technological transfer and increase self-sufficiency is the recruitment of foreigners
and nationals living abroad who have
skills, sufficient know-how and experience in the domain of the high tech-
nologies. Korea has intensively recruited Korean engineers trained in the
USA as well as foreigners to overcome
the technological shortfalls.
Korean companies continue to pay
large royalties for foreign technologies.
The amount of royalties from 19951996 reached 1.9 billion dollars
Another important aspect at the origin
of the development of the microelectronics industry in Korea has been the use
of old equipment manufacturers' agreements which have enabled the Korean
companies to sell their products under
the name of other companies to compensate for the shortfall due to the lack
of recognition of their name on the
market. The vision of Korean companies today is to be the leader on the
world microelectronics market with
manufacturers using their own trade
names, thus increasing their prestige
through technological innovation.
Roles of the universities
Korea's commitment to education and
teaching is shared by the government,
the cooperations and most of the population. Today, the literacy rate in this
country has reached 95%. A large percentage of pupils from secondary education go to university, and about 20%
of students from business schools get a
masters' degree. The population's education in all the domains in Korea is an
absolute priority, more specifically in
the branches of sciences and mathematics. The Korean university system is
today a source of national pride.
Together, the public and private universities offer adapted programmes
to support the development of the
microelectronics domain. In the same
way as in industry, universities encourage nationalism and a passion for
excellence.
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141
November 2006
PARTNERSHIP
Partnership
Mr Bedjaoui calls upon the American
business community to reinforce its
investments in Algeria
Before the Business Council for International Understanding
In New York, Mohammed
Bedjaoui, Minister of State,
Minister of Foreign Affairs,
called upon the business
community of the United
States to reinforce and
diversify its investments in
Algeria which now has, he
said, the conditions of a
mutually advantageous
and beneficial partnership
for both countries, indicated a diplomatic source.
Speaking before the Business Council
for
International
Understanding
(BCIU), set up in 1955, upon the
initiative of President Eisenhower, to
promote American trade and cooperation with the rest of the world, Mr
Bedjaoui felt that, with the return of
peace, safety and stability, and the putting in place of important reforms, particularly political, economic and social
ones, Algeria offers major investment
opportunities to foreign partners, and
particularly American ones.
Algeria, which has over these last few
years put much effort into improving
the situation of several economic sectors and making the business climate
healthier, has become an attractive destination for foreign investment, and
also offers large partnership prospects
in all domains, he specified in the
speech.
“I hope that Algeria and the United
States will be able to make the most of
this opportunity to contribute to further strengthening their relations and
raise them to a level of considerable
quality able to serve the interests of the
two people and the two countries”, he
stated. In his speech, the Minister
reported on the different measures and
initiatives by the Algerian government
to achieve stable and healthy macro-
Energie & Mines
142
November 2006
economic policies, to accelerate the
structural reforms, to achieve the economic transition and to create appropriate conditions for productive investment, recalling that the decade of terrorism that Algeria experienced is now
no more than “a bad memory”.
Algeria, he added, has now restored its
political stability, reinforced its institutional capacities and is rebuilding the
bases of economic and social growth.
It has also put in place a series of political and economic reforms aiming to
consolidate the State by right, good
governance, the democratic values and
the market economy, he further
emphasised to a large audience mainly
comprised of heads of state organisations and institutions, company managers, bank portfolio managers, members of diplomatic institutions and
members of business consultancy and
international trade institutions.
For the Minister of Foreign Affairs,
present in New York, where he led the
Algerian delegation in the works of the
61st session of the General Assembly of
the United Nations, the efforts made by
the Algerian authorities reflect their
desire and their profound conviction
that the reforms are determining factors for a sustainable social and economic development.
Growth figures
This undertaking will enable Algerian
citizens to enjoy the benefits of growth
and have access, inter alia, to the
health, education, vocational training
services, whilst giving them the opportunity to play a large role in society, he
stated, emphasising that the reform
work is completed by several other
measures, programmes and initiatives
including the application of a national
reconciliation programme, as well as a
series of political, legal, administrative,
economic and social-type reforms and
measures. He also recalled certain
results gathered at the socio-economic
level and indicated the improvement of
the financial situation, with, particularly, a significant growth rate of 5.1%,
large foreign exchange reserves, a
significantly declining unemployment
rate, particularly investments totalling
over 16 billion dollars, in the last few
years, 2.8 billion dollars of which were
contributed by foreign partners, the
reduction of foreign debt, the reduction
in inflation (from about 30% in the
middle of the 1990s to 3% in 2005),
and GDP of around 6% in 2003-2004.
The head of Algerian diplomacy, who,
from 11 to 13 April, made a working
visit to Washington during which he
spoke with his American counterpart,
Mrs Condoleezza Rice, on the future of
Algerian-American relations, also recalled the major economic growth and
recovery programmes initiated by
President Abdelaziz Bouteflika, aiming
to improve the living conditions of the
populations, to modernise the infrastructure, develop the market economy
and promote national economic integration.
Mentioning the international dimension of new Algeria, he cited, among
other objectives, the creation of conditions for a greater integration in the
world economy, by using and showcasing its advantages, particularly its
geostrategic position at the crossroads
of several regions and civilisations, its
population's capacities and skills, particularly those of its workforce, the existing industrial infrastructures, natural
resources and the new economic policy
offering more insurance and a better
business climate.
The government is continuing its
efforts to deepen the reforms to attract
more investments, excluding hydrocarbons, emphasised the Minister, adding
that new legislations are reinforcing the
guarantees offered for investment, are facilitating the transactions and awarding of contracts,
are making the business climate healthier, lifting
the bureaucratic barriers that have existed up to
now and giving more advantages to stakeholders and entrepreneurs.
Convergence of views
Algeria has committed to a vast programme of
reforms for its public finances. The stabilisation
of the macroeconomic environment facilitates
the creation of companies, encourages the
financial institutions to increase their capital,
participates in making the budgetary policy
more flexible, favours access to credit and to
offering new products, he noted, announcing
that new reforms are underway whereas Algeria
is setting about taking advantage of the association agreement with the EU and concluding an
agreement with the WTO. The efforts made are
producing results, replied the Minister, citing,
amongst others, energy and mines, telecommunications,
agriculture,
infrastructures,
transport, the habitat, hydraulics, but also justice, health, education or services in general.
Dealing with the political aspect, he said that at
the regional and international level, Algeria has
found its place again and is fully enjoying its
role by contributing to the stability, peace and
safety in our region as in the rest of the world.
Speaking about Algerian-American relations, he
expressed his conviction that both countries
share numerous objectives and are called upon
to further develop their cooperation and partnership relations.
Algeria and the United States share a convergence of views on a large range of issues of
common interest. Our partnership benefits
from a solid economic and political base which
we hope will support and consolidate further
still through a cooperation at the security and
military levels, in-depth dialogue and greater
cooperation in view of establishing a sustainable
strategic partnership. He also drew the audience's attention to the development of bilateral
trade which increased to 3.3 billion in 2004,
making Algeria the no. 2 partner in Africa (after
South Africa) and in the Arab world (after
Saudi Arabia) of the United States which
remains its no. 1 economic partner. It is also an
important exporter of LNG and oil products for
America where it plays a major role in securing
its energy supplies, he further indicated.
Partnership
The generalised system of preferences
A mechanism to help Algerian
exports to the USA
Over these last few years, Algeria has
become a focal point for the United
States not only in the hydrocarbons sector, but also in those particularly of agriculture, hydraulics, transport, construction, the habitat, new information and
communication technologies, the pharmaceutical industry and trade. The
importance which the Algerian market is
arousing from American business communities is reflected by the growth in
turnover (over 11 billion dollars in
2005), but also by the intensification of
bilateral relations as well as by the putting in place of mechanisms, instruments and cooperation tools that are
able to favour a reconciliation between
the two economies which have complementarities and reinforce the cooperation relations. Among these instruments
is a mechanism called the Generalised
System of Preferences (GSP), which is a
system for exporting, through customs,
products on the American market.
Algeria has benefited from this system
since March 2005 and this system now
enables the Algerian operators to export
some 3,400 products to the American
market and to benefit from the customs
duties excess. The United States decided to enable Algeria to benefit from
their
Generalised
System
of
Preferences, both because of the quality
of the relations existing between the two
countries and to take account of the
economic reforms made by Algeria, in
the last few years, particularly in terms
of international trade, investment, business rights, anti-corruption measures,
adherence to international agreements
and conventions, protecting the environment, energy or intellectual and
industrial property, remarked a specialist in Washington. Unfortunately this
system, which enables Algerian producers to export their products without
having to pay customs duties in the
United States, is still little known and
above all little used by the Algerian operators, regrets a manager from the
United-States-Algeria Business Council
(US ABC), adding that his organisation
has for two years been working to
encourage mutual knowledge of both
markets.
Algeria has the abilities to develop and
vary its exports on the American market.
The products eligible for exporting are
in place and have a good quality-price
ratio. Algeria will simply have to
conform to the quality standards and
rules in force on the American market
where we increasingly find products
coming from Arab countries, Maghreb
and Africa, noted, for his part, a civil
servant from the American Department
of Trade. In this respect, he added that
the time has come to make the institutions set up between the two parties,
such as the US ABC, more dynamic, to
ensure the entry in force of the cooperation agreements and conventions
concluded, the Trade Investment
Framework Agreement or Tifa, which
now links the two economies, and to
open up outlooks for trade. The
Generalised System of Preferences,
managed by American customs authorities, defines the list of products and the
eligibility criteria for the customs duties
excess regime and all the facilitations
and the benefits granted to these products, including most manufactured or
semi-manufactured products subject to
customs duty, some agricultural products (including dates, olives, olive oil
and wines) or fishing products as well as
the primary industrial products which
do not generally benefit from a customs
regime, he further remarked. For the
Algerian market, the non-eligible items
may be particularly textiles, products
from the leather industry, household
items, all products for which the
American producers are in competition,
including electronic, glass and steel products, noted the same source, which
does not mean that agreements may be
concluded on some of these non-eligible
products, particularly arts and crafts
and textile items. The GSP deserves to
be used quickly by both business communities. All the existing mechanisms
must be shaken up, said an Algerian
businessman established in the USA.
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143
November 2006
PARTNERSHIP
Partnership
Strong US presence
Algiers International Trade Fair
44 companies (3 in
hydrocarbons) representing 51 firms, 18 of
which new exhibitors.
■ An investment potential of 2.5 billion
dollars for 2006.
■ 858 million dollars
of investments, excluding hydrocarbons,
in 2005.
■
Present for the 7th consecutive year at
the Algiers International Trade Fair, the
United States of America reinforced its
participation in this 39th AITF with 44
companies representing 51 firms, particularly in the services and latest technology segments.
The ICT, the pharmaceutical industry,
energy, agriculture, the aeronautics
and automotive industry are, amongst
others, the key sectors in the American
pavilion, which is catching the interest
of the Algerian economic operators.
The United States Ambassador,
Mr Richard Erdman, present on the
occasion of the United States' Day
organised in the company of Mr Daniel
E. Harris, Under Secretary of the
Department of Trade, reconfirmed his
country's interest in the Algerian market due to the potentials it offers, indicating that the trade between both
countries did, in 2005, amount to
11.5 billion dollars, part of which is
generated by hydrocarbons, recording
25% growth compared to 2004, i.e.
1.3 billion dollars. On another topic,
Americans have invested in Algeria the
equivalent of 858 million dollars,
excluding hydrocarbons.
“This potential should reach 2.5 billion
dollars at the end of 2006, confirmed
the Ambassador. This growth is driven
by a convergence of interests, an
opening up of the market and a better
integration of Algeria in the world markets”, he argued.
Energie & Mines
144
November 2006
Also on the same occasion, Mr Richard
Erdman mentioned his country's support “for the reform efforts initiated by
Algeria”, particularly in terms of
transparency in managing and fighting
against corruption, he specified.
With regards the competition on the
Algerian market, the speaker said that
“this will enable benefits to be drawn in
terms of transparency and quality”.
Describing the national market as the
largest in Maghreb, the Ambassador
said that Algeria had “important
resources but which do however
remain unexploited due to a lack of
know-how”. As to the eventuality of a
free trade agreement between both parties, he specified that his country is
interested by such an agreement with
the Maghreb and Middle Eastern
States, confirming that “what is important for Algeria in the short term is the
successful completion of the negotiations in view of its membership to the
WTO; a framework which will define
the bilateral relations on the basis of
more solid and beneficial foundations
for both countries”.
Asked about the development of the
Open Skies project, which will enable
opportunities for direct air links between both destinations, the American
ambassador replied that “the matter is
making positive progress”, without
adding more. For his part, Mr Daniel
E. Harris explained that the serenity,
transparency, respect and intellectual
property rights and particularly the
measures facilitating the repatriation of
capital are profit-making opportunities
expressed for the Algerian market by
the Americans.
Partnership
Chakib Khelil receives an American
delegation from the NNSA
Algeria-USA
The possibilities
of creating sister
laboratories examined
■
The Minister of Energy and Mines, Mr
Chakib Khelil, received in Algiers an
American delegation from the National
Nuclear Security Administration
(NNSA) led by Mr Kenneth E. Barker,
we learn from the Ministry.
The audience, which took place at the
Ministry's head office, in the presence
of the managing director of the
Commissariat national de l'énergie atomique (Comena), Mr Mohamed
Derdour, related to cooperation in
terms of training in the domain of the
safety of nuclear activities for peaceful
purposes, specified the same source.
The audience enabled both parties to
exchange points of view and examine
possibilities of creating sister laboratories, he pointed out.
During its trip to Algeria, the American
delegation from the NNSA will have
meetings with the Comena managers.
The NNSA is a semi-autonomous
agency
within
the
American
Department of Energy, responsible for
enhancing national security through
the military application of nuclear energy. Its main mission is to enhance the
safety, security, reliability and performance of the U.S. nuclear weapons
stockpile without nuclear testing, to
reduce the global danger from weapons
of mass destruction, to provide the
United States Navy with safe and effective nuclear propulsion and to support
the conduct of the United States in
science and technology.
In February, Algeria hosted a seminar
on the means of guaranteeing the security and safety of nuclear power plants
and protecting people and the environment against risks of using nuclear
materials for peaceful purposes.
Algerian Development Corporation
A structuring port project worth
6 billion dollars
■ 100,000 jobs will be generated by this project, which
should be completed in 2015.
Algerian Development Corporation (ADP) is a company of
Algerian law, with American capital. Its representative in the
American pavilion, Mr Iskounène, who is also responsible for
the container terminal at the port of Béjaïa, told us about a
structuring project worth an amount of 6 billion dollars planned
in the deltas of Issers in the wilaya of Boumerdès.
The project in question encompasses an industrial zone,
a port for hydrocarbons, a site for the processing of iron, a
trading port, a seawater desalination plant, an electric power
plant, a shipyard and a business centre.
100,000 jobs will be generated by this immense port complex
which will be completed in 2015, whose works must be started
in 2007. According to Mr Iskounène, the project has been submitted to Mr Hamid Temmar, Minister of Participations and the
Promotion of Investments.
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145
November 2006
PARTNERSHIP
Partnership
President Vladimir Putin in Algiers
Algeria-Russia
■ Four master agreements
signed
■ Numerous Russian companies intend to increase
their presence in Algeria
The President of the Russian
Federation, Mr Vladimir Putin, on a
visit to Algeria, described the future of
the relations between the two countries
as “very promising”.
This visit, upon the invitation of the
President
of
the
Republic,
Mr Abdelaziz Bouteflika, was concluded with the signature of four master
bilateral cooperation agreements, once
of which related to the cancellation of
Algerian debt, estimated at 4.7 billion
dollars, contracted with Russia.
These master agreements related to the
economic and financial relations and
the treatment of the debt contracted by
Algeria with Russia, the non-double
taxation, the promotion and protection
of investments and the cooperation
between the Algerian and Russian
Chambers of Commerce and Industry.
For Algeria, which committed to buy
goods and services from Russia for an
equivalent amount of the debt, this
marks a “significant development” in
the cooperation between the two countries already bound by a strategic partnership agreement. Both countries
expressed their interest in “greatly”
increasing the volume of trade and
financial investment and agreed on the
need to “raise” the level of their partnership in several domains and business sectors. Both presidents had faceto-face meetings which lasted over
three hours, thereafter extended to
members of both delegations. This visit
was an opportunity for President
Bouteflika to call for the intensification
and the diversification of trade between
the two countries.
Recalling the in-depth discussions
which took place in April 2001 with Mr
Putin, when the Algerian President
visited Russia, the Head of State indicated that these discussions are now
Energie & Mines
146
November 2006
Gazprom wishes to
realise projects with
Sonatrach in the
domain of LNG
part of the framework of a “cooperation marked by exemplary relations”
based on a “foundation of common
convictions” and “mutual interests”.
"Very positive results have been able to
be achieved since our meeting in
Moscow in terms of reinforcing our
political dialogue, both multilaterally
and bilaterally, as fully demonstrated
by the high level visits exchanged between our two countries and also within
the framework of our bilateral cooperation which has already added significant new and promising impetus”, further emphasised the President of the
Republic.
For his part, the Russian President
focussed on the “high status” and the
“quality” of the relations linking his
country and Algeria “both at the political and at the economic level”.
President Putin, who noted that Algeria
was the first Arab country with which
Russia has signed a strategic partnership agreement, specified that the
Algerian-Russian relations “date back
several years”.
He also stated that he had examined,
with President Bouteflika, cooperation
in the economic domain, adding that
the two countries have agreed to
extend this cooperation to the domain
of mechanical construction, the energy
sector and the transport sector.
President Putin, in this perspective,
The Russian gas giant Gazprom has
expressed its interest in the realisation of
projects in partnership with Sonatrach in the
domain of the production and selling of
liquefied natural gas (LNG). According to the
Russian daily newspaper Russkaïa Gazeta,
the Chairman of the Board of Gazprom, Mr
Alexei Miller, who accompanied the Russian
President Vladimir Putin on his visit to
Algeria, emphasised that his company
would like to realise projects with Sonatrach
in the domain of LNG. Other than the gas
pipeline construction and prospecting operations, Gazprom is also interested, he said,
“in producing LNG in partnership with
Sonatrach”, underscoring that “Algeria
enjoys great experience in this domain”,
added the same source. He furthermore
indicated that Sonatrach might be asked to
participate in the construction of LNG plants
in Russia, adding that the latter “is working
for the development of LNG production”. Mr
Alexei Miller, according to the newspaper,
denied any competition between his company and Sonatrach in terms of supplying gas
to Southern Europe, emphasising that
“Russian gas is not competitive”. "Algeria is
closer to Southern Europe than Russia
which cannot, consequently, compete with it
for this market”, he confirmed. He further
specified that the Russian party would like
to collaborate with the Algerian partners “on
the market study in view of reaching an
agreement on this subject”, announcing “the
upcoming signature of a memorandum of
understanding on cooperation in the domain
of hydrocarbons between Gazprom and
Sonatrach”.
confirmed that he had fixed with president Bouteflika “targets” described as
“very promising for the future”,
emphasising that “a lot of Russia
companies are already on the Algerian
market and intend to increase their
presence”.
Partnership
First meeting of the
Algerian-Russian Business Council
Algeria-Russia
Russians will submit
tenders for the fourth
mobile telephony
operating licence.
To enable a very solid political relationship and a very old friendship to be reinforced and to enable economic cooperation, which is currently minimum, to
take on a more substantial shape, the
Algerian-Russian Business Council, set
up last March, is determined to set down
the bases of an energy partnership and a
dynamic approach which targets, in the
field, the objectives of both countries in
terms of business relations. The Council
held its first working meeting in the
Sheraton hotel in the presence of businessmen from both countries, supervised by the two chairmen of the Council
and executives from the Algerian
Chamber of Commerce. The main aim
of this meeting is to solidify the desire
and the ambitions of the Algerian and
Russian authorities to move quicker
towards a business and economic
cooperation in a more pragmatic and
more active way to make up for a great
delay in this domain. This desire was
expressed through the strategic partnership agreements signed in Moscow in
2001 and in Algiers in 2006 between the
Algerian President and the Russian
President who insisted on the importance of reinforcing the bilateral coopera-
tion in the domains of investments,
stake-holdings and company acquisitions, exports and imports and exchanges of information concerning the
potentials of both countries.
The Algerians therefore took advantage
of the Business Council meeting to
explain to the Russian operators the possibilities and advantages of our country
in terms of investment, particularly in
the agriculture and tourism sectors. The
business opportunities, the regulatory
framework, the tax and para-tax advantages, the investment facilities - everything has been explained attractively in
order to convince the Russians and
guide them towards the most useful sectors and particularly those which have
yet to be discovered. The construction
sector is one of these and, according to
the Chairman of the Business Council,
Mr Kamel Abderrahim, Russian companies excel in the domain of construction
and can easily compete with Chinese
companies in terms of quality and cost.
Indeed, it is the Russians who built the
city of Boumerdès. The interest of the
latter is, however, focussed on the gas
sector and on research in the mining
domain; no less than seven oil companies were part of the business delegation.
Russians are also interested in mobile
telephony and intend to submit tenders
for the fourth operating licence.
Scientific research, biotechnology, ship
construction, agriculture, etc. are also
sectors which interest the Russian businessmen and on which they intend to
gather as much information as possible.
It should be pointed out that there is a
huge lack of information on the Algerian
economy for Russian businessmen and
that trade and economic exchanges between the two countries are derisory,
since they only represent 500 million
dollars - generally in favour of Russia.
The few products exported to Putin's
country fall within the framework of our
debt repayment. Therefore, the Algerian
market is completely unknown by
Russians. Algerians, however, do know
the Russian economy as, in the 1970s,
Algerian companies were automatically
driven towards cooperation with Russia,
which meant that a lot of Algerian executives have been trained in this country.
Their experience will be very beneficial
in this desire to consolidate the economic relationship between the two countries. The field of this cooperation hence
led to the signature of the rules of the
Algerian-Russian Business Council and
the establishment of its different sections. Mr Abderrahim said he was determined to move found to translate in the
field the political desire to reinforce this
cooperation and to produce positive
results as quickly as possible.
Balance of Trade
A surplus of 2.6 billion dollars in April
Algeria's trade in the month of April 2006 balanced with a surplus of 2.6 billion dollars, up by over 52% compared to the
month of April 2005, according to the customs data collected by
the Centre national de l'informatique et des statistiques (Cnis).
Exports amounted to USD4.33b, i.e. an increase of 21.36%
compared to the month of April 2005 (USD3.57b), whereas
imports recorded a reduction of 7.47%, totalling USD1.7b compared to USD1.84b in the month of April 2005. During the month
of April 2006, hydrocarbon exports continued to represent the
majority of sales from Algeria to overseas with 97.35% of the
total volume and an increase of 22.04% compared to the month
of April 2005. As for exports excluding hydrocarbons, these
remain marginal with only 2.65% of the total volume of exports,
i.e. a value of USD115 million. The main products exported,
excluding hydrocarbons, are particularly comprised of the group
“semi-products” followed by the group “raw products”, the group
“foodstuff”, “non-food consumption goods” and “industrial equipment goods”. The breakdown of imports per financing method
shows a significant predominance of cash, which remains the
most used method with 84.40% (USD1.44b) recording, however, a 6.67% decline compared to the month of April in the previous year. The largest of the remaining imports (9.14% of the
total volume) was financed through credit lines, and the remainder using the currency account and financial transfers.
Energie & Mines
147
November 2006
PARTNERSHIP
Partnership
“The Gazprom-Sonatrach
agreement is in the same spirit
as the Gazprom-ENI one”
Interview with Mr Renato Urban
The first part of the interview focuses on the agreement between
Sonatrach and Gazprom and on the possibility of creating a natural
gas OPEC as well as the potential repercussions on Italy.
For Mr Urban, the meeting which took
place in August 2006 between
Sonatrach and Gazprom falls within
the framework of the meetings regularly organised between the two companies. These are technical-type meetings
during which these companies aim to
define a common trade policy to avoid
allocating to the same market volumes
of gas which might compete with one
another.
With regards the agreement signed between Sonatrach and Gazprom
(Mr Urban recalls that this agreement
was signed by the Vice President of the
Sonatrach Sales Activity and the VicePresident of Gazprom, in the presence
of the Algerian Minister of Energy and
Mines and the Russian Minister of
Industry and Energy), Mr Urban sees
no relation with the creation of a gas
OPEC, without, however, excluding
the possibility that two large producers
cannot agree on concerted actions to
maximise their profits within the framework of the energy policies of their
respective countries.
• Mr Urban feels that the agreement
being negotiated between Gazprom
and ENI is part of the same spirit.
After mentioning the characteristics of
the gas industry compared with the oil
industry (particularly in terms of
transportation and the complexity and
particularity of trade agreements), Mr
Urban focused on the difficulty of creating a gas OPEC in the short term.
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148
November 2006
Hence, the main danger for Italy is not
the creation of a hypothetical gas
OPEC, but this country's chronic inability to construct new natural gas importing and storage infrastructures.
Whilst numerous foreign companies
have set up in Italy since the deregulation of the natural gas market in 2000,
attracted by the profits to be made on
the final market, none of them have
made investments in the transportation
and storage activities. However, none
of them have stopped courting the
infrastructures built by ENI - infrastructures which continue to ensure
Italy's natural gas supply.
In reality, only the major ones have the
necessary qualifications and the financial means required to realise this type
of project.
• The second part of the interview
deals with the specific situation of the
Italian gas market.
Mr Urban explains that the tensions
recorded in the 2005-2006 thermal
year are explained by the difficult weather conditions recorded last winter
which caused an increase in demand in
the residential sector, but also the production of electric power designed for
importing.
If these factors should be repeated next
year, the market will encounter numerous problems, in spite of the provisions taken by the Ministry of
Economic Development. These preoccupations are exacerbated by the statements made by the Russian Minister of
Economic Development, Norman
Gref, who recently stated that Russia
will have to face a shortage of natural
gas production in 2007 in parallel to a
rapid increase in local demand.
In response to a question on the high
level of gas prices in Italy compared to
other European countries, Mr Urban
emphasised that this situation was
explained by the taxation applied to
natural gas in this country. In fact,
import prices are in line with those
applied on other markets. The different
attempts by the Italian Ministry of
Economic Development to bring gas
taxation in line with those of other
European companies have come up
against opposition from the Treasury.
With regards the difficulty of developing import infrastructures in Italy, Mr
Urban considers that it is unimaginable
that the government and the opposition
reach an agreement on a domain as
strategic as natural gas. The recent
referendum cancelled the reforms in
terms of energy, by moving the decision centre to the regions. Indeed, the
legislation has not integrated storage
and re-gasification terminals as points
that are under the exclusive remit of the
State.
In practice, this text leaves the decision
making on storage and the new
transportation and re-gasification
infrastructures in the hands of the
regions. In other European countries,
energy is a strategic sector which only
depends on the State and is managed
in the interest of the entire country.
In Italy, there is no planning body, even
in the Ministry of Economic
Development, that can only be limited
to collecting the authorisation applications and checking the conformity of
the project with the legislation in force.
The risk might be finding oneself with
import infrastructures which will have
cost billions, but without natural gas.
The inter-departmental commission
recently put in place by Prime Minister
Prodi is looking to find a solution to
this problem but, as it does not have
decision-making power, it can only
favour and accelerate the LNG projects' approval procedures.
To conclude, and for Italy to end its
Partnership
supply crisis, Mr Urban recommended
lifting the regulatory bans which today
prevent some of the Adriatic's gas
reserves from being exploited, which he
estimates at about 30Gm3.
Mr Renato Urban, Director of Urban Gas
& Power, formerly marketing director of
Agip SPA, an expert on the Gas system
monitoring and emergency technical
Committee of the Ministry of Economic
Development.
Energy Europe in question
ANALYSIS
Analysis
By Mohamed Sofiane Kasbadji *
Recent take-over operations
and merger projects involving large European groups
have highlighted the difficulties encountered by
European institutions in
deregulating the energy
market faced with national
considerations.
H
ence, the Italian Group Enel,
which said, a short while ago,
that it was looking forward to
launch a take-over bid for the
French Group Suez, has considerably reduced its enthusiasm. Enel now wants to
obtain guarantees from Brussels that its bid
will not be countered by the French government for “national security” reasons.
Now, in Brussels we are indeed attentively
studying the planned merger between Gaz
de France and Suez, designed as a counter,
it seems, to the solid attempt from the
Italian Group against Suez. For the
European Commission, this means evaluating the conformity of this planned merger
with the competition law or with the operating rules of the domestic market.
Furthermore, we can even mention the possibility of referring the matter to the
European Court of Justice, as France is
suspected of contravening community
regulations. Having been referred the case,
Mrs Neelie Kroes, the Commissioner in
charge of competition, does not hide her
reticence towards the consolidation operations underway in the energy sector (not
only in France, but also in Spain) which, in
her opinion, restrict competition on the gas
and electricity markets.
Being wary of the "national champions",
Mrs Neelie Kroes has made it known that
the Commission will “always look with
concern at any attempt by national governments, directly or indirectly, to interfere
unduly in the process of cross-border restructuring in Europe”.
The Commissioner of Energy, Mr Andris
Piebalgs, is not of this opinion. He feels, to
the contrary, that the GDF-Suez merger,
“apart from the emotion it arouses, will be
positive for competition on the French mar-
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150
November 2006
ket", a point of view which endeavours to
uphold the French who uphold that this
operation will enable the emergence of a
solid competitor of Electricité de France
(EDF). However, the Commissioner in
charge of the domestic market, Mr Charlie
McCreevy, is concerned and has asked for
explanations from the French government
which he suspects of having, through this
merger operation, hindered the free circulation of capital and of contravening the legislation on market abuse.
Mr Charlie McCreevy has asked for similar
explanations from Madrid which is trying to
prevent the German company E.On from
buying Endesa and who supports the merger of the latter with Gas Natural. In the
meantime, the French Finance Minister, Mr
Thierry Breton, has filed a bill on anti-takeover bid measures whereas the head of
Suez, Mr Gérard Mestrallet, upholds that
the Group's performances (profits up by
48% in 2005) provide a convincing response to shareholders tempted by an Enel bid
(Suez' stock market capitalisation is 43
billion euros) and is more tempting than
what has been proposed to them within the
framework of the merger with GDF.
Hence, four years after the Barcelona
Summit, which launched the deregulation
of the energy markets on 1 July 2004 for
professionals, and on 1 January 2007 for
private individuals “it's the open season”:
European companies from the sector are
launching in a wave of unprecedented takeovers. Already in 2003, the acquisition of
Ruhrgas by E.On was not able to prevent
the German Cartel Office; the same would
have been the case in Portugal if the commission had not vetoed it at the end of
2004. This is what is happening in France
today with the Suez-GDF merger, with the
capital of the latter Group having been, in
the meantime, opened up to the private sector. The European Commission has few
arguments likely to counter these repetitive
initiatives aiming to protect or establish
national champions. Hence, in 2002, upon
the instruction of the Luxembourg Court of
Justice, Madrid and Rome renounced blocking EDF, which multiplied acquisitions
whilst being protected in France by its
monopoly. The States refused to set up a
common policy in a divided Europe. The
British and Dutch want to control 100% of
their hydrocarbons; the French intend to do
what they want in nuclear matters, whereas
the Germans, the Austrians and the Italians,
who do not want nuclear power stations in
their countries, intend, nevertheless, to take
advantage of those of their neighbours.
With regards the Suez-GDF merger project, it has provoked the wrath of the
Belgian authorities: they fear that the
Belgian energy market will become annexed
by France if this operation goes ahead and
feel that Belgium's energy independence is
threatened. To the economic nationalism
and euro-scepticism which accompanies it,
should be added, in the same perspective of
the security obsession in terms of energy,
the proposal launched by Poland for an
energy NATO. The President of the Polish
Republic, Mr Lech Kaczynski pleaded for
putting in place a Euro-Atlantic energy
security organisation designed to guarantee
the supply of its members. This device
would be open, on the basis of a treaty, both
to the countries of the European Union,
and also to those of NATO, such as the
United States and Turkey. The initiative
which excludes Russia is not arousing
enthusiasm.
Germany, for example, would prefer an
"Energy OSCE” which would have, on the
contrary, Russia and even Kazakhstan as
members. The Polish initiative does, however, talk greatly about the concerns of new
EU members on energy matters, as Russia
remains the main supplier of the central and
eastern European countries. Its deliveries
represent over two thirds of their natural
gas consumption (some Baltic countries are
100% dependent on it, compared to 25%
for the European Union). These countries
have not appreciated the fact that Germany
has set up an agreement with Russia to
construct, at the bottom of the Baltic Sea, a
gas pipeline which carefully bypasses their
territory; but the new member countries
themselves are not defending the same
interests and their respective approaches
diverge. Prof. Elie Cohen (Dauphine
University) states that Europe has failed in
its energy policy: "The deregulation has
been considered market by market; the
commission's objective has been to break up
the national monopolies and not to build an
integrated European electric platform by
developing the interconnections to the borders." But the operators are not interested
in this, as each one wants to remain master
of its own country and the European energy map which is being drawn is one of six or
seven national champions.
M. S. K.
* Oil expert
Partnership
Towards a summit with
the hydrocarbon supplier neighbours ?
Algeria-European Union
The French Prime Minister
proposes the “emergency”
holding of such a meeting.
The French Prime Minister, Mr
Dominique de Villepin, proposed in
Brussels the “emergency” holding of a
summit between the European Union
and its large oil and gas producing
neighbours and suggested the appointment of an “Energy Representative”
who would represent the EU.
Among the major hydrocarbon exporting neighbours to the EU, Algeria is in
second place for gas, after Russia and
before Norway (40% of the EU's gas
imports come from Russia, 30% from
Algeria, 25% from Norway).
With the doubling of its exports by
2010, Algeria would get closer to
Russia's level.
Mr de Villepin also proposed to the
president of the EU executive body, Mr
José Manuel Barroso, the appointment
of a special French energy representative for the European Union who will be
responsible for “energy diplomacy”.
During a press conference held at the
end of a meeting with the president of
the European Commission, the head of
the French government specified that
his proposal does not aim to create a
new European body, but to appoint
someone who can “put everything into”
this common energy strategy.
On the other hand, Mr Villepin considered it "important to plan to enhance”
the EU partnership agreements with its
neighbours through “a genuine energy
strategy”. The head of the government
prefers to “enhance” these agreements
rather than establish new energy partnerships.
“Europe is losing its interest in the
Southern Mediterranean countries”
Workshop on the future of the partnership between Algeria and Europe
The participants in the Algeria-Europe workshop, that met in
Algiers, deplored the “failure” of the Euro-Mediterranean
(Euromed) process, putting it largely down to Europe
“losing interest” in countries on the south bank of the
Mediterranean. "The history and geography, the human
exchanges, the imperatives of assuming together the construction of a country's future (…) mean that both parties
must have a strong, favoured relationship, showing trust and
mutual respect”, emphasised the Ministry of State, Ministry
of Foreign Affairs, Mr Mohamed Bedjaoui, in an opening
speech at the workshop which took place in the APS conference room. But over ten years after the adoption, in
November 2005, of the Barcelona Declaration, the founding
text of Euromed, the “situation is uncertain”, regretted Mr
Bedjaoui during this one day meeting organised by the
Réseau intermaghrébin économie et société (Rimes).
"Barcelona was a virtuous aspiration which was not achieved"
revealed, for his part, the financial expert Mohamed Mihoub
during a discussion in which about thirty researchers and
representatives from the different Ministries took part.
For Mr Mihoub, Europe, for several years “now only has eyes
for the countries of the East”, adding that “Europe's enlargement from 15 to 25 countries, on 1 May 2005, has harmed”
the Euro-Mediterranean process.
He stated that Europe's enlargement was still underway and
that “things should not therefore change a lot in the near
future” concerning the “European priorities”. A representa-
tive of the Ministry of Small and Medium Enterprises (SME)
made the same analysis, confirming that “Europe is no longer interested in us, but in the countries of the East”. For her,
"the Barcelona process is a total failure". "Today we note that
dialogue with the Arab countries is not a priority for the EU”,
stated, for his part, Mr Mohamed Chami, managing director
of the Algerian Chamber of Commerce and Industry (Caci).
For his part, the managing director of the APS, Mr Nacer
Mehal, stated that a lot of agreements signed within the framework of Euromed have not been become a reality, quoting, as an example, “a training programme for Algerian
journalists worth an amount of 4 million euros, dating back
six years, which has never seen the light of day”. "The
bureaucratic debates are in the process of gaining the upper
hand. We must no longer look at the theory - we (now) have
to look at the reality" he hammered forward.
For his part, the economist Malek Boussaïd felt that the
Euromed is of a “purely commercial” nature. "Where we have
made a mistake, he said, is that we have taken for given the
promise made in the Barcelona Declaration to make the
Mediterranean a region of shared prosperity”. The president
of the Rimes, Mr Mohamed Bahloul, did however state that
part of the responsibility of the failure of the Barcelona process is incumbent upon the countries of the south bank of the
Mediterranean which, in his opinion, "have not been able to
put together arguments and considerations".
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151
November 2006
PARTNERSHIP
Partnership
The Italian Minister of Economic Development
welcomed by Medelci and Khelil
The pace of partnership
relations will be accelerated on the eve of the
Romano Prodi's visit to
Algeria next November.
The Minister of Finance, Mr Mourad
Medelci, and the Italian Minister of
Economic Development, Mr Pier Luigi
Berani, held, in Algiers, a working meeting in which both parties defined the
priority investment projects which must
be realised within the framework of
partnership. In his speech before the
Italian Minister, Mr Medelci emphasised straightaway that Algeria “wishes
not only to maintain good relations
with Italy but also to develop them and
diversify them by identifying new paths
for economic cooperation and larger
business opportunities. "It is not the
political desire which is lacking, but it is
the organisation of relations between
the two countries and their projection
in the future which must be better perceived and better understood” he stated.
Making reference to the planned visit
next November to Algiers of the Head
of the Italian government, Mr Romano
Prodi, Mr Medelci stated the need to
accelerate the pace of cooperation and
partnership relations between the two
countries.
During this meeting, which was also
attended by Mr Karim Djoudi, Minister
of Financial Reform, Mr Medelci also
presented to the Italian Minister
Algeria's economic and financial situation which is characterised by sustained
growth, foreign exchange reserves
which are reaching remarkable levels,
an active debt reduction policy and the
realisation of vast public investment
programmes whose cost exceeds 100
billion dollars.
Speaking in turn, Mr Bersani said he
was "impressed" by the accomplishments made by Algeria, particularly in
the economic and financial domain. He
further considered that it was fundamental to “give more consistency, more
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152
November 2006
Algeria-Italy
pragmatism and stability in the relations between the two countries”. The
reinforcement of the energy relations
between Algeria and Italy, particularly
the state of progress of the second
underwater gas pipeline project (Galsi)
between the two countries, was also, in
Algiers, at the centre of the talks between the Minister of Energy and
Mines, Mr Chakib Khelil, and the
Italian
Minister
of
Economic
Development, Mr Pier Luigi Bersani.
"We have discussed Algerian-Italian
relations in the field of energy, particularly the increase in the capacity of the
first gas pipeline (Enrico-Mattei) and
above all the quickest completion possible of the Galsi project which will
connect Algeria to Italy via Sardinia,
indicated Mr Khelil to the press at the
end of the discussions. Other issues
related to the electric interconnection
project but, also, the dialogue between
gas producers and consumers within
the framework of the EuroMediterranean discussions were cove-
red, added the Minister who described
the relations between the two countries
as “excellent”. For his part, the Italian
Minister specified that this meeting
should given “major impetus and accelerate” the realisation of the Galsi project which “has already exceeded its
first phase”, he specified.
"I think that we are able to speed up the
realisation of this project through an
inter-governmental agreement which
must solve the problems related to the
authorisations, taxation and regulations as well as the definition of the
infrastructure which concerns the
Italian territorial waters”, specified the
Italian Minister. "I think that, as of this
meeting, the project will be given major
impetus”, he said.
940km long, 640km of which in
Algerian territory, the Galsi (the name
of the consortium responsible for constructing it) has a transportation capacity of 8 billion cubic metres/year.
Press conference with the Italian Secretary
of State for Trade and the Italian Ambassador
The Italian Secretary of State for Trade, who
stayed for two days in our country as part of
the 39th Algiers International Trade Fair, as
well as the Ambassador of the same country
to Algiers, respectively Mr Mauro Agostini
and Mr Giovan Battista Verderame, during a
press conference, expressed their country's
satisfaction as to the Italian participation in
this important event before revealing the
interest expressed by Italy in the
entire Mediterranean region and Algeria in
particular.
The two speakers, whilst emphasising the
quality of the bilateral relations in political
and economic terms, did not fail to welcome
the decision made by the Safex executives to
designate their country as a host of honour
for the next Algiers International Trade Fair,
adding that their government intends to
make this large business event an area
capable of reinforcing Italian presence in
Algeria.
They further stated that, between Italy and
Algeria, there is a traditional and positive
cooperation to be consolidated further, particularly through programmes likely to make
the Italian SME known in its organisational
forms and corporate networks. On the same
occasion, they recalled that their country,
within the company privatisation process
initiated by Algeria, intends to develop specific projects.
Mr Agostini and Mr Verderame announced
the request from the Italian Institute of
Commerce to define the projects deemed
interesting, on the one hand, and which can
be niches for the investors and operators, but
also to draw up the programme on Italy's participation in the 40th Algiers International
Trade Fair, through which it will particularly
be a question of presenting the experience of
Italian companies, and a representation in all
regions without any distinction. We now
intend to put in place specific promotion programmes, particularly concerning the
hydraulics, buildings and public works sectors. They also confirmed that their country is
interested in Algerian gas, before adding that
Italy, which hopes to be Algeria's partner in
terms of energy, is considering intensifying
the informative actions so that both countries
get to know each other more, given that
Algeria has initiated a privatisation process.
Italy expressed certain interest in Algerian
Partnership
Mr Khelil : “The completion of the
project will be accelerated”
Second Algerian-Italian gas pipeline
The construction of the
underwater gas pipeline
project which will connect
Algeria to Italy via
Sardinia, by 2009, will be
“accelerated”, confirmed,
in Algiers, the Minister of
Energy and Mines, Mr
Chakib Khelil, who welcomed the Italian Minister of
Economic Development,
Mr Pier Luigi Bersani.
"We will accelerate the completion of
the project", stated Mr Chakib Khelil in
an interview with the Italian press
which accompanied Mr Bersani.
In this respect, he indicated that an
Algerian delegation would go to Rome
before the end of this year to discuss
the terms and conditions for completing this important work of a transportation capacity of 8 billion cubic metres/year. The Algerian mission in the
Italian capital should also, according to
Italian investments in
Algeria will increase
companies. The speakers felt that the two countries are called upon to increase reciprocal knowledge of the investment opportunities offered
capable of arousing the interest of economic
operators.
The speakers, still within the framework of the
privatisation process, did not hide the interest
shown by their countries in the cement plants put
up for sale, whilst adding that Algeria conceals
numerous potentials capable of arousing the
interest of economic operators and investors.
Mr Agostini and Mr Verderame further said that
visit of the Minister of Participations and the
Promotion of Investments, Mr Hamid Temmar, to
their country, in view of presenting the road
shows, concerning the privatisation of the companies, upon the invitation of the Milan Chamber
of Commerce, is an opportunity for the Italian
operators to discover the investment opportunities in Algeria.
With regards the current volume of investment in
Algeria, they noted that this is likely to increase
progressively, as mutual trust solidifies. In the
domain of mutual cooperation, the speakers
wanted to specify that Italy has contributed to the
restoration of certain cultural sites, such as
Casbah and Medina de Constantine.
the Minister, discuss the possibility for
the national company Sonatrach to
take shares in re-gasification terminals'
projects as it has already done in Great
Britain and Spain.
Mr Khelil also indicated that a marketing company for the gas which will be
routed by this gas pipeline, named
"Sonatrach-Italia", was created last
July.
Less than a third (30%) of the quantities transported will be sold by
Sonatrach on the Italian market, he
specified.
Emphasising the interest of this gas
pipeline for Italy and Europe, the
Minister insisted on the necessity to
sign, as quickly as possible, the intergovernmental agreement which should
enable the construction process of this
long pipeline to be started.
This will connect the Hassi R'mel gas
deposit, in the Algerian South, to the
city of El Kala on the east Algerian
cost, then Cagliari, in Sardinia, and
Olbia and Pescaia, in the north of Italy.
Furthermore, the Minister did not fail
to highlight Algeria's efforts in view of
promoting this project through promotion and marketing meetings, both in
Algeria and in Italy.
Questioned on the agreement concluded at the beginning of August between
Sonatrach and the Russian gas giant
Gazprom, an agreement which in
Europe caused concerns about a possible emergence of a “gas cartel”, the
Minister repeated that this “cooperation agreement between two companies” was however similar to the ones
already signed by the Algerian company with the Anglo-Dutch company
Shell, the Norwegian company Statoil
and the British company British Gas.
"This is nothing new - these are agreements which we have already signed
with Shell, Statoil, BG, etc.” said the
minister, stating that the same countries and the same companies that are
concerned about the possible impacts
of this agreement have signed similar
agreements themselves with Gazprom.
"So why not Sonatrach?" he exclaimed,
asking: "Why is the agreement between
the Italian ENI and Gazprom not
posing problems for the European
Union whereas the SonatrachGazprom one is?”
For him, "the concern is misplaced and
responds to egotistical considerations".
As for the possibility of swap transactions (exchange of assets or projects
between two companies) between
Sonatrach and the Italian ENI, Mr
Khelil noted that there were “possibilities” in this domain and that the two
companies were in the process of examining this, in spite of their “complexity”.
"The difficulty is finding the projects
which satisfy each party's objectives",
he explained, emphasising that the two
companies have already cooperated in
certain projects.
In this respect, he recalled the swap
transaction made by Gazprom which
supplies the United States with
Algerian LNG, and Sonatrach which
sells Russian gas on other markets.
As for a potential "Gas OPEC", the
Minister was very clear, setting aside
any possibility on the matter for the
simple reason that there “is not one
world gas market, but rather three different markets, namely the European,
Asian and American markets”.
The Minister once again explained that,
unlike the oil industry, the gas industry
requires heavy investments, long term
contracts, without mentioning the
interdependency of producers and
consumers, which excludes an organisation for gas producers.
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November 2006
PARTNERSHIP
Partnership
“Italy wants to increase
its economic presence in Algeria”
Mr Pier Luigi Bersani (Italian Minister of Economic Development)
Italy wants to reinforce further its presence in Algeria, particularly in the energy,
services and SME
sectors, indicated,
in Algiers, the Italian
Minister of Economic
Development, Mr Pier
Luigi Bersani, at the
end of an official twoday visit to Algeria.
During a press conference, Mr Bersani
expressed “the strong
desire of the Italian
government to increase the Algerian-Italian
cooperation and to
reinforce the already
large presence of
Italian companies in
Algeria”.
“These two days have been prosperous
and the meetings held with the Algerian
executives have enabled us to confirm
that the next visit by Romano Prodi
(the President of the Italian Council) to
Algeria will be very positive”, emphasised the Italian Minister.
In his opinion, these meetings have
enabled the “already excellent” relations between the two countries to be
intensified and Italy, on this occasion,
"has sent the Algerian government a
very clear message which speaks of
cooperation and possibilities of intensifying the relations by investing in the
infrastructures which connect the two
countries”, added Mr Bersani.
On this subject, the Italian Minister
mentioned the realisation of the underwater Algeria-Italy gas pipeline project
via Sardinia, baptised Galsi, as well as
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154
November 2006
Mr Pier Luigi Bersani (Italian
Minister of Economic
Development)
the SME sector in which "Italy already
has a significant presence in Algeria”,
he emphasised.
Shortly before this meeting with the
journalists, the Italian Minister indicated that these Algerian-Italian get-togethers should give “major impetus to
and accelerate” the realisation of the
Galsi project, which should be completed in 2008-2009.
“I think that we are able to accelerate
the realisation of this project through
an inter-governmental agreement
which must solve the problems related
to the authorisations, taxation and
regulations as well as the definition of
the infrastructure which concerns the
Italian territorial waters”, specified the
Italian Minister.
940km long, 640km of which in
Algerian territory, the Galsi (the name
of the consortium responsible for constructing it) has a transportation capacity of 8 billion cubic metres/year. With
regards cooperation in terms of SME,
Italy wishes to create a “work verification structure for Italian companies in
Algeria”, indicated the Italian Minister,
estimating that his country's companies
“can take even more place on the
Algerian market, by enlarging
the cooperation domains which are
numerous”.
For example, he noted, Italy has
expressed its desire to be able to get
involved in all gigantic infrastructures
currently being built, just like the EastWest motorway or the Algiers's metro.
"Also, numerous Italian companies
have submitted tenders in managing
services" connected to these infrastructures, pointed out Mr Bersani.
To a question on the sectors which may
further benefit from the AlgerianItalian cooperation, Mr Bersani cited
the transport sector where there are, in
his opinion, "enormous possibilities for
cooperation, particularly in the railway
sector where Italian companies have
submitted tenders for the realisation of
numerous projects”. Italy is also interested in the privatisation of Algerian
companies, particularly mineral water
productions, construction materials
plants and buildings, he indicated.
This is why the first visit to Algiers of
the current Head of the Italian
Government, Mr Romano Prodi, planned for mid-November “will be of a
strategic nature and will be fundamental for the continuation of the bilateral
Algerian-Italian cooperation, enabling
the domain of trade to be enlarged”,
confirmed the Minister. According to
the figures of the Italian Embassy,
Italian exports to Algeria amounted to
958 million dollars in 2005, whereas
Italian imports from Algeria amounted
to a total of 3.789 billion dollars.
"These figures will practically explode
with the completion of all projects currently underway between Italy and
Algeria and on which both parties are
working tooth and nail”, specified Mr
Bersani, emphasising that the AlgerianItalian cooperation could be used as a
cooperation model between Europe
and the Southern Mediterranean.
Partnership
Setting up of the board of directors
of the Algeria-Italian Forum
Algeria-Italy
About forty Italian companies were present at the
first meeting of the
Algerian-Italian Business
Forum which was inaugurated by the putting in
place of its board of directors. "We are making
investments five times
more than in Tunisia",
declared the Simest
representative.
This meeting of contacts takes place
more than three years after the two
countries, through their Ministers of
Foreign Affairs, agreed, as of 2003, to
put in place this cooperation framework, which is "an admission of the
delay”, according to the operators from
both countries, if only in relation to the
solidity of the "political and economic
relations between the two countries
and whose trade dates back to the
1960s in the domain of energy infrastructures in particular”.
For the Italian Ambassador to Algiers,
Mr Giovan Battista Verderame, Algeria
is a partner of “choice for Italy, due to
the energy requirements of the Italian
economy” but also with regards its
country's Mediterranean policy which
is counting on the stability in this
region and “Algeria's role throughout
the Mediterranean region”.
Hence his call for Italian investors to
get involved in the "sustainable development effort" of our country. The
President of the Algerian Chamber of
Commerce, Mr Bendjaber, defined the
outlines of this action which must be
based "on a mutually beneficial partnership for both countries”.
This is also the desire of Mr Chami, copresident of the business forum, who
recalled "the Algerian-Italian friendship, even in the most difficult of times".
Indeed, "Italy is the only country to
have kept its consulate open” in the
black decade, he emphasised.
But that said, there is a finding of
"insufficiency in the level of economic
development between the two countries" and that the operators must take
up this challenge. In addition, we are
rightly starting to promote the putting
in place of an easier European partnership than with “the Chinese and
Asians whose dynamics seriously worry
the other side of the Mediterranean”.
This worry is summarised by the president of the Association of the Region of
Rome which groups together 1,500
companies, Mr Francesco Morabito,
who defends that the “Mediterranean
strategy of the Italian industrialists
through the putting in place of the project of Rome, the capital of the
Mediterranean”, expresses an availability to focus the investments on this
region, part of which includes Algeria.
of
Hence,
another
Forum
Mediterranean countries will bring
together six countries, including
Algeria. Another meeting will call upon
companies from the countries of Egypt,
Morocco, Italy, Tunisia, Lebanon and,
of course, Algeria; "a business meeting
to which companies from Ukraine and
Russia will be invited”, continued the
Italian representative. This trend is
confirmed by the Simest, a financial
company that develops and promotes
Italian companies abroad. This company's missions are to facilitate the financing of projects, the feasibility studies,
export credits, etc.
For Mr Bottini, its representative, “we
are making investments five times more
than in Tunisia” and our action will be
focussed on the SME. It is now the
turn of the company heads to make
proposals since the Italians are more
interested in the infrastructures such as
transport, water, training, etc.
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155
November 2006
PARTNERSHIP
Partnership
Contract to sell 1 billion cubic
metres of gas to Spain
In Algiers, Sonatrach
signed an Algerian
natural gas purchase
and sale contract with
the Spanish electricity
company Endesa. This
contract, which
concerns a volume of
0.96 billion cubic metres, was signed by the
Chairman and CEO of
Sonatrach, Mr
Mohamed Meziane,
and the chief executive officer of Endesa,
Mr Rafael Miranda.
The agreement, which is staggered over
20 years, is part of the framework of
the future underwater gas pipeline project which will directly connect Algeria
(Béni Saf) to Spain (Almeria) and
whose transportation capacity is 8
billion cubic metres / year. Sonatrach
has already signed two contracts of the
same type with the Spanish partner
companies of Medgaz, namely the oil
company Cepsa with a volume of 1.6
billion cubic metres/year and the electricity company Iberdrola (1.6 billion
cubic metres/year).
A sale contract for 0.96 billion cubic
metres of Algerian natural gas a year
was signed in Algiers between the
national
hydrocarbons
company
Sonatrach and the Spanish electricity
company Endesa. The contract was
signed by the Chairman and CEO of
Sonatrach, Mr Mohamed Meziane,
and the chief executive officer of
Endesa, Mr Rafaeal Miranda.
Of a contractual duration of 20 years,
this transaction is part of the framework of the gas pipeline project which
will connect Algeria (Béni Saf) to Spain
(Almeria), Medgaz, whose transportation capacity is 8 billion cubic metres/year, extendable to 16 billion cubic
Energie & Mines
156
November 2006
Algeria-Spain
metres/year in the second phase.
Sonatrach and Endesa (the no. 1 electricity producer in Spain) have already
been bound, since 2001, by a long term
(15 years) LNG sale and purchase
contract for a volume of 1 billion cubic
metres/year. They are also shareholders, 10% and 21% respectively, in the
Reganosa (north Spain) re-gasification
project. The amount of this contract is
250 million dollars for 1 billion cubic
metres, calculated on the basis of the
current gas price, specified the vice
president responsible for Sonatrach
marketing, Mr Ali Hached.
"If these prices stay at their current
level, an amount of 5 billion dollars will
be gathered in 20 years' time” he
added.
For his part, Mr Meziane emphasised
that this agreement is “added to the
successive agreements we have concluded with our other partners on the
Medgaz Trans-Continental gas pipeline”, namely the Spanish companies
Cepsa (1.6 billion cubic metres/year)
and Iberdrola (1.6 billion cubic metres/year). With this agreement, which
"is a further milestone towards the
objective to export 85 billion cubic
metres a year of gas that we have set
ourselves by 2010”, Sonatrach “consolidates its position on the Spanish and
European markets as a reliable long
term supplier”, he added.
The project, in which the French companies Total and Gaz de France (GDF)
and British company (BP) also participate, is already seeing “a start of the
construction on the Algerian SouguerArzew section and the appeals for tenders for the 1st Arzew-Béni Saf section
are underway”, continued Mr Meziane.
The construction works will go on until
the end of 2008 for all sections over a
length of 1,050km, 550km of which on
the Algerian territory, 200km under the
sea and 300km on the Spanish territory, explained the same speaker. The
commissioning of this "strategic project
for Spain and for Europe" is expected
for the start of the year 2009.
For his part, Mr Miranda "congratulated" the conclusion of this agreement
and described Sonatrach as an "essential partner for the energy security of
several European markets".
After recalling the importance of the
cooperation relations between the two
companies that are “leaders in their
respective countries and in the entire
Mediterranean region”, the Spanish
executive indicated that his company
looked forward to the “entry, by the
end of the year, of the first methane
tanker into the Reganosa re-gasification terminal” in Spain.
"Sonatrach and Endesa have been main
players in the establishment of trade
links between Spain and Algeria and
will continue to be so both with Spain
and with the other countries of the
Mediterranean region where both companies operate”, he added.
Mr Miranda, on the other hand,
emphasised that his company has
bought for the Spanish market, since
27 January 2001, the day when Endesa
received its first liquefied natural gas
(LNG) tanker from Sonatrach, 1.59
billion cubic metres of Algerian gas,
worth an amount of 310 million dollars.
"The agreement we are signing today is
part of the long term Endesa gas supply
portfolio in Spain which, with this operation, will reach 7 billion cubic metres”, said Mr Miranda, adding that
“there were opportunities and concrete
projects which represent a solid cooperation and commercial base to continue
to build for the future”.
Partnership
The Spanish hope to compensate
the energy bill
Algeria-Spain
105 million euros of
export credit lines in
favour of Algerian
companies.
■ Spain ranked
Algeria's 6th largest
supplier in 2005 with
900 million euros
■
A delegation of businessmen from the
region of Catalonia stayed in our country. The three-day visit is part of the
framework of the partnership agreement signed in 2003 between the Caci
and the Chamber of Commerce and
Industry of Barcelona (CCIB) and aims
to promote the cooperation field between the two parties and hence enable
the companies present to prospect the
Algerian market for a potential contribution to the economic recovery programme initiated by the Algerian State.
The Caci representative, Mr Loudini,
indicated that this meeting with the
Catalan businessmen, which was held
in the Sofitel hotel, the second of its
kind after the one held in 2004, was
“an entrepreneurial meeting to discuss
partnership possibilities in a context
which is increasingly favourable”. The
speaker spoke of economic growth,
macroeconomic stability and the strategic position of relations between Spain
and Algeria - factors deemed to encourage the bilateral cooperation.
In fact, Spain is the no. 3 trade partner,
excluding hydrocarbons, of our country. Also, trade with Algeria represents
35% of the total volume of Spain's
trade, which makes our country a priority zone for the CCIB, emphasised Mr
Loudini.
The speaker, on behalf of the Ministry
of Participation, reviewed the measures
taken by the Algerian State to encourage the movement of business mainly
focussing on the readjustment of the
legislative framework, the reduction in
interest rates, the stability of the
exchange rate and the revision of the
taxation system brought in line with
Maghreb standards in a free market
context. Mr Hamoud Benhamdine
announced, on this occasion, the imminent visit of Mr Hamid Temmar to
Spain with the aim of explaining the
privatisation approach initiated by our
country and explaining the potentials of
the public companies likely to be privatised.
54 Spanish companies
operating in Algeria
For her part, Mrs Maria Jesus Vidal,
the business associate at the Spanish
Embassy in Algeria, committed in a
routing of statistics to express the interest given by her country in the
Algerian market.
"Algeria is a priority country in Spain's
trade policy given its geographic density, its geographic importance and its
energy position”. The speaker, who
revealed the imbalance in the balance of
trade with our country, spoke of the
necessity to “compensate the costs of
the energy bill, particularly gas”, a bill
which was 96% comprised of Spanish
imports in 2004, she specified.
On another level, she indicated that her
country intends to "reinforce its pre-
sence on the Algerian market, confirming that high level meetings are
expected in this perspective”.
On the other hand, she revealed that a
new export support programme in
favour of Algerian companies for the
year 2006-2007 worth an amount of
105 million euros will be imminently
concluded. This programme is broken
down as follows: 80 million euros for
the acquisition of goods and services, 5
million euros by virtue of support for
feasibility studies and 20 million for the
acquisition of equipment designed for
SME. With regards the debt reconversion, she indicated that an amount of
40 million euros of commercial debt
will be converted into direct investment
(FDI) and 30 million euros of the
public debt should be reconverted into
public investment. The project is in the
process of being finalised, she confirmed, recalling that 54 Spanish companies are currently operating in Algeria.
Energie & Mines
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November 2006
PARTNERSHIP
Partnership
Coface seminar on the methods
of setting up French companies
in Algeria
The French export credit insurer,
Coface, has announced the holding of a
seminar, in Paris, on the methods of
setting up French companies in Algeria.
A comfortable financial base which
enables an “acceleration of public
investments within the framework of a
Growth Consolidation Plan over five
years which should support the activity
of the non-oil sector” and “growth
which, in 2006 and 2007, should
remain clearly focussed” are the arguments presented by the Coface consulting branch for this seminar organised
on the theme of “Developing in
Algeria”. "The reality of the Algerian
market”, its “banking environment,
“the payment and guarantee methods”,
the “large contracts”, and the “medium
and long term credit insurance and
investment experience”, the “business
environment” and the “investment
opportunities to be seized and access
keys” are also the themes selected for
this seminar which will be led by
experts from Coface, including Mrs
Catherine Monteil, a specialist in evaluating country risk, Mr Jean-Pierre
Algeria-France
Caussin, credit insurance and investment manager, and even Mr Alain
Tovar, deputy director of the marketing
and international department.
The head of the economic mission of
the French Embassy in Algeria, Mr
Pierre Mourlevat, as well as bankers,
including the expert Mrs Muriel
Chassing from the French bank BNP
Paribas, will also participate in this
seminar which will also deal with
“Coface's development in Algeria”.
"In October 2006, Coface opened up a
services subsidiary in Algeria which
enables it to operate in domestic insurance and exports with regards the
Algerian client”, indicated the insurer.
During a recent seminar in Paris on the
theme of “Algeria: Investing in a booming country", the Coface representative emphasised the “satisfactory risk” of
the Algerian market which has, for a
year now, been re-rated as A4, according to 7-level risk rating.
"We have received 500 new insurance
applications for the Algerian market”,
he indicated, emphasising the attractiveness of Algeria, “placed at the top of
the African scale, in terms of hedging,
in front of Morocco, Tunisia and South
Africa”.
Société Générale is satisfied with its
investment in Algeria
Banks
The French bank Société Générale is satisfied with its investment on the Algerian market, which "is developing well",
indicated to the APS one of the members of the board of
directors, Mr Frédéric Genet.
"The Algerian market is developing well, but what is more
encouraging for us is that Algerians are enhancing in favour
of good economic growth, which will push them to consume
more”, explained this banker on the fringes of the works of
the FCE-Medef meeting.
For Mr Genet, "there was a bet to play in Algeria and for
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158
November 2006
Société Générale, this bet has been won". Société Générale
has been set up in Algeria since 2000 and today operates 30
branches employing 450 people compared to only 35
employees when it set up. Its ambition for 2006 is to increase the number of its branches to 40 throughout Algeria - a
performance which this banker feels “possible given the
potential market that exists in the country”.
The banking sector was cited by the Medef among the “successful” French investment examples in Algeria, as well as
agro-food and infrastructures.
Partnership
Coface to set up in Algeria
French entrepreneurs launch a pressing appeal to invest
in Algeria
In Paris, some 350
Algerian and French entrepreneurs participated in a
seminar on the theme
“Algeria, investing in a
booming country” marked
by a pressing appeal not to
delay in going there”.
Agro-food, automotive and the new
communication technologies were the
main investment fields on the Algerian
market selected for this seminar organised by the Chamber of Commerce
and Industry of Paris (CCIP).
The managing director of investment
and foreign economic affairs at the
Ministry of Participations and the
Promotion of Investments, Mr
Hamoud Benhamdine, reported on the
current macroeconomic stabilities of
the country and explained the entire
investment support system.
He also reported on the privatisation
programme, emphasised the State's
withdrawal "from the business sphere”
and described the structuring dimension of the complementary economic
growth support plan. Faced with this
set of flexible technical and legal procedures, aiming to make the investment
action more fluid and secure, “the
stock of French direct investments
(FDI) in Algeria far from reflects the
opportunities which the Algerian market offers and the extent of the business
relations”, emphasised, for his part, the
representative of the Algerian Embassy
in France, Mr Djamel Eddine
Bennouam.
He called upon his audience "to better
appreciate the appeal of the Algerian
market", having previously recalled that
"the exceptional partnership (2003)
remains the road map between the two
countries”.
"The weakness of these French FDI"
was then the subject of a large debate,
particularly leading Mr Michel de
Cafferli, president of the French
Chamber of Commerce and Industry in
Algeria (CFCIA) to launch an appeal to
French investments to come here and
“invest now”. "We have to occupy the
land”, he emphasised, mentioning the
“extremely stiff” international competition on the Algerian market.
"To better understand the opportunities
offered by this friend country, we have
to move", he continued.
"Algeria will give you a very warm welcome”, he said to the French entrepreneurs. This encouragement to come to
invest in Algeria was also developed by
a representative of the French Embassy
to Algiers, Mr Sebastien Andrieux, who
revealed “the very favourable context of
the business climate in Algeria which,
currently, is one of the least indebted
countries in the world”, noting that the
Algerian market is marked by noninflationist growth. "Our investments
are certainly weak in Algeria but they
will only increase”, emphasised, for his
part, a representative of the French
Ministry of Finance, Mr Raphaël Bello,
who mentioned the structuring investment programmes of the Algerian State
whose financial package is making
foreigners “shake with envy”.
"Today's context is favourable to dialogue” to boost French FDI, he continued. The representative of the French
credit insurer Coface, an export support organisation, also participated in
this seminar to emphasise the satisfactory risk of the Algerian market, rerated since a year ago as A4, according
to a 7-level risk rating. "We have received 500 new insurance applications for
the Algerian market”, he indicated,
emphasising the attractiveness of
Algeria, “placed at the top of the
African scale, in terms of hedging, in
front of Morocco, Tunisia and South
Africa”.
Coface “will probably set up in Algerian
in the coming days", he added, to
extend its activity in partnership with
the Algerian insurance company Sagex.
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November 2006
PARTNERSHIP
Partnership
French companies will have more
presence in Algeria
The Mouvement des
entrepreneurs de France
(Medef) expressed, in
Algiers, through its first
representatives, the
desire of French entrepreneurs, particularly
those of the SME, to be
more present on the
Algerian investment and
business market.
"There is undoubtedly a real desire
to work together between the
French and Algerian business communities”, emphasised, during a
press conference, Mrs Laurence
Parisot,
president
of
the
Mouvement des entrepreneurs de
France (Medef), leading a delegation of 70 company heads to reinforce prospecting of the Algerian
market. Among the assertions made
during these two days of works between the FCE and the Medef, Mrs
Parisot cited Algeria's macroeconomic indicators which reveal “a huge
potential for future development”.
In her opinion, the French entrepreneurs present in Algeria have
also appreciated the “modernity"
which is starting to characterise the
Algerian economy. Today, "we have
to think of things in a new way”,
she stated, emphasising that the
French investments in Algeria have
increased by 75% in one year, that
200 French companies operate here
and that 6,000 jobs had been created by these companies. To a question on "the possible repercussions
of political relations on the economy”, Mrs Parisot indicated that
during these two days “there was
no discussion on politics”. For his
part, the president of the Algerian
committee of Medef, Mr Yves de
Silguy, confirmed that at no time
had the political relations between
the two countries influenced the
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November 2006
Medef
economic relations which remain
“vigorous, structural and representative of a climate of trust”. "We will
shortly welcome the FCE to Paris to
make a report and see what has
worked and what hasn't worked”,
said Mr de Silguy.
To a question on the competition
which is increasingly being established in Algeria between foreign
companies, particularly in the
domain of energy, where the
French companies are “barely
represented”, Mr de Silguy felt that
it would be “dangerous” for the
foreign investors to focus investments on a single sector. In his opinion, "it is preferable to invest in the
long term in various sectors (agrofood, transportation, pharmaceutics, etc.) than be solely present in
the
hydrocarbons
sector”.
"Excluding hydrocarbons, the
French companies remain the top
investors in Algeria”, he summarised, thus boasting that, in his opinion, these are investments will
“contribute to increasing knowhow and creating jobs”. The French
SME and SMI intend to invest in
new sectors such as tobacco, according to the Medef executives. "For
this reason, I do not think that there
has been any coldness from French
entrepreneurs”, said Mr de Silguy,
arguing the presence in Algeria of
“large French companies” as
“examples of successful investment
in Algeria”, he said.
Mrs Laurence Parisot,
president of the Medef
"French companies
want to work more
and better in
Algeria”
The works of the third round of regular meetings between
the Algerian Forum des chefs d'entreprise (FCE) and the
Mouvement des entreprises de France (Medef) took place in
a closed session in Algiers to continue the investigations into
the partnership possibilities between the Algerian and
French economic operators.
The French delegate, made up of some 80 company heads
representing a large range of business sectors (banks, energy, construction, environment, services, agro-food industry),
was led by the president of the Medef, Mrs Laurence Parisot.
The morning's programme scheduled a meeting between
French operators particularly on the development of the political situation and Franco-Algerian bilateral relations, the
development of the French investment in Algeria, vocational
training as well as the business environment and its operating conditions in Algeria under the heading: "How to invest
in Algeria in 2006”
The Algerian party spoke in the afternoon for a closed session meeting also with a speech by the Minister of Financial
Reform, Mr Karim Djoudi, and the presentation of an investment support scheme which will be illustrated by practical
cases of foreign investments in Algeria (the case of Henkel
and Schneider Electric, as well as the relocation of a factory
from China to Algeria).
This visit's programme, which finishes today, includes direct
meetings between the companies of both countries, discussions in plenary sessions on bilateral cooperation and the
opportunities offered to companies for them to be able to
commit to the construction of "solid partnerships", he
emphasised.
In a recent statement to the APS, the president of the
Algerian committee of international Medef, Mr Yves-Thibault
de Silguy, indicated that this meeting aimed to “encourage
French companies to be more present and more audacious"
on the Algerian market.
For its part, the Forum des chefs d'entreprise (FCE) wanted
this meeting to be able to help to "promote the development
of more solid and more balanced business partnership relations between the Algerian and French companies".
The FCE, along with the Medef, was the initiator of this meeting, which follows on from those of 8 February 2005 in
Algiers and 15 November 2005 in Paris.
Partnership
Towards a multiform, “fruitful
and consistent" political dialogue
Algeria-Great Britain
Algerian-British relations
are likely to be given new
impetus further to the official announcement of the
founding of the "bilateral
relations commission" between Algeria and Great
Britain during the visit of
the President of the
Republic to the United
Kingdom, it was revealed
in London.
This commission "will manage bilateral
relations and lay down the legal basis for
a multiform, fruitful and consistent political dialogue” particularly noted the two
parties during the signature, last month
in Algiers, of the memorandum of the
creation of the commission and of the
cooperation mechanism between the two
countries when the Algeria-British forum
was held. This document comprises two
sections: political cooperation and economic relations.
"This memorandum will enable the economic relations to be intensified and
encourage British companies, likely to
have a determining role adapted to their
means and the capital experience, to
contribute to the realisation of important
development programmes planned by the
economic recovery programme for the
development of the Hauts Plateaux and
the South”, according to the joint statement made public during the visit to
Algiers of the British Secretary of State
for the Middle East, Mr Kim Howells.
The committee is the culmination of a
supported development process of bilateral relations with, as its focal point, the
entry in force, in June 2005, of the agreement related to the importing by the
United Kingdom of Algerian gas. This
agreement reinforces the partnership
relations which Algeria intends to enlarge, particularly in the economic domain,
in view of increasing the volume of
British investments and establishing
cooperation in the cultural and scientific
domains, especially given that, since the
second half of 2005, trade has reached
important growth levels after the entry in
force of the gas contract between
Sonatrach and British Petroleum (BP) in
June 2005. The volume of Algerian
exports to the United Kingdom has gone
from 44.6 million in 2005 to 497.385
million delivered in 2006 (1 pound = 0.7
euros).
Algeria has thus become the no. 3 Arab
exporter to Great Britain after Saudi
Arabia and Egypt whereas it had been in
last place, according to the statistics of
the British Department of Trade.
The gas agreement has marked the start
of a fundamental change in the British
policy towards Algeria, with the labour
government led by Prime Minister Tony
Blair having shared its desire to revamp
and restart Algerian-British relations in
the aftermath of the revaluation of the
British political orientations with regards
the Middle East and North Africa. This
revaluation has led to the necessity to
rebalance these relations in favour of the
Arab Maghreb region and Algeria, particularly, has become an essential energy
supplier of the United Kingdom which
has gone from a producer status to an
importer status after the depletion of the
North Sea fields.
Other than Norway, Algeria is an energy
supply alternative for Great Britain,
which is working on reducing its dependency on Russia.
According to a study drawn up on behalf
of the British Department of Foreign
Affairs, Algeria is ranked at the top of
Arab candidate countries for a strategic
partnership with Great Britain, not only
because the energy needs of the latter
require it in the framework of the diversification of supply resources, but also
because Algeria responds to the criteria
opening up the doors to this partnership.
These five criteria authorising a country
to enjoy the quality of the strategic partnership of Great Britain are related to the
energy resources, to the development and
trade means, to the security cooperation,
to the fight against illegal immigration
and to the relations with the European
Union.
According to the speakers, the year 2006
should mark a decisive turning point in
the bilateral relations, given that the
British business milieus have become
aware, thanks to several meetings, of the
investment opportunities in Algeria and
of the strong potential of the Algerian
market boosted by the 2005-2006 economic recovery programme.
The reduction of Algeria's risk to level 2,
by the official British export credit guarantee department, supports this forecast
and opens up the path to credits, confined beforehand to hydrocarbons, to
encompass all investment sectors.
Furthermore, the expected structuring
impact of the entry in force, in June
2005, of the gas importing contract has
encouraged the British party to work
towards finding formulas which enable a
balance of the trade relations between the
two countries and an enhancement of the
partnership. Hence, the Algerian-British
relations have extended to the cooperation in the fight against terrorism and
illegal immigration; two points which
have always been the source of divergences as Great Britain was a refuge for the
terrorist groups and a tribune of propaganda for the extremists.
Also the signature of a judicial cooperation agreement thanks to the visit of the
President of the Republic is of particular
importance for the future of the relations
between the two countries in all domains,
particularly in the penal, judicial and
consular matters.
In this context, we should very shortly
arrive at the signature of agreements and
conventions related to guaranteeing
investments, non-double taxation and the
cultural, scientific and technical cooperation which will boost bilateral relations
and consolidate them by a legal framework.
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November 2006
PARTNERSHIP
Partnership
Official Visit of President
Bouteflika
Algeria-United Kingdom
Algeria and Great Britain
have agreed to breathe
new life into the relations
between the two countries, by favouring the
emergence of a real political dialogue and putting
in place mechanisms
capable of providing new
impetus to the bilateral
cooperation.
The joint press release, made public at
the end of the meeting between the
President of the Republic, Mr
Adbdelaziz Bouteflika, and the British
Prime Minister, Mr Tony Blair, reports
the signature by Algiers and London of
an agreement to put in place a joint
commission, at the ministerial level, to
enhance the political and economic
dialogue. This commission is to meet
up once a year.
President Bouteflika and the British
Prime Minister, in this framework,
expressed satisfaction at the inaugural
round held in Algiers, last June, with a
follow-up round held in London, in
October 2005 – a round which particularly enabled the economic relations
and the investment opportunities in
London to be examined, emphasised
the press release. Dealing with the
inter-parliament relations, the press
release indicated that President
Bouteflika and the British Prime
Minister welcomed the formation of
the UK All Party Parliamentary Group
on Algeria and looked forward to future cooperation between the two
Parliaments in support of democracy,
reform processes, business development and mutual understanding, noted
the press release. With regards investment and taxation, the President of the
Republic and the British Prime
Minister looked forward to the conclusion of negotiations on an Investment
Promotion and Protection Agreement
(IPPA) which will facilitate the conti-
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162
November 2006
nued strong commercial links between
the two countries. Furthermore,
Algeria and Great Britain will also examine the possibility of negotiating a
bilateral Double Taxation Convention.
With regards debt prepayment, both
parties welcomed the recent agreement
and completion of payment of Algerian
debt to the UK within the Paris Club
framework and looked forward to a
successful round of negotiations regarding the Algerian debt to the UK within
the London Club framework. With
regards judicial cooperation, Algeria
and Great Britain, continues the press
release, have signed four legal treaties
on extradition, mutual legal assistance
in criminal matters, judicial cooperating in civil and commercial matters
and the readmission and circulation of
persons.
The press release further adds that
President Bouteflika and Prime
Minister Blair exchanged letters on the
framework for nationals who present a
threat to national security. With
regards security and defence cooperation, the press release noted that both
parties have noted with satisfaction the
joint intention to conclude a formal
bilateral Memorandum of understanding on Defence and Security in
conformity with constitutional requirements. This cooperation will reflect the
ongoing and expanding lines of practical cooperation between the defence,
security and law enforcement authorities of the two countries in combating
terrorism and its causes.
Algeria and Britain furthermore
emphasised their commitment to include joint military exercises, training,
visits and defence equipment procurement discussions. With regards business, the President of the Republic and
the British Prime Minister agreed to
encourage an increase in two-way business and investment, whilst noting with
satisfaction the strong presence of UK
companies in the hydrocarbons' sector,
particularly British Petroleum. They
furthermore expressed their desire for
greater UK participation in projects
financed by Algeria's sizeable public
investment programme.
With regards visa services, the British
Prime Minister expressed the UK's
determination to extend the capacity of
the British Embassy in Algiers to offer a
full range of consular and visa services
when, as is planned, a new British
Embassy is built which is foreseen to
open in 2008. Finally, in terms of
scientific cooperation, the press release
indicated that Algeria and Great Britain
welcomed with satisfaction the intention to sign a Memorandum of
Understanding between the British
National Space Centre and the
Algerian Space Agency ASAL and welcome the restart of cultural cooperation, particularly after the decision to
reopen, in Algerian, the UK cultural
centre, the British Council.
President Bouteflika
Partnership
“I am certain that our two countries will take
inspiration from this immense tradition of cooperation that was put in place in the 16th century
by Elizabeth I and the Regency of Algiers”
The President of the Republic, Mr Abdelaziz Bouteflika,
gave a speech in London to the British parliamentary
group on friendship with Algeria.
Here is the full text of the speech: "Ladies and Gentlemen,
it is with great pleasure that I welcome the emergence of
the UK All-Party Parliamentary Group on Algeria at the
same time as I am making an official visit to the United
Kingdom upon the invitation of his Excellency the Prime
Minister, Mr Tony Blair.
I would like to give my warmest congratulations and fervent wishes of full success in the accomplishment of this
parliamentary diplomacy which guides your accomplishments and your initiatives. There is no doubt that your
Algerian colleagues, soon to be comprised in a similar
group, will find with you the paths of a fruitful and creative
dialogue. We are living in a period of phenomenal and
rapid change and the action of parliamentarians translates the aspirations of citizens and has an impact on their
lives.
In this dialogue the responsibility of the parliamentarian is
complex: how to organise the understanding between the
people around usual and unanimously recognised
values? How to celebrate human fraternity by defining the
marks of solidarity and the necessary well-being to be
promoted for everyone?
With you all assembled here, there will be no escape that
these questions result in the sense of our orientations and
the definition of our expectations. Here even, in this prestigious centre, still resonate the voices of pioneers, who
were ardent defenders of freedoms and human rights,
that were also certain to offer the world legal State and
good governance models. It is not necessary to go back
as far as the signing of the Magna Carta and the
Runnymede stakes which have contributed to the building
of our society and provided the foundations of our State.
Your Algerian colleagues and yourselves will undoubtedly
find in your imminent contacts the paths and means to stimulate our relations and specify the guidelines for our parliamentary diplomacy in the current international context.
A Mediterranean country, Algeria is at the crossroads of
the European, African and Arab worlds and its cultural
substrata reveals the wealth of contributions of each of
these cultures in a symbiosis which highlights the possibility and the value of dialogue between them. I am certain
that our two countries will take inspiration from this
immense tradition of cooperation that was put in place in
the 16th century by Elizabeth I and the Regency of
Algiers.
The discussions I have just had with the Prime Minister
have shown just how much we share the same analyses
with regards how the world is changing. These discussions enable us to set down the bases of an ambitious
partnership that is open to all business areas. In the
Mediterranean region, we have made the commitment to
work to set up a co-development and shared solidarity
region between its north and south banks. In a world that
is now shaped by globalisation, our action will be complementary and coordinated for universal integration in
favour of peace, cooperation and concord between all
peoples and to carry out together a merciless fight against
terrorism which, yesterday, struck Algeria, and which you
experienced last year, through our mutual agreement to
defend the right to live. By congratulating your group once
again, I would like to say that this will, for me, be quite a
special pleasure to see you soon in Algiers and to then
measure the progress we have made in a friendly and
fruitful cooperation between our two peoples and our two
countries.
Thank you."
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163
November 2006
PARTNERSHIP
Partnership
Energy cooperation agreement
The Algerian-Albanian
cooperation agreement
in the energy and mine
domains was signed in
Algiers between the
Minister of Energy and
Mines, Mr Chakib Khelil,
and the Albanian
Minister of Energy,
Finance, Trade and
Energy, Mr Grunc Ruli.
This agreement, which gives official
recognition to the first visit to
Algeria of an Albanian Minister of
Energy, particularly relates to a project to supply Algerian oil products
to Albania and the possibilities of
developing other cooperation projects in other domains such as electricity and the transportation of
hydrocarbons, indicated Mr Khelil
to journalists.
Both parties also supported the
principle of sustainable development
for exploring hydrocarbons as well
as cooperation in the mining domain
which offers, it was emphasised,
interesting and complementary
opportunities for both countries.
"This short visit has been fruitful
since it has enabled us to develop
solid projects and consider others”,
revealed Mr Khelil.
The Albanian Minister said he was
satisfied with his stay which should
enable, in the unanimous opinion of
those present, the economic relations between the two countries to
be increased, particularly in the
Energy and Mines sector. "We have
been able to explore the cooperation
opportunities”, which today are
non-existent in the different
domains such as the supply of
Algerian oil products and the development of the mining industry.
Algeria-Albania
Chakib Khelil :
“Both countries wish
to develop relations
in the energy domain”
The Albanian Minister confirmed that “the
time has come to increase our economic
relations”.
Algeria and Albania wish to develop energy
relations together which, today, are nonexistent, indicated the Minister of Energy
and Mines, Mr Chakib Khelil, at the end of
a meeting with the Albanian Minister of
Energy, Finance and Trade, Mr Grunc Ruli,
during his first visit to Algeria. The meetings particularly dealt with the cooperation
possibilities in the domains of exploring
and producing hydrocarbons, the sale of oil
products and potentially supplying Albania
with Algerian gas through the European
gas pipelines, as well as the domains of
electricity and mines, specified Mr Khelil to
journalists.
“We have studied the trade opportunities
between both countries and identified the
possibilities of cooperation, particularly in
the domains of supplying Albania with oil
products, especially LPG and LGN, even
natural gas through the European gas
pipelines, and Albania is geographically
well placed for the interconnections”, said
the Minister.
Both parties also dealt with the possibility
of cooperation in the domains of LPG storage, electricity and mines. This last sector
offers a complementarity between the two
parties given that Albania has large wealth
in terms of nickel, copper and chrome whereas Algeria has none. "We have discovered a complementarity between Albania,
which produces chrome, nickel and copper,
and Algeria which produces other metals”,
revealed the Minister. He indicated that
both parties have agreed to exchange
delegations to study the possibilities of
developing projects in these domains.
For his part, the Albanian Minister said he
was “honoured” by this visit to Algeria with
which, he said “we have always have good
political and diplomatic relations”, but that
Energie & Mines
164
November 2006
“we now need to extend the economic relations”.
“I think that the time has come to increase
our economic relations” especially given
that the two countries are located in the
same Mediterranean region and are both in
the process of transformation to integrate
the world economy.
He added that his country wished to reinforce the direct bilateral cooperation with
Algeria, particularly in the domains of energy, electricity and mines.
“We have discussed cooperation opportunities between the two countries in the
hydrocarbons and electricity sectors and
supplying Albania with Algerian gas, as
well as other sectors”, he said.
Algeria's host, who finished his visit, should
still meet other Ministers, particularly the
Minister of Finance.
This visit, which marks, he emphasised,
the beginning of “intense development” in
cooperation in economic and particularly
energy terms with this country, whose
needs for these products are important, will
be officially recognised by the signature of
a report on the discussions held between
Mr Khelil and his Albanian counterpart.
Partnership
Towards Sonatrach taking shares
in Norwegian deposits
Algeria-Norway
“The Algerian national
oil company wishes to
take shares in the
Norwegian deposits in
exchange for increased Norwegian presence in Algeria.
We discussed taking shares in the
Kristin deposit. The Tyrihans deposit, a
new deposit currently being constructed in the Norwegian Sea, was also a
possible shareholding for the Algerian
company Sonatrach. Over the last six
months, Statoil and the Algerian oil
company Sonatrach have had an agreement on joint investments. But the
work has also been stopped. Algeria
worked hard to introduce new legislation and reorganise its oil and gas sector, amongst others, to facilitate the
entry of foreigners (on the Algerian
market). But they are now ready to
speed things up.
We wish to balance the relationship and
trade together in the world, perhaps in
Africa, and we are discussing if we can
take shares in the deposits throughout
Norway.
• The Kristin deposit is one of the
names, and several other deposits, said
the Chairman and CEO of Sonatrach,
Mr Mohamed Meziane.
Up to present, Sonatrach has only operated on the ground, in the desert sand,
but it might then obtain a concession in
the sea along the Norwegian coast. Mr
Meziane is in charge of the public giant
which dominates the Algerian oil and
gas industry. Whereas Algeria supplies
the clients of the European gas market
through the South, Norway is the main
supplier from the North. Now, the two
large players in the European gas market have found each other. Sonatrach's
director almost does not know how to
sufficiently pay tribute to the relationship with Statoil.
• We are both national oil companies,
we have the same origins. We both sell
gas to Europe. We have a lot in common and are able to find good synergies, said Mr Meziane.
Statoil has a great presence in Algeria's
oil and gas industry and is the second
largest foreign investor in the country.
- We have had a great start. Algeria is
already one of the most important
countries in Statoil's portfolio. Statoil
and Algeria go extremely well together
and the relations are particularly good,
said Statoil's Head of North Africa, Mr
Ottar Rekdal.
The cooperation with Sonatrach is an
example of Statoil's active strategy to
look for cooperation with other national oil companies. The continuous
growth in Algeria may therefore be
accomplished through Statoil offering
Sonatrach shareholdings in the
Norwegian deposits in exchange for
increased Norwegian presence in
Algeria.
• I hope that Sonatrach can procure
shareholdings in the Norwegian deposits, said the country's Minister of Oil,
Mr Chakib Khelil.
• There is enough oil in the world. Oil
reserves are high. Up to now, the oil
price has not hindered the world economy and growth. The world is experiencing neither a crisis nor inflation. I
cannot see the oil price fall below 50
dollars in the next three months, or
below 50 dollars on an annual basis,
said the influential Algerian Minister of
Oil, Mr Chakib Khelil.
Mr Khelil had previously been president of the Organisation of Petroleum
Exporting Countries (OPEC) and people listen to him when he talks about
the price of oil. He emphasised how
problems in several oil producing
countries have contributed to increasing the oil price: Nigeria, Venezuela,
Iran and Iraq. In Saudi Arabia, also,
there have been attacks against the oil
facilities”.
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165
November 2006
PARTNERSHIP
Partnership
Algiers and Ankara sign
a friendship and cooperation treaty
Algeria-Turkey
Algiers and Ankara have committed to promote bilateral cooperation in the political,
economic and cultural domains as part of the friendship and cooperation treaty which
was signed in the presence of the President of the Republic, Adelaziz Bouteflika, and
the Turkish Prime Minister, Mr Recep Tayyip Erdogan.
In this perspective, Algeria and Turkey
plan to develop the political dialogue
through the institutionalisation of a
high-level annual meeting between
both countries' heads of governments
as well as ministerial meetings which
will be held in Algiers and Ankara.
The two countries also agreed to boost
economic cooperation and increase
investment, particularly in the development of small and medium-sized enterprises (SME), whilst stepping up bilateral cultural exchanges and know-how
in this domain.
By virtue of this treaty, both countries
also plan to encourage mutual cultural
actions, by granting specific importance to promoting culture and Arabic and
Turkish language teaching in Algeria
and in Turkey.
The Turkish Prime Minister indicated,
in a press statement at the end of the
signing ceremony, that Algeria and
Turkey are “two brother countries, profoundly connected to each other
through historic links”.
He added that the signing of this
friendship treaty is a “revealing sign”
that “starts a better and prosperous
future” for both countries. "This is a
treaty which will enable us to better
consolidate our cooperation in the political, economic, military and cultural
domains”, further stated Mr Recep
Tayyip Erdogan.
By virtue of this treaty, Algeria and
Turkey have committed to develop and
promote bilateral cooperation in the
political, economic and cultural
domains.
At the political level, both parties have
planned the institutionalisation of a
“high level” annual meeting between
the two countries' heads of government
as well as ministerial meetings to be
held alternatively in the two capitals.
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166
November 2006
The two countries also agreed to boost
economic cooperation and increase
investment, particularly in the development of small and medium-sized enterprises (SME), whilst stepping up bilateral cultural exchanges and know-how
in this domain. The treaty also plans to
“encourage” mutual cultural actions,
by granting “specific importance” to
promoting culture and Arabic and
Turkish language teaching in both
countries.
Talking at the end of the signing ceremony, the Turkish Prime Minister
confirmed that this friendship treaty
was a “revealing sign" that "starts a better and prosperous future" for both
countries. During this visit, the first
one made by a Turkish Prime Minister
in 21 years, the businessmen from both
countries met in a forum in Algiers.
On this occasion, the Minister of
Participations and the Promotion of
Investments, Mr Abdelhamid Temmar,
expressed his desire to see Turkish
investors "more present" in Algeria
either through direct investments, or
through the company privatisation process initiated by the country”, recalling
that “900 companies from all business
sectors are being proposed for privatisation”. In front of the two countries'
businessmen, Mr Temmar described a
number of structuring advantages of
the national economy, particularly a
growth rate which “today, is 5%, and
which should reach between 7 and 8%
in the next three years and an unemployment rate reduced to 14% at the
end of 2004 which should reach 12% in
2007”.
"We have put in place a strategy aiming
to restore the country's political and
economic stability, thus enabling
Algeria to record 8.5 billion dollars of
foreign investment in 2005”, he said.
Mr Temmar also reported "the stable
investment environment which Algeria
is currently enjoying”, specifying that
the “pharmaceutical products, chemistry, buildings and public works, ship
building sectors and the agro-food
industry are all sectors which are offered to Turkish economic operators”.
He also stated the three large development schemes launched by the country,
namely the growth support programme
and the complementary development
programmes for the wilayas of the
South and the Hauts Plateaux, mobilising a financial package of 80 billion
dollars. For his part, Mr Erdogan, who
supported the "very serious" transformation process initiated by Algeria
since 1999, “illustrated by favourable
economic parameters”, added that “it
has launched an ambitious programme
for building a million houses”.
In this respect, he invited his country's
promoters to monitor this programme
“very closely”, feeling that the Turkish
experience in the construction domain
“may be transferred to Algeria”.
Mr Erdogan also confirmed that the
construction of dams, inter-city roads
and the distribution of water are,
amongst others, domains where Turkey
has recorded “remarkable evolution”.
Partnership
Good business on the horizon
Algerian-Turkish businessmen forum
Other than the direct
investments proposed to
the Turkish businessmen
in different economic
domains, Mr Temmar also
insisted on the privatisation programme of public
companies which “certainly, he said, have financial
problems but they also
have good markets”.
About fifty Turkish businessmen who
accompanied the Turkish Prime
Minister, Mr Recep Tayyip Erdogan,
on an official visit to Algiers, met up at
the El Mithaq residence with their
Algerian counterparts from the
Minister of Participations and the
Promotion of Investments, Mr
Abdelhamid Temmar, the president of
the Caci, Mr Ali Djabbour and Turkish
presidents of the Foreign Economic
Commission and the Stock Exchange
as well as members of the government.
Mr Temmar initially emphasised in his
speech the importance of the efforts
made by Turkey in terms of development, speaking of the “Turkish miracle”.
He invited the businessmen to come
closer together to do business in the
mutual interest of both countries whose
political relations are at the highest
level and particularly between the two
Heads of State.
After reviewing the efforts made by
Algeria at the macroeconomic level, Mr
Temmar indicated that our country will
achieve economic growth of around 7%
in the next three years.
Other than the direct investments proposed to the Turkish businessmen in
different economic fields, he also insisted on the privatisation programme of
public companies which “certainly, he
said, have financial problems but they
have good markets”.
The Turkish Prime Minister also spoke
in the same perspective of reinforcing
the Algerian-Turkish cooperation and
in all economic domains given, he
added, the major investment opportunities which Algeria offers. He was
keen to emphasise Turkey's and
Algeria's interest to go beyond the framework of trade to move towards reciprocal investments. This means taking
advantage of these favourable economic and political conditions to do
"good business" between Algerians and
Turks. After presenting two reports on
the regulatory framework on investments, the businessmen from both
countries sat around tables to speak
face-to-face on paths and means enabling direct investments to be made.
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167
November 2006
PARTNERSHIP
Partnership
1 Symposium of Algerian
and Iranian businessmen
st
The Minister of Industry in Iran
The Minister of Industry,
Mr Mahmoud Khedri, copresided with the Iranian
Minister of Trade, Mr Mir
Khademie, over the opening, in Tehran, of the 1st
Algerian-Iranian
Businessmen Symposium
organised by both national Chambers of
Commerce and Industry.
After recalling the excellent relations
between the two ministries, thanks to
the desire of the President of the
Republic, Mr Abdelaziz Bouteflika, and
the Iranian President, Mr Mahmoud
Ahmadinedjad, the Minister of
Industry suggested creating an evaluation and monitoring committee planned by the master industrial cooperation agreement signed in 2003.
Targeted actions in the standardisation,
the quality system, metrology and
industrial property will be major areas
of cooperation through exchanging
experience between the organisations
and technical centres of both countries.
The Minister of Industry also recalled
the major infrastructure works initiated
in our country and explained the promising areas of Algerian industry with
regards the increasing needs of the
domestic market. He launched an
appeal to Iranian industrialists to invest
in Algeria, which grants many advantages, incentive measures and other
exemptions following the general and
exemption investment schemes, in
addition to the additional facilities and
arrangements provided by the texts of
July and August 2006. Mr Khedri also
highlighted the guarantees offered by
Algeria to investments, in accordance
with the bilateral and multilateral
investment protection agreements
(Cidri) and the Multilateral Investment
Guarantee Agency (Miga).
This has led to the opening up of a
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168
November 2006
large area in our country intended for
our partners and to encourage all
initiatives.
The Minister of Industry dealt with, at
length, the opportunities and comparative advantages, particularly the evergrowing local market, the skilled
labour, the competitive natural gas and
electricity prices, the abundance of
natural resources and the proximity of
the markets of the European Union to
which Algeria is bound by an association agreement stipulating specific provisions for exporting the products
manufactured in our country.
Mr Khedri proposed giving the
Algerian-Iranian cooperation objective
dimensions on the basis of a rational
vision guaranteeing sustainable part-
nership, free-trade and useful investment.
The Minister of Industry reconfirmed
the right of developing countries and
transition economy countries to develop technological scientific research as
a legitimate demand recognised by the
international agreements, including
research in the domain of nuclear energy for peaceful purposes dealing with
medicine and economic development,
in the respect of the international
agreements, particularly the treaties on
the non-proliferation of nuclear weapons by all countries, without distinction.
International cooperation, on bases of
justice and legitimacy, is the best route
for maintaining international security
and peace, in favour of people and the
fight against poverty, famine, pandemics, illiteracy and plagues, concluded
the Minister of Industry.
The setting up of the Evaluation and
Monitoring Committee was, furthermore, at the centre of the preliminary
discussions between Mr Mahmoud
Khedri and Mr Moufidi, Iranian
Deputy Minister of Industry, the president of the public holding company of
Iranian industries (Idro). An agreement was concluded between the two
parties in view of creating this mechanism that is able to enable the identification of determined bilateral cooperation actions. The Minister of Industry
proposed holding this committee's first
meeting in Algiers.
Furthermore, the discussions on
exports continued, leading to an agreement between the two standardisation
organisations.
Partnership
Meeting of the Algerian-Saudi
Businessmen Council in Algiers
Algeria-Saudi Arabia
The Algerian-Saudi
Businessmen Council met for
the 3rd time in Algiers to examine means of reinforcing
the domains of cooperation
between the two countries.
The meeting was inaugurated by the president of the Algerian Chamber of
Commerce and Industry, Mr Brahim
Bendjaber, in the presence of about fifteen Algerian operators representing
several industries and their Saudi counterparts.
In his opening speech, Mr Bendjaber stated that the holding of this meeting in
Algiers is an opportunity to boost the
trade and economic activity between both
countries.
He further specified that this meeting
“will enable the Algerian and Saudi businessmen to reinforce their relations and
get closer together”, emphasising that the
creation of this council, which groups
together the parties interested by the
Algerian and Saudi markets, aims to
remove the obstacles hindering the development of economic relations between
the businessmen in both countries.
The head of the Saudi businessmen delegation, Mr Mohamed Ben Abdallah Ben
Adouan, for his part indicated that this
3rd meeting of the council is an opportunity to look at the investment opportunities in Algeria whilst removing all obstacles with which the economic operators
are confronted. He added that Algeria is a
promising market and has enormous
potentials whilst emphasising the interest
of Saudi operators for numerous cooperation and investment domains in Algeria
and for increasing the volume of trade
between the two countries. The representative of the Ministry of Participations and
the Promotion of Investments, Mr
Horcine Bendhif, presented the facilities
and legal guarantees and procedures for
investing in Algeria.
In a press statement, he specified that all
the economic public companies can be
privatised, which is an opportunity for
Saudis and other foreigners from Arab
countries to invest in Algeria. He quoted
Saudi Arabia's current projects in Algeria
such as the Sider group in the domain of
construction which has over 12 partners,
including Jordan and Palestine as well as
other giant projects in the tourism sector
currently being drawn up and the
Pharaon group in partnership with the
Béni Saf cement plant. He recalled that
several other projects are being studied
with the Saudi businessmen.
Saudi industrialists
want to speed up
their investments in
Algeria
The Saudi industrialists want to
speed up their investments in Algeria,
confirmed, in Algiers, the co-president of the Saudi part of the AlgerianSaudi Business Council, Mr
Mohamed Ben Abdellah Ben
Oudouane, during an audience granted by the Minister of Trade, Mr El
Hachemi Djaâboub. The meetings,
which took place in the presence of
the board of the SGP Développement
agricole and co-president of the
Algerian part of the council, Mr
Belhouadjeb Bayzid, have enabled
us “to take a large look at the future
of trade and business relations between Algeria and Saudi Arabia”, indicated a press release from the
Ministry. Stating that the current level
of trade and business exchanges “is
below the potentials offered by the
economies of both countries”, both
parties “committed to work further to
intensify the contacts between the
economic operators of both countries
in view of exploring and identifying
solid outlooks for economic cooperation and the development of trade”,
continues the press release.
Furthermore, both parties "welcomed
the holding of the 3rd session of the
combined Business Council which
was the opportunity for several meetings between the Algerian and Saudi
economic operators which open up
promising perspectives of partnerships and concrete achievements of
investment projects in both countries”. Finally, both parties dealt with
the issue of the Arab free trade area
and the need to set it up, adds the
same source.
Energie & Mines
169
November 2006
PARTNERSHIP
Partnership
Creation of a joint
business council
The 4th session of the Algerian-Omani
joint commission was officially recognised by the signature of two agreements related to the “creation of a joint
business council” and to “scientific and
technical cooperation". The session's
closing ceremony and the signing ceremony of the two agreements was copresided by the Minister of State,
Minister of Foreign Affairs, Mr
Mohamed Bedjaoui, and his counterpart, Mr Youssef Ben Aloui Ben
Abdellah. Mr Bedjaoui, on this occasion, welcomed the "good results reached by the two parties during this session's works", which, he emphasised,
have contributed to the "reinforcement
of the legal framework between the two
countries through the signature of the
agreement to create a Business Council
and that of the scientific and technical
cooperation". This meeting, added Mr
Bedjaoui, has also enabled "the two
parties to lay down solid foundations
for the future of the relations between
the two parties" and to "define the priorities of bilateral cooperation, particu-
Energie & Mines
170
November 2006
Algeria-Oman
larly in terms of investment through the
partnership and privatisation system,
especially in the domain of hydrocarbons, production industries, tourism
and services”. The Omani Minister also
congratulated the "positive” results of
this session, emphasising that the
agreement to create a joint Business
Council between the two countries
“will enable the basis of bilateral cooperation to be enlarged”. Mr Youssef Ben
Aloui Ben Abdellah specified that this
council, which has six businessmen
from the Sultanate of Oman and six
others from Algeria, “should meet up at
the end of 2006 on the fringes of the
Arab businessmen forum, planned to
take place in November in Algiers”.
This council intends to be a means of
“exchanging information on the economic projects” and aims to “agree on an
action plan for establishing cooperation
in fruitful projects”, added Mr Youssef
Aloui Ben Abdellah. The Omani
Minister further specified that “other
agreements being examined and drawn
up will be signed in the future in the
domain of economic and cultural
cooperation”. The Ministers of Foreign
Affairs from both countries signed the
minutes of the session before the signature of the agreement related to the
creation of a Business Council by the
Algerian Vice President of the Chamber
of Commerce and Industry and his
Omani counterpart. The agreement on
scientific and technical cooperation, for
its part, was signed by the secretary
general of the Ministry of Higher
Education and Scientific Research and
the Ambassador of the Sultanate of
Oman to Algiers.
These last few years, Algerian-Omani
relations have undergone a development which has resulted in visits between heads of the two countries and
the holding of three sessions of the
joint Algerian-Omani commission, the
last of which was held in April 2002 in
Muscat.
Partnership
To reinforce banking supervision
30th ordinary session in Algiers of the Council of Arab Central
Bank Governors and Financial Institutions
The governors of the Arab
Central Banks appealed, in
Algiers, for a reinforcement of banking supervision and an improvement
of the payment systems to
preserve the financial and
monetary stability of the
region's countries further.
The governors of the Arab Central
Banks appealed, in Algiers, for a reinforcement of banking supervision and
an improvement of the payment systems to preserve the financial and
monetary stability of the region's countries further.
Speaking before the 30th ordinary session of the Council of Arab Central
Bank Governors and Financial
Institutions, in the presence of the
President of the Republic, Mr
Abdelaziz Bouteflika, members of the
government, the governor of the Bank
of Algeria and the Chairmen and CEO
of Algerian and foreign banks operating in Algeria, the chairman of the
board of the Arab Monetary Fund
(AMF), Mr Djassem El-Mennai,
appealed for larger cooperation between the Arab monetary institutions to
work towards the implementation of
the Basel II criteria.
The new Basel II system was finalised
in 2004 by the Bank for International
Settlements (BIS) and aims to improve
the bank risk management capacities
by the central banks. After Basel I,
introduced in 1988, shake-ups occurred on the international financial markets which led the BIS to revise this
system which had become inappropriate. Among the reasons which made
such a revision necessary are the liberalisation and the deregulation of the
financial markets, the financial innovations not taken into account by Basel I,
the growing importance of risk management techniques and the increased
volatility on the financial markets such
as the Asian crisis in 1997.
Describing the background to the hol-
ding of this session in Algiers, Mr
Mennai reported the current favourable
situation of the economies of Arab
countries which are characterised by
the continuous achievement of “encouraging" growth rates and by the
“consolidation of internal and external
financial balances”, in the region.
In this perspective, he considered that,
certainly, these positive results are
mainly generated by the increase in the
world oil prices, but are also due to the
"prudent" economic policies adopted by
the Arab countries as well as the “diligent continuation of economic and
financial reforms”.
Reporting on the action initiated by the
AMF in terms of banking supervision,
the Chairman of this monetary institution indicated that the Arab
Commission, particularly responsible
for this matter, has worked for greater
cooperation and coordination between
the Arab monetary authorities, particularly with regards the application of the
Basel II criteria.
As for the payment systems, Mr
Mennai emphasised that the AMF has
established cooperation with the
International Monetary Fund (IMF),
the World Bank and the Bank for
International Settlements to evaluate
the Arab payment systems with the aim
of ensuring that it is more efficient.
Mentioning the economic, financial
and monetary shake-ups currently
taking place throughout the world and
their impact on the Arab economies,
Mr Mennai reported on the “draft united statement” drawn up by the councils of governments of the Arab central
banks. This draft statement, he confirmed, which expresses the position of
Arab countries on economic, regional
and global issues, must be presented in
front of the next general assembly of
the IMF and the World Bank which will
be held at the end of September in
Singapore.
On this matter, he indicated that the
draft statement must also deal with the
issue of the losses recorded after the
war led by Israel against Lebanon (the
direct physical losses estimated at 3.6
billion dollars) and called upon the
international community and world
financial institutions to present sufficient aid for the reconstruction of this
country.
According to the Chairman of the AMF,
Algeria has been entrusted by the Arab
countries with presenting the “united
Arab statement” in front of the next
meetings of the Bretton Woods institutions in Singapore.
For his part, the president of this 30th
session, Mr Adib Miyal focussed his
speech on the role which the Central
Banks must play in the reforms undertaken in the Arab region.
With regards the current situation of
the oil markets, Mr Miyal, who is also
governor of the Central Bank of Syria,
considered that if the upsurge in the
prices of black gold is one of the main
growth factors in the economies of the
Arab countries, it may, however, have
the opposite effect.
In this respect, he indicated that the
financial and monetary surpluses induced by the increase in oil prices would
entail a strong increase in liquidity
which might cause, in their aftermath,
strong inflation.
According to Mr Miyal, other than the
impact of the increase in oil prices on
the foreign exchange rates of the national currencies of Arab countries, the
surplus oil export income also results in
an increase in public expenditure,
hence reinforcing the public sector.
"Which goes against the flow of the
economic reforms initiated by the Arab
countries, a large majority of which
have opted for the market economy”,
he said.
Furthermore, My Miyal also focussed
on the importance of modernising the
payment systems. "This will lead to
financial and monetary stability" in the
national economies of the Arab countries, he noted.
Energie & Mines
171
November 2006
PARTNERSHIP
Partnership
President Bouteflika : “African
countries have a lot to learn from
European construction”
Meeting in Algiers of the 1st Africa-Europe conference of organised
civil societies
In a speech given at the
1st Africa-Europe
Conference of organised
civil societies, President
Bouteflika stated that
"African countries have a
lot to learn from European
construction from the
signature of the Treaty of
Rome up to the current
enlargement process”.
"In view of continuous marginalisation,
added the Head of State, Africa's development does not lend itself to optimism with regards the stakes of globalisation”.
"But, he observed, the commitments
made by the international community
with regards Africa have been disappointing, particularly with regards the
means of fighting against poverty”,
emphasising that “Europe's contribution was particularly disappointing with
regards partnership practices and the
means mobilised in favour of Africa”.
The President of the Republic also felt
that “the participation of civil society,
intellectuals, political parties, associations, employee organisations and unions is required for the reconstruction
of African economies, taking account
of the modern trends of the world economy”.
Held under the presidency of Cnes
(Algeria), this meeting was organised
jointly by the European Economic and
Social Committee (EESC) and the
Union of African Economic and Social
Councils (UAESC).
The institutional objective was to develop a cooperation mechanism between
the UAESC and the EESC. A memorandum of understanding was also
signed for this purpose at the end of the
conference.
Energie & Mines
172
November 2006
Mrs Anne-Marie Sigmund, president
of the EESC, signed this document, for
the European side, with Mr Mohamed
Segheir Babès, current president of the
Ucesa. In parallel to this event, a resolution adopted on the eve of the conference selected Algiers for the head office of the UAESC.
Mrs Anne-Marie Sigmund emphasised
that this conference is part of the priorities which the European Union wants
to set up in the cooperation with Africa.
She felt that the creation of the African
Union and the setting up of Nepad
which highlight the principles of good
governance favour Africa's development.
The works were mainly focussed on
three themes: migrations and development; regional integration; good governance.
The question of migrations was developed on the eve of the conference in the
UAESC. Mr Abdelkader Messahel
developed the objective causes of these
African migrations towards the developed countries. He indicated that the
number of these migrations, which was
67 million in 2005, had reached 180
million in the last few years. Algeria is a
transiting country concerning the
departures from 42 countries. "Algeria
intends to deploy the necessary efforts
to collectively take in charge this subject”.
The conference's recommendations on
the two other themes are summarised
by
the
“Memorandum
of
Understanding” between the UAESC
and the EESC. It particularly recommended involving the consultative
assemblies in the perspective of good
governance and to favour the interAfrican integration process and on the
world market. Democracy is recommended "as the appropriate framework
for a large participation of civil society
in terms of good governance”. All these
actions include the “preservation of elites” and “the construction of Rules of
Law in Africa”.
In line with Africa's ambitions
Nigeria-Algeria gas pipeline project
The feasibility study has
shown the profitability and
the technical-economic
viability of this mega-project whose cost is estimated at 10 million dollars
and which will be completed as of 2015.
"This initiative is considered as one of
the best up to present to succeed in the
regional economic integration". This is
what, in substance, was indicated by
the Minister of Energy and Mines
during the presentation of the final
report of the study into the feasibility of
the Trans-Saharan Gas Pipeline
(TSGP) project, carried out by the
British company Pespen/IPA. An intercontinental, world-wide scale project,
the Trans-Saharan Gas Pipeline is designed to transport natural gas from
Nigerian deposits to the European
continent via Niger and Algeria. Of a
length of 4,128km, 1,037km of which
on the Nigerian territory, and 841km
through Niger, this pipeline will cross
Algeria over 2,310km, up to the
Mediterranean coast, in two different
places, one in Béni Saf (west) and the
other in El Kala, in the east. This pipeline, whose feasibility studies anticipate
the start of its construction in 2015,
has a planned width of 48 to 56 inches
and will transport the equivalent of 20
to 30 billion cubic metres a year, mostly through the European market.
The cost of this construction, whose
study has already cost 2 million dollars,
is commensurate with its ambition,
since it is estimated at 10 billion dollars, in addition to 3 more billion dollars for the exploration and production
of the gas it has to route; a colossal
sum which the three countries concerned are not giving up hope to find in
the large international banking institutions, in view of the importance of the
economic and financial impacts which
should result from it.
However, the gas producing and
consuming countries will be called
upon to contribute to the financing of
this pipeline, and this is what was therefore explained by Mr Chakib Khelil
during a press conference organised at
the Hilton Hotel and run together with
the Niger Minister of Mines and
Energy, Mr Mohamed Abdullahi, and
the Nigerian Minister of Oil Resources,
Mr Edmund Dokuru.
Indeed, our Minister of Energy confirmed that this study has shown the profitability and the technical-economic
viability of this mega-project, whereas
his Nigerian counterpart emphasised
its importance on the supply of the
European market where the demand
continues to increase. This will also
have “very positive” repercussions on
the population of the three countries
through the creation of some 5 to 6
million jobs in total "which will contribute to the establishment of total stability in the region”, confirmed Mr
Dokuru.
Furthermore, the Minister indicated
that his country counted on the experience of Algeria in the construction of
gas pipelines and the sale of gas in the
hope of attracting the largest financing
possible in favour of the future pipeline. These investments are, according to
Mr Chakib Khelil, almost assured in
view of the prices imposed per cubic
metre of gas, decreed at 4 dollars, whereas it is already currently around 7 to
8 dollars. For his part, Niger's Minister
of Energy was delighted with the
results of this study which will enable
the project to go into the realisation
phase; a realisation which will see the
official participation of Niger, announced in the coming weeks in Niamey, he
revealed.
Mr Abdullahi, for his part, revealed the
importance of the consequences of this
project on the economy and the population of his country which, he added
“will, in the next few years, join the oil
and gas producing countries' club” as
long as, in his opinion, important
reserves of hydrocarbons have been
pointed out, “this is an invaluable asset
for Niger's economy. Hence, we will
Partnership
participate responsibly in this project".
One thing to be pointed out is that this
enormous project will certainly give
serious impetus and will ensure solid
outlooks for the economic activity and
social progress, for all regions of the
three countries through which the
pipeline will cross, according to the
press release from the Algerian oil
company, Sonatrach, which specified,
furthermore, that this will also supply
natural gas not only to the countries
along its route, but also the neighbouring countries. This will thus given
renewed impetus to the orientations
contained in the Nepad framework and
which, up to now, have not been able to
take on their full scale!
A third exploration
block for Sonatrach
in Niger
The negotiations between the national
hydrocarbons company Sonatrach and
Niger's oil company on the hydrocarbons
block Eldjado, in Niger, are complete,
confirmed, in Algiers, Niger's Minister of
Mines and Energy, Mr Mohamed
Abdullahi. He specified that the signature
of the agreement on the exploitation of
this block could not however take place
before the publication of the application
decree of Niger's new oil code. "The
negotiations (with Sonatrach) are complete but we are waiting for the finalisation of
our oil code. All we need is the application decree to finalise the agreement on
the Eldjado block”, he said on the fringes
of a ceremony presenting the feasibility
study of the Nigeria-Algeria gas pipeline
project. Without further details, the
Minister stated that other hydrocarbons
exploitation and even production
contracts in Niger would soon come to
light between the two companies and
with partners from other countries. In
Niger, Sonatrach has already been awarded two exploration blocks, namely the
Kafra block for a period of 12 years and
the Tamsna block for 9 years.
Energie & Mines
173
November 2006
PARTNERSHIP
Partnership
The ratification problem still persists inside
the AU Commission
African Energy Commission (Afrec)
The President of the
AU Commission,
Prof. Alpha Oumar Konaré,
expressed his deep disappointment as to the negligence of numerous African
member states in ratifying
the treaties, charters,
protocols and agreements
of the AU Commission, in
his speech to the African
Heads of State and government during the 7th conference held in Banjul.
The president blamed the slowness and
the reticence shown in terms of ratification, which has significantly slowed
down the operational implementation
of several AU bodies; he gave the
impression that the ratification issue
has become one of the largest problems
with which the AU Commission is
faced. His speech on this issue is given
below:
"I have no doubt that you will ensure
that our organisation becomes a legal
arena: too many adopted protocols and
agreements have not yet been ratified
and signed. Thus:
1- The non-aggression and common
defence pact, adopted in Abuja, 31
January 2005, has been ratified, to
date, by two countries.
2- The additional Protocol to the
Agreement for the prevention of and
fight against terrorism, adopted in
Addis Ababa, on 2 July 2004, has been
ratified by one country only.
3- The Protocol amending the articles
of association of the African Union,
adopted in Maputo, on 11 July 2003,
has been ratified by 11 countries.
4- The African agreement for the prevention of and fight against corruption,
adopted in Maputo, on 11 July 2003,
has been ratified by 14 countries.
5- The additional Protocol to the
Human Rights Charter, on women's
rights in Africa, adopted in Maputo on
11 July 2003, entered into force on 25
Energie & Mines
174
November 2006
November 2005. To date only 15 countries have signed it.
6- The agreement creating the African
Energy Commission, adopted on 11
July 2001, in Lusaka in Zambia, has
been ratified by 12 countries.
7- The Pelindaba Treaty, proclaiming
the Africa Region free of any atomic
weapons, adopted in July 2005, in
Cairo, Egypt, has been ratified by 20
countries. 28 countries need to ratify it
before it can enter into force.
8- The Protocol on the Pan-African
Parliament, adopted in Syrte, Libya, on
2 March 2001, entered in force on 14
December 2003. Seven countries have
not yet ratified it.
9- The Protocol on the establishment
of the Council for Peace and Security
of the African Union, adopted on 9 July
2002, in Durban, South Africa, entered
into force on 26 December. To date, 12
countries have not yet ratified it.
10- The OAU Convention on the
Prevention
and
Combating
of
Terrorism, adopted in Algiers on 4 July
1999, entered in force on 16 December
2002. To date, 17 countries have not
yet ratified it.
11- The Convention for the establishment of the African Centre for
Fertiliser Development, adopted in
February 1981, has been ratified by
only 3 countries and signed by only 27
countries.
Evolution of the ratification
of the Afrec Convention
Countries which have ratified
the convention
Ratification date
Country
(1) Libya
20/02/2002
(2) Algeria
03/06/2003
(3) Rwanda
20/11/2003
26/11/2003
(4) Niger
(5) Mozambique 04/02/2004
(6) Comoros
16/04/2004
28/08/2004
(7) Egypt
(8) Senegal
14/02/2004
09/02/2005
(9) Sudan
14/02/2005
(10) Sah. Rep.
(11) Tanzania
03/06/2005
(12) Mali
20/04/2005
(13)
(14)
(15)
(16)
(17)
Angola
Ghana
Tunisia
Gambia
Zambia
03/03/2005
19/03/2005
26/12/2005
12/06/2006
12/07/2006
Niger, the Sahraouie Republic, Angola
and Gambia have not yet filed their ratification instruments. To date, Afrec has
focal points in the member countries.
Progress of Afrec's national focal
points
Country
1. Algeria
2. Egypt
3. Kenya
4. Ethiopia
5. Sudan
6. Senegal
7. Mali
8. Niger
9. Malawi
10. Libya
11. Gui. Bis.
12. Cape Verde
13. Sao Tomé
14. Angola
15. Rwanda
16. Lesotho
17. Ivory Coast 18. Ghana
19. Zambia
20. Gambia
21. Liberia
22. Sahraouie Rep.
23. Tunisia
24. Namibia
25. Botswana
26. Tanzania
27. Gabon
28. Cameroon
29. Central Africa 30. South Africa
31. Mozambique 32. Mauritania
33. Chad
34. Equ. Guinea
35. Zimbabwe
36. Guinea
38. Uganda
37. Congo
The Afrec continues to establish national focal points within the African
Ministries of Energy of the Member
Countries. For the time being, we have
finalised the focal points of 38 countries, recruited more than 68 managers
and directors to assist us in putting in
place the information system project
and in coordinating the relations between their respective Ministries and
the Afrec. Furthermore, we have put in
place focal points within 15 CERs and
RPPs.
The AFREC intends to organise a
workshop with the Focal Points in
parallel with the meeting of the
CAMEN on the launch of the AFREC.
Partnership
Progress of the Afrec Programme
on the sustainable development
of electricity
As recommended by its convention,
the Afrec has prepared a series of draft
energy programmes, including oil, gas,
electricity, renewable energies, coal,
nuclear power, training and strengthening of capacities and the information
system. Below is a summary of the
Afrec Programme on the sustainable
development of electricity.
• Resources
- Vast hydro-energy programmes
- Micro and small hydro-energy projects
- Solar power resources (photovoltaic
and thermal)
- Wind energy convention systems
- Geothermal electric production
- Energy efficiency
• Means
- Afrec's Programme for the sustainable development of energy
- Sponsoring of continental strategies
and policies (renewal energy and sustainable development managers)
- Mobilising the African organisations
dealing with energy
- Mobilising the African regulatory and
legislative instructions
- Popularising energy management
- Creating the African Renewable
Energies company (ARES)
- Boosting the regional power pools
(RPPs)
- Popularising energy management
• Objectives
- Encouraging the use and acceptance
of the renewable energy technology.
- Putting in place a continental community of industry, people and institutions to support the renewable energy.
- Creating an African network to facilitate the cooperation and exchanges.
- Creating and circulating publications
to the different target groups in view of
supporting the diffusion of the renewable energy technologies.
- Bringing together the industry, science and politics in workshops, conferences and summits on renewable
energy.
- Advising the governments and organisations on the policy, the implementation and the sustainability of renewable energy activities in the world.
• Goals
The popular companies will contribute
to the following:
For a Sustainable Africa
- Encouraging the use of the renewable energies throughout the continent,
through the appropriate technology,
scientific excellence, social responsibility and continental communication.
Establishing African communities:
- Bringing together the industries, individuals and institutions to support the
renewable energy technologies,
through communication, cooperation,
support and exchanges.
Development support:
- Applying practical projects, transferring technology, education, training
and supporting issues of African energy development.
- Supporting the renewable energy
technology sciences: stimulating and
encouraging fundamental and applied
research into the renewable energy
technologies.
Contributing to growth:
- Ensuring individual and community
growth by supporting the private company and providing training in the
domain of renewable energies.
Information and communication:
- Quick access to information through
communication and exchange platforms designed on the basis of
modern technologies.
Stakeholders:
- Afrec
- Continental energy organisations
- Local communities
- Futuristic non-governmental organisations (NGOs)
- National and local governments
- Specialised United Nations institutions
- International organisations concerned
- International bilateral donators affiliated to the countries
Global partners:
- The International Solar Energy
Society (ISES)
- The World Bank and associated partner organisations
- Development Banks
- Specialised United Nations (UN)
institutions
- the International Energy Agency
(IEA)
- The European Union (EU)
- the Eurec Agency
- The World Wind Energy Association
(WWEA)
- Governments
- Industrial and services' organisations
- Non-governmental organisations
- Research institutes
- Universities
- Public services
Functions and activities:
The continental people's sustainable
energy society will include a large
range of services, activities, networks
and support mechanisms.
A group of custom-made professional
services will be reinforced by a continental and global interaction, quick
access to information, concerted projects and a community of individuals
sharing the same opinions. Affecting
all domains of energy supply and sustainability, membership to such a
society may contribute to sustainable
development, to a healthier environment, to scientific responsibility and to
economic prosperity.
It may:
- promote extended short and long
term use of renewable energies;
- organise popular scientific and awareness conferences;
- publish reviews, books, information
on-line and policy statements;
- sponsor round tables and organise
debate platforms;
- distribute brochures and publications
on renewable energies, and organise
the regional and continental networks
of the renewable energy societies.
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175
November 2006
PARTNERSHIP
Partnership
Working towards putting in place
a coordination mechanism in terms
of developing energy infrastructures in Africa
African Energy Commission (Afrec)
A document related to the creation of a
coordination mechanism for developing energy infrastructures in Africa
was discussed in Tunis during a meeting convened by the Commissioner of
the African Union responsible for
infrastructures and energy and which
was held under the aegis of the African
Development Bank (ADB).
In this meeting, which included the
participation of Dr Hussein El-Hag,
executive director of the African
Energy Commission, whose headquar-
ters are in Algiers, it was a question of
working towards speeding up the developing of infrastructures on the continent in exchange for better coordination.
It is very important for the African
Energy Commission and for the
African Union to clarify the roles of the
players involved in these programmes,
to speak with the same voice in the
international forums and to better
exploit the synergies to avoid the
redundancies and the overlapping obs-
erved to date. The document presented
at this meeting essentially aims to put
in place an efficient coordination
mechanism and particularly to establish
a common agenda with regards foreign
partners in relation to the development
of continental infrastructures. In this
respect, the African Action Plan in this
domain which includes the short term
Nepad action plan must be used as a
platform for drawing up this agenda.
Cooperation programme project between
Africa and Latin America
The cooperation programme in terms of energy between
Africa and Latin America was discussed in Mexico between
Mr Alvaro Rios Roca, Executive Secretary of the Latin
American Energy Development Organisation (Olade) and
Mr Hussein El-Hag, Executive Director of the African
Energy Commission (Afrec). This cooperation programme
which is part of the Afrolac framework - the Afro-Latin
American Association for Energy Development - identifies
four main areas of action. This means the putting in place of
an information system and drawing up a database on energy
as well as drawing up a technology transfer plan related to
the development of bio-fuels where Brazil is the world's leader.
It also provided for the publication of a joint review under the
aegis of Afrolac, as well as exchanging information and
publications.
Afrec develops its relations with OPEC
and the IAEA
The recent meeting in Vienna of the
3rd international OPEC Seminar provided Dr Hussein El-Hag, Executive
Director of the African Energy
Commission, whose headquarters are
in Algiers, with the opportunity of meeting the senior executives of large international energy organisations.
To the OPEC executives, the Executive
Director of Afrec proposed participating in the internal management structure of the African Energy Commission
through the permanent representation
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176
November 2006
of the Organisation of Petroleum
Exporting Countries in the Executive
Committee of the Afrec and in its
Technical Consultative Body. It is
expected that OPEC will shortly
appoint its representatives inside the
Afrec structures. As for the executives
of the International Atomic Energy
Agency, who Dr El-Hag met on this
occasion, they have, for their part,
expressed their approval of the invitation to associate the IAEA to the
Technical Consultative Body of the
Afrec and the representative of the
agency in this body will be appointed in
the next few days.
With Mr Edmond Daukorou, Nigeria's
Minister of State for Oil Resources, it
was a question of having this country
ratify the Afrec Convention. Mr
Daukorou committed to give his support and his assistance to ensure that
Nigeria finalises the ratification process
as quickly as possible.
Partnership
15 session of the Algerian-Mauritanian
joint cooperation commission
th
The works of the 15th
session of the AlgerianMauritanian joint cooperation commission were
officially recognised, in
Nouakchott, by the
signature of nine agreements, in the presence
of the Head of the
Government, Mr Ahmed
Ouyahia, and the
Mauritanian Prime
Minister, Mr Sidi
Mohamed Ould
Boubakeur.
In the domain of energy, both parties
signed a master agreement between
Sonatrach and the Mauritanian hydrocarbons company defining the general
principles governing the bilateral
cooperation in the domain of oil activities and the foundations of a future
partnership in the domain of exploration, research and development, in
addition to expertise and training.
The agreement also provides for the
possibility of creating a joint venture.
Both parties also agreed to put an end
to the application of the master agreement related to the financing of the
renovation works of the Nouadhibou
refinery, its operating and its management, through the signature of a master agreement inherent to this domain.
A bilateral cooperation agreement was
also signed in the domain of public
works, particularly with regards the
organisation, the regulations and the
exchange of experiences and studies.
The agreement also provides for the
opening up of partnership prospects
between the two countries in this
domain.
Furthermore, the parties reached a
consular agreement, which is an
important legal instrument for regulating the circulation and residence of
nationals from both countries in view
Algeria-Mauritania
of guaranteeing them better protection
and ensuring better reconciliation between the two peoples. The session was
also marked by the signature of a
cooperation agreement on women,
family and children providing for
cooperation between the institutions
concerned through the protection of
women's and children's rights in the
two countries and the development of
training programmes in favour of specialists in this domain.
With regards the vocational training
sector, both parties decided, thanks to
an executive programme for the period
2006-2007, to reinforce and reorganise the vocational training sector in
Mauritania, through the training of
supervisors and the awarding of annual
study grants in favour of Mauritanian
trainees. With regards illiteracy and
education for adults, both parties
agreed to put in place an executive educational cooperation programme for
the year 2006-2007 and to share experiences. Both parties signed an executive programme, for the same year, in
the domain of youth and sports, provi-
ding for different visits by managers
from the sector and youth groups in
order to build bridges of continuity between the youth of the two countries
and encourage the promotion of sport
in Mauritania. With regards the fishing
sector, both countries agreed to twin
the two countries' aquaculture centres
and institutes. Hence they will proceed
to the twinning of the National
Halieutic documentation and research
centre in Algeria and the Mauritanian
Institute of Oceanographic research, as
well as the Algerian Halieutic and
aquaculture technology institute and
the Nouadhibou Halieutic School in
Mauritania. With regards health, the
Algerian and Mauritanian parties
agreed to register the Saïdal products
for their export to Mauritania, as well
as to update the agreement signed in
1996 in view of boosting the bilateral
cooperation in this vital domain.
Before closing this session's works, the
Ministers of both parties held sectoral
meetings, it was stated.
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PARTNERSHIP
Partnership
Signature of an energy
cooperation agreement
Algeria-Chad
Possibility of
Sonatrach taking a
stake in the Chad
company
■
The Minister of Energy and Mines, Mr
Chakib Khelil, and the Chad Minister
of Oil, Mr Emmanuel Nadingar, in the
El Mithak residence (Algiers), signed a
cooperation agreement in the domain
of hydrocarbons, in the presence of
Chad's Ambassador to Algiers and
representatives of the two delegations.
This agreement, which officially recognises the three-day visit made by the
Chad Minister to Algeria, focuses on
the need to reinforce the cooperation
between the two countries in the
domain of hydrocarbons particularly in
terms of technical support, training and
exploration.
"This visit, which has achieved its
objectives, aimed at sharing and collaborating between the two countries as
well as cooperation, particularly, between Sonatrach and the new Chad
national oil company”, indicated Mr
Chakib Khelil at the end of the signing
ceremony.
The Minister, who wished every success to this new company, assured his
Chad counterpart of Algeria's “availability” to provide everything needed to
develop this company” and to reinforce
the partnership through the establishment of projects in the hydrocarbons'
sector, as long as the opportunities
exist.
For his part, the Chad Minister expressed his “satisfaction” on this visit which
has been a “response to our request that of having your assistance and
Sonatrach's assistance for the putting
in place of our oil company”.
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178
November 2006
“We have come to gain inspiration
from Sonatrach's organisation and we
are going back with very useful and
necessary information which should
enable us to set up our company”, said
Mr Nadingar, who emphasised that
this visit is “one further step towards
consolidating our relations in the
domain of hydrocarbons”.
The Chad Minister took this opportunity to invite the Algerian Minister to
visit Chad so as to “further deepen our
cooperation” and make more progress
towards turning it into a reality. This
invitation was accepted by Mr Chakib
Khelil, who emphasised that the date
will be fixed at a later date.
As for the date on which the new Chad
company will be put in place, Mr
Nadingar specified to the APS that this
company would be created before the
end of this year. "The law creating this
entity has been published and we are at
the stage of putting in place the articles
of association to finalise it”, he added.
With regards the negotiations between
Sonatrach and Chad on the exploration
of certain blocks in this country, which
has been an oil producer since 2003,
the Minister emphasised that these
negotiations will be resumed after the
creation of this company.
“We will have to talk about the possibility of Sonatrach taking a stake in the
Chad company and also about its participation in the existing or future
blocks”.
Official visit to Algeria
of President Roh Moo-Hyun
Algeria-Korea
Partnership
The official visit to Algeria
of the President of the
Republic of Korea, Mr Roh
Moo-Hyun, was particularly officially recognised by
the signature of a
Strategic Partnership
Statement designed to
“reinforce the multi-sectoral cooperation” between
the two countries and
“raise their multiform relations to a higher level”.
During this visit, Presidents Bouteflika
and Roh Moo-Hyun discussed several
bilateral, regional and international
issues of mutual interest. On this occasion, they had head-to-head discussions, extended to the members of both
delegations, which particularly enabled
them to finalise the outlines of the
Strategic
Partnership
Statement
encompassing several domains of bilateral cooperation. In this statement,
based on “mutual trust and understanding”, and co-signed by Presidents
Bouteflika and Roh Moo-Hyun, both
parties committed to reinforce their
partnership in the political, economic,
commercial, financial, cultural, scientific and technological domains, but also
in all domains of "mutual interest" and
on the international scene.
“The Statement which we have just
made public establishes an impetus for
Algerian-Korean cooperation relying
on our respective capacities and on the
conditions offered by our respective
regional belongings” stated the Head
of State on this matter to his host,
during a lunch given in his honour.
The fruit of about fifteen years of trade
and cooperation, which have placed
Algeria in first place with its Korean
partners in Africa, the document is perceived also as an instrument for promoting bilateral relations to a qualitati-
vely high level.
It is finally the fruit of a series of bilateral agreements concluded in different
domains between the two countries,
particularly thanks to the State visit to
Korea of President Bouteflika in
December 2003 which then gave
“significant impetus” to the bilateral
relations.
During Mr Roh Moo-Hyun's visit, both
parties concluded a memorandum of
understanding in the domain of energy
and mines, another in the domain of
small and medium-sized enterprises
(SME), and a Legal Cooperation
Convention.
The energy agreement in question,
which relates to the storage of crude oil
in Korea, the exporting of LPG gas and
renewable energy, “will consolidate the
partnership between the two countries,
already enhanced by a very fruitful
cooperation”, confirmed the Minister
of Energy and Mines, Mr Chakib
Khelil, at the end of the signing ceremony.
Furthermore the memorandum of
understanding in the SME domain
defines the framework for the coopera-
tion and partnership in terms of supporting and developing SME, as well as
the mechanisms and programmes
required for their realisation.
More specifically, this means exchanging information and experiences in
the domain of promoting SME, transferring technologies and experience
and promoting partnership through the
organisation of study visits in both
countries and the training of managers
responsible for implementing the sector's development programme. With
regards the Legal Cooperation
Convention, this enhances “the majority of the bilateral legal framework
required to ensure the continuous and
harmonious development of our relations”, specified President Bouteflika,
thus enabling both countries to prepare
the “road for establishing multiform
and sustainable links by strictly respecting the rules and uses of Rules of
Law”.
Furthermore, in the housing sector,
both parties planned to conclude a
master agreement on a draft memorandum which will define the “partnership
formulas” between Algeria and the
☞
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November 2006
PARTNERSHIP
Partnership
☞
Republic of Korea in view of "exchanging experiences and visits, as well as
documents, meetings of experts, in
addition to the organisation of scientific study days”.
In terms of the new information and
communication technologies (NICT),
Algeria and Korea, which signed in
September 2004 a memorandum for
the realisation of a million ADSL lines,
examined the possibilities for resuming
the joint-venture project.
Within this framework, the president of
the
Korean
group
Daewoo
International indicated to the APS that
both countries “were currently discussing investing” in the domain of the
NICT in Algeria.
The presence, in Algeria, of a strong
delegation of Korean economic operators accompanying the Korean Head of
State was also taken advantage of by
the Algerian executives to explain the
potentials offered by the national economy to foreign and, more specifically,
Korean investors.
"Today, Algeria's economy offers
Korean companies many opportunities
to participate in a mutually beneficial
way in the development of Algeria and
in the reinforcement of our bilateral
relations”, explained the Head of State,
adding that the presence in Algeria of
his Korean counterpart “will encourage the Korean companies to get interested in the Algerian market and double the initiatives and dynamics to
overcome the difficulties, particularly
those caused by the geographic distance between the two countries and the
human barriers”.
In this context, the Head of the
Government, Mr Ahmed Ouyahia,
explained in detail to the Korean economic operators “the structuring
advantages” of the national economy,
assuring that Algeria, “today, offers a
particularly favourable economic situation for the investor”.
It should also be pointed out the
Algerian State has, for the period
2005-2009, mobilised a budget of
“over 100 billion dollars” for the deve-
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180
November 2006
Energy cooperation
Signature of a partnership
agreement
A partnership agreement on energy
cooperation between Algeria and
the Republic of Korea was signed in
Algiers by Mr Mohamed Meziane,
Chairman
of
the
company
Sonatrach, and Mr Huan Do-Yool,
Managing Director of the Korean
company Korean Oil Corporation.
The signing ceremony took place in
the presence of Mr Chakib Khelil,
Minister of Energy and Mines, and
Mr Chung Sye-Kyun, Korean
Minister of Industry, Energy and
Trade.
The first part of this agreement
concerns the storage of crude oil in
Korea, and the second part relates
to the exporting of LPG gas, whereas the third relates to renewable
energy.
“This is an agreement which will
consolidate the partnership between the two countries, which has
already been enhanced by a very
lopment in the socio-cultural sectors
and infrastructures", which, he said
"also supports growth".
As an example, he indicated that this
public expenditure represents the construction of over 1 million houses, over
10,000km of roads and motorways,
almost 2,000km of railway tracks,
dozens of dams, hundreds of schools
and colleges, medical infrastructures
and others.
Talking during a ceremony organised
by the University of Algiers, where he
received the award making him doctor
honoris causa, the Korean Head of
fruitful cooperation”, confirmed Mr
Chakib Khelil in a statement to the
press at the end of the signing ceremony.
He added that Algeria has entered
into a phase where is it called upon
“to develop a strategic partnership,
not only with the Republic of Korea,
but also with all countries in the
world”.
For his part, Mr Meziane indicated
that this agreement should enable
Sonatrach “to increase the supply
capacities of the Algerian market for
the needs of its Korean partner”.
Recalling the agreement which was
already signed, in 2005, between
the two countries in the domain
of energy, the Chairman of
Sonatrach explained that the objective sought after through this agreement is “to develop the upstream
and downstream partnership agreements and to enhance the cooperation possibilities”.
State shared his desire to see the
friendship and cooperation between his
country and Algeria strengthen further.
He indicated that, in spite of a new
relationship, the progress accomplished by the two parties in view of reinforcing the cooperation lends itself to
optimism with regards the longevity of
this relationship, adding that his country “is putting its experience into the
different domains in favour of Algeria”
and hopes “to reinforce the bilateral
strategic partnership”.
Partnership
A “considerable” partnership
potential
Algeria-Korea
A seminar on investing in Algeria was
recently held in the Korean capital, Seoul,
where the “desire” of both countries to
“resolutely commit to a diversified and
mutually beneficial partnership” was
confirmed, indicated a press release from
the Ministry of Foreign Affairs.
On this occasion, the Minister of
Financial Reform, Mr Karim Djoudi, on a
working visit to the Korean capital, presented a report where he particularly
emphasised Algeria and its “natural, geographic and human assets”.
Mr Djoudi also emphasised the "importance" of the “expanding” Algerian
domestic market and its aim “to become
an export platform towards Europe,
Africa and the Arab world”, and illustrated “the solidity of the macroeconomic
balances maintained by Algeria for several
years and the sustainability of its external
position”, added the press release. After
also mentioning the impact which the
complementary growth support plan will
have on the acceleration of the rate of
world growth, the Minister explained the
scope of the reforms already made and
the progress made in the reforms underway and described the elements of the
incentive framework put in place to
encourage the investments, indicated the
Minister.
Mr Djoudi furthermore emphasised
Algeria's and Korea's “mutual desire” to
boost the bilateral relations in accordance
with the strategic partnership statement
signed by Presidents Abdelaziz Bouteflika
and Roo Moo-Hyun. For his part, the
director of the inter-sectoral working
group, put in place by Korea in the aftermath of the State visit of the Korean
President to Algiers, made a detailed presentation of the “extremely positive”
results of the discussions between
Presidents Bouteflika and Moo-Hyun. In
this respect, he emphasised that, at the
end of the visit, the Korean delegation
"reached the conviction that Algeria is the
most promising partner in Africa and
encouraged the Korean companies to get
interested from close up and that the
government has put in place appropriate
monitoring mechanisms to support their
efforts".
The executive director of Space Group
presented the experience of her company
in Algeria and emphasised the “considerable” Algerian-Korean business and
partnership potential, adds the press
release. Organised under the aegis of
South Korea's Ministry of Trade, Industry
and Energy, the South-Korean association for foreign trade (Kita) and Algeria's
Ambassador to Korea, the seminar
brought together over a hundred important Korean companies, concludes the
same source.
Press conference with the Korean
Deputy Minister of Trade, Industry
and Energy in Algiers
During a press conference held at the Hilton hotel, the Korean
Deputy Minister of Trade, Industry and Energy, Mr Joug-Gap
Kim, spoke about the cooperation prospects between Algeria and
Korea at the end of the visit he had just made to Algeria (21-25
May 2006) leading a large delegation of businessmen.
Mr Joug-Gap Kim indicated that he had been welcomed by
President Bouteflika as well as by Mr Hamid Temmar, Minister
of Participations and the Promotion of Investments.
This visit, deemed highly beneficial, will have enabled them to
explore future cooperation domains. With regards trade, the
amount is 500 million dollars in 2005 and this amount should
double in 2006, i.e. 1 billion dollars.
This is a somewhat high figure given the potentials of the two
countries, felt Mr Joug-Gap Kim.
We therefore need to explore the possibilities which the complementarity of both economies enables. The Koreans expressed
their desire to benefit from the advantages that the European
Union benefits from.
Currently, Korean exports to Algeria are comprised of cars and
household electricals.
Algeria, for its part, exports petrochemical and gas products to
Korea. Korea wishes to contribute to the development of
Algerian exports to Europe, said the Korean Deputy Minister of
Trade. Korean investments in Algeria will continue to increase.
The figure concerning the Korean investments currently is 150
million dollars approximately - an amount that is not high.
"We are capable of producing an amount of 8 to 10 billion dollars. "This visit to Algeria will enable us, perhaps, to invest more
actively since our investment capacities have increased. Algeria's
demand, according to a study which identifies the cooperation
sectors, concerns the sectors of the habitat, port infrastructures,
roads and consumer goods. We would like to participate in the
upstream and downstream of the oil and gas sectors as well as in
mining resources".
Korea totally depends on overseas for its hydrocarbons and
mining products. Korea's desire is to implement a cooperation,
according to a global approach. Algeria will be the first country
to test out this relationship founded on complementarity.
Questioned on the interest in privatisations, Mr Joug-Gap Kim
indicated that the Koreans are expressing very strong interest in
the privatisations. “We have become aware of the privatisation
methods”. Discussions are very advanced between Korean companies and their Algerian counterparts, but it is still too soon to
talk about them. Algeria's policy in terms of privatisation and
promoting investments is very judicious. "I think that this is a
very wise choice”, indicated Mr Jong-Gap Kim.
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November 2006
OVERSEAS
Overseas
Cooperation with China cited
as an example
The President of the Republic inaugurates the 39th Algiers
International Trade Fair
The Head of State has
inaugurated the 39th
Algiers International Trade
Fair. The President of the
Republic, who was accompanied by Mr Abdelaziz
Belkhadem, Head of the
Government, as well as
members of the Executive,
who had gone around the
main foreign pavilions, lingered on different stands.
Hence, he was interested in the products and services proposed by the different companies operating in Algeria
and those who are prospecting it.
The President of the Republic, in each
discussion with the foreign representatives, invited them to take advantage of
the highly incentive and promising
investment framework, whether to
satisfy the needs of the domestic market or “exporting prospects on the
European market” by virtue of free
trade agreements.
For the Head of State, this is “the only
path for a beneficial and sustainable
partnership”, he said to the businessmen.
Furthermore, Mr Abdelaziz Bouteflika
said he was satisfied with the Chinese
cooperation with Algeria which, he
said, is “sincere” and “is done in a
transparent framework”. In this
respect, he called upon the domestic
operators to “overcome the influence
of intermediaries” which domicile
themselves in a “bank in Luxembourg”
to back triangular transactions.
The Head of State thus congratulated
certain dealers which offer “equipment
50% cheaper than the European partners”. Furthermore, this is the case of
this importer of trucks and tractors
from China which is doing this very
same thing from the loan granted to
young promoters from the Ansej (a
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182
November 2006
total of “22,000 applications processed” with attractive financing). This
investor will go as far as to build the
Chinese truck in April 2007, the Ouled
Naïl 1 in the region of Aïn Oussera to
then consider the assembly of tractors
also.
This type of partnership can only arouse the satisfaction of the Head of State
who, a few metres further on, and at
the German stand, stated the depth of
his thinking: "Western partners do not
transfer the technology to us” which
the domestic economy needs…to the
European partners (with, however, a
free trade agreement, including the
Maghreb countries) which, at all times,
do not fail to express their concerns on
the “threat of Chinese dynamics” to
react therefore by "a real partnership”.
In any event, the Head of State who
reserved his first stop for the French
pavilion had a long discussion with the
French Ambassador when he left after
doing a tour of the different standards.
This discussion was shorter than the
one accorded to our country's traditional partners and neighbouring Arabic-
African countries; countries which
nevertheless participate in the development of the country through a series of
trades of different products and services or through an investment in the
cement plants, the milling industries,
the chemical and energy products like
this group from the Gulf region supported by the Saudi Investment Fund
and which intends to target the African
market through our country, according
to a Saudi gentleman.
In any event, the foreigners who are
there through their local representatives or via their representative office
hope to set upon a market whose
advantages they are aware of. Some
know the advantages. Others have
already set up, after an initial service
provision. Here we are thinking about
the Japanese company JGC which
knows our country as it equipped the
Arzew refinery in 1969 and created a
company of Algerian law recently; this
is also the case of a Swiss company in
financial engineering or the company
which took control of the public company Sonatmag.
This is also the case, once again, of
Canadian companies - a country which
we know a lot more than just through
Lavallin and Petro Canada who are everfaithful to Algeria - whereas others did
not ask so much. We cite this year the
arrival of representatives from the aeronautics company Bombardier and
Business Jet. The Canadians, who want
a share of the transportation and rail
market in particular, “regret that they
were not able to win the equipment
contracts for the Algiers's metro and the
tram project designed for the capital”
they admitted.
However, according to an operator from
this country, his firm is able to provide
the equipment requested “cheaper and
in a record timeframe of 17 months" as
it is the world leader with a presence in
20 countries, including China. As a
challenge, they do not exclude a "joint
venture with the Algerians for assembling locomotives”.
In any case, "we will not miss any future project", promised the Canadian
representative to the Head of State.
In the meantime, appetite will certainly
come from eating, said the global food
Group McCain, which will offer
Algerians frozen chips.
After a study of the market, which lasted
four years, according to its director, the
Canadian, which has a presence in
Morocco and Tunisia, cannot ignore the
Algerian consumer. He proposed awaiting a partnership with our “special
seed” agricultures for his product.
And this is only the start…
A factory of this type will cost between
50 and 100 million dollars. We have to
ensure “the operation's profitability” he
explained.
Good to know
Overseas
● The total number of exhibitors at this event was 1,635.
● The number of foreign countries represented is 45, 34 of which officially.
● Out of the 1,113 foreign companies participating, 1,063 exhibited inside official pavi-
lions and 51 individually.
● At the national level, 522 Algerian companies participated this time, 84 public, and
431 private.
● The exhibition surface area was around 75,500m2. Almost 29,000m2 were reserved
for foreign exhibitors whereas the national exhibition takes the lion's share with some
46,550m2.
● The French pavilion is the largest of this 39th Algiers International Trade Fair with
almost 330 exhibitors occupying almost 10% of the total exhibition surface area.
● The United States which has been Algeria's no. 1 economic partner since 2004 is
greatly represented in pavilion C.
● Canada doubled its participation this year with 39 exhibiting companies, compared
to 25 in 2005.
● Numerous events will be held daily at the Safex level.
● Professional mornings will be organised on 3, 4, 5, and 6 June from 11.00am to
2.00pm.
● The general public times are from 2.00pm to 7.00pm.
● An exhibitor's guide is made available to participants to make it easier for them to
find things during the fair.
● A nearby support system designed to respond to exhibitors' concerns is set up this
year.
● A major control and security system has been used by the Safec.
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November 2006
OVERSEAS
Overseas
New record for foreign direct
investments (FDI) in Africa
According to a report by the UNCTAD
Algeria is ranked in 8th place and occupies 1st place in terms of foreign investments
in the domain of hydrocarbons.
Africa received record high foreign
direct investment (FDI) inflows in
2005 of USD31 billion, but this was
mostly concentrated in a few countries
and industries, says UNCTAD's World
Investment Report 2006 - FDI from
Developing and Transition Economies.
A sharp rise in corporate profitability
and high commodity prices over the
past two years helped produce a growth
rate of 78% in FDI inflows to the
region. Prospects are good for another
increase in 2006 given high project
commitments, a large number of investors eager to gain access to resources,
and a generally favourable policy stance for FDI in the region.
FDI continued to be a major source of
investment for Africa as its share in
gross fixed capital formation increased
to 19% in 2005. However, the region's
share of global FDI remained low at
about 3% in 2005. In the manufacturing sector, a number of trans-national
corporations (TNCs) in the textile
industry pulled out of Africa because
quota advantages for African countries
declined after the end of the Multi-fibre
Arrangement (MFA) in 2005
South Africa was the largest FDI recipient in the region in 2005, experiencing a sharp jump in inflows to US$6.4
billion from only US$0.8 billion in
2004. South Africa accounted for
about 21% of the region's total. This
was mainly due to the acquisition of
Amalgamated Bank of South Africa by
Barclays Bank (United Kingdom) for
US$5.5 billion.
Africa's top ten recipient countries
– South Africa, Egypt, Nigeria, Morocco,
Sudan,
Equatorial
Guinea,
the
Democratic Republic of Congo, Algeria,
Tunisia and Chad, in that order –
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184
November 2006
accounted for close to 86% of the regional FDI total. Eight of these countries,
FDI inflows exceeded US$1 billion
(more than US$3 billion for Egypt,
Nigeria and South Africa in particular).
Inflows to South Africa were also the
most diversified: investment was channelled into energy, machinery and
mining, as well as into banking, which
received the largest share.
At the other extreme, FDI inflows
remained below US$100 million in 34
African countries. are mostly least
developed countries (LDCs), including
oil-producing Angola, which witnessed
a drastic decline in FDI receipts in
2005. Many of the low FDI recipients
in the region have limited natural
resources; lack the capacity to engage
in significant manufacturing, and, as a
result, are among the least integrated
into the global production system.
Some countries have also experienced
political instability or civil war in
the recent past, which destroyed much
of their already limited production
capacity.
FDI inflows to the region were concentrated in a few industries, such as oil,
gas, and mining. Six oil producing
countries (Algeria, Chad, Egypt,
Equatorial Guinea, Nigeria and Sudan,
in descending order of the value of
FDI) accounted for about 48% of
inflows to the region. Although countries such as Kenya, Mauritius,
Lesotho, Swaziland and Uganda had
begun to receive FDI for their textile
and apparel industries due to the
African Growth and Opportunity Act
(AGOA), the trend changed following
the end of the MFA in 2005. In
Mauritius there was a 30% contraction
in the volume of garments manufactured in 2005 following the departure of
Hong Kong (China)-owned compa-
nies. In Lesotho, six textile TNCs closed, with a loss of 6,650 jobs. The setback demonstrates that the impact of
trade-related initiatives can be shortlived in Africa, where domestic capabilities are inadequate for quickly absorbing and continuing production processes. It also underscores the fact that
Africa's industrial progress requires
competitive production capacity, in
addition to better market access and
more welcoming regulatory frameworks. The persistence of the critical
capacity problem may continue to
hamper the region's ability to attract
and retain FDI in the manufacturing
sector.
FDI outflows from Africa in 2005
remained small and originated from a
few countries. Six home countries:
Egypt, Liberia, Libyan Arab Jamahiriya,
Morocco, Nigeria and South Africa -accounted for over 80% of total outflows. The largest African TNCs are
also from a small number of countries.
In 2004, nine of the top 10 non-financial African TNCs ranked by foreign
assets were South African, although
Orascom Construction (Egypt) also
made it onto the list.
The IMF half-opens up
to emerging countries
Overseas
Chinese, South Korean, Turkish and Mexican voting rights
The International
Monetary Fund (IMF)
reform entered in force on
Tuesday 19 September:
China, Mexico, South
Korea and Turkey will see
their voting rights increase
to 3.65%, 1.43%, 1.33%
and 0.55% respectively
once they have paid the
increased capital required,
i.e. for the four countries
the equivalent of 5.66
billion dollars in special
drawing rights (+1.8%
of equity).
The qualified majority required of 85%
of the votes expressed by 184 member
countries was achieved on Monday 18
September in Singapore for this capital
increase which marks the first act of
the reform. This is designed to confer
better representativeness in the IMF,
for a long time accused of defending
the interests of the United States, Japan
and Europe which have preponderant
weighting in it. In the future, the institution should better reflect the importance of the emerging economies. The
first four countries to benefit from this
are those whose voting rights corresponded the least to their actual
importance.
The second stage should not exceed
two years. It will consist of developing
a new capital sharing formula (the
“quotas” in the Fund's jargon) which
might take account of the gross domestic product (GDP), the economic
openness, the financial flows and the
foreign exchange reserves of each
nation. According to this formula,
other countries whose economy today
is undervalued will improve their representativeness.
But this new system might marginalise
the poorest countries. Upon the initiative of France and Great Britain, it was
therefore decided to “at least” double
the “basic” votes allocated to all countries, free and independent of the
wealth of these countries.
Furthermore the IMF has been entrusted with a "multilateral supervision"
role so as to prevent crises. Rodrigo
Rato, its managing director, will, in
spring 2007, present the conclusions of
an initial report on the major imbalances in terms of foreign exchange,
savings and consumption, with the
assistance of the United States,
Europe, Japan, China and Saudi
Arabia. Gordon Brown, the British
Chancellor of the Exchequer and president of the supreme body of the IMF,
the International Monetary and
Financial Committee, felt that this
reform was “the most important for
sixty years” and that it announced the
“IMF of the future”.
Perceptible breakdown
The NGOs replied to him by denouncing a “farce” (Christian Aid) and
insisted on the perpetuation of a system
in which 43 African countries only hold
4.4% of the voting rights, when the G7
members control 45% (Oxfam).
"However, this is not a small reform”,
commented, for his part, Pierre
Duquesne, administrator for France at
the IMF. If the UN had achieved a
tenth of what was proposed in
Singapore, this would have made the
front pages of the world's press.”
For the interested parties, the breakdown is perceptible. Within the G24,
where we find a number of emerging
countries, a majority was pronounced
for the reform in spite of their fear that
the second phase lasts over two years,
as it will require a modification of the
articles of association of the IMF and
its ratification by 184 national
Parliaments.
"We ask that the new formula for calculating the quotas takes account of a
GDP calculated at purchasing power
and of the vulnerability of our countries
to commodity price fluctuations and
other exogenous shocks", stated
Margarito Teves, Philippine Minister of
Finance, on behalf of the G24.
However, Felisa Miceli, his Argentine
colleague, counts on a categorical refusal in the company of Brazil, India and
Egypt, “because this reform does not
guarantee that our countries will not
see their representation eroded at the
end of the process”.
"This reform is a great success” exclaimed John Benjamin, Minister of
Finance of Sierra Leone. Indeed,
Africans are seduced by a doubling of
the "basic" votes by the promise of
being able to expand the number of
their advisors and hence see two new
replacement African administrators
appointed.
Inevitably, the new breakdown will disadvantage the “old” economies, starting with the Americans (about 17% of
the votes) and the Europe of 25 (32%).
This is why, well before the Autumn
assembly of the IMF in Singapore, we
heard Belgium, the Netherlands and
Germany confirm that their quotas
should not be reduced… As a general
opinion, it is not a monetary crisis
which Mr Rato is expecting, in the next
two years, but rather the establishment
of the ideal equation which would enable each country to increase somewhat
their ranking in the IMF.
Numbers
The countries with the most voting rights:
United States, 17.08%; Japan, 6.13%;
Germany, 5.99 %; France, 4.95 %; Great
Britain, 4.95%; Italy, 3.25%; Canada,
2.94%; Russia, 2.74%; Netherlands,
2.38%; Belgium, 2.13%; India, 1.92% ;
Brazil, 1.14%; South Africa, 0.87 %. The
countries whose voting rights will increase: China from 2.94% to 3.65%; Mexico,
from 1.20% to 1.43%; South Korea, from
0.76% to 1.33% and Turkey, from 0.45%
to 0.55%.
Energie & Mines
185
November 2006
OVERSEAS
Overseas
Major losses
for the producing countries
■
150 billion cubic metre are emitted and flared each year.
The gas flaring associated with the
extraction of crude oil makes the producing countries lose major income
and is increasingly concerning these
countries, according to the World
Bank, which sees here not only a
serious threat for the environment, but
also a waste of a very valuable energy
resource. According to recent statistics
from the World Bank, some 150 billion
cubic metres of natural gas are being
flared and vented annually.
This is the equivalent a quarter of the
annual gas consumption of the United
States, 30% of the European Union's
and 75% of Russia's gas exports. If we
take the gas that is flared in Africa,
which only represents 40 billion cubic
metres annually, and we used it to create the electricity produced by modern
and efficient plants, we could double
Sub-Saharan Africa's electric production. With the exclusion of South
Africa, feels Mr Ben Svenson, the WB's
director of the GGFR (Global Gas
Flaring Reduction partnership) initiated, in August 2002, by the international financial institution.
The GGFR, whose objective is to help
the efforts of member oil companies
and governments in view of reducing
the volumes of gas flared each year in
the world, is preparing, for this purpose, an international forum, planned for
December 2006, in Paris (France), in
association with the WB and the
International Association of Oil and
Gas Producers (OGP) to examine the
results obtained up to now and the
stages to be overcome to improve and
upgrade this resource.
“Reducing gas flaring requires a global
and concerted effort by governments
and industry, as well as financial institutions and local communities”, says a
manager of the GGFR.
Whilst, for specialists, stopping gas flaring would also help to reduce by 13%
the carbon dioxide emissions to which
the developed countries are committed
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186
Flared gases
November 2006
by virtue of the Kyoto Protocol for the
period 2008-2012, we still need to help
the producing countries to overcome
the problems they are encountering in
their efforts in exploiting, developing
and making these resources profitable.
The main obstacles to reducing gas flaring are mostly linked to difficulties of
accessing the international gas markets, the tightness of domestic markets,
the lack of financing to put in place the
necessary infrastructures, the little
commitment from consumer countries
to grant investments and the lack of an
appropriate legal framework. The
World Bank's report recalls that over
95% of the evacuation of flaring of the
associated gases, at the world scale,
concerns less than fifteen countries,
namely Algeria, Nigeria, Iran, Iraq,
Angola, Qatar, Venezuela, Equatorial
Guinea, Indonesia, Brazil, Mexico,
Kazakhstan and Cameroon.
It should however be recalled that in
numerous producing countries, projects have been developed in the last
few years to retreat the associated
gases, such as in Algeria where several
re-injection and exploitation programmes have been put in place.
Within the framework of Nepad,
Algeria is a stakeholder in the construction of the Nigeria-Algeria gas pipeline,
to export the gas produced from the
Nigerian oil fields to the European
markets - gas which has been flared up
to now. Some 17 demonstration projects are currently operating in the
GGFR partner countries, it is noted.
The GGFR partnership, managed and
facilitated by the World Bank, includes
Algeria
(Sonatrach),
Angola,
Cameroon, Canada, (Cida), Chad,
Ecuador,
Equatorial
Guinea,
Indonesia, Kazakhstan, Russia (Khanty
Mansijsysk), Nigeria, Norway, Qatar,
United
Kingdom
(Foreign
Commonwealth Office), the United
States, BP, Chevron, Exxon Mobil, ENI
(Italy), Marathon, Norsk Hydro, Shell,
Statoil, OPEC and the World Bank,
whereas the European Union will become a member in 2007.
The return of industrial
policies
Chronicle
By Alice Sindzingre *
The development
theories are not so exotic after all: as in France
today, one of the questions requires industrial
policiespolitiques industrielles.
A
fter their independence, a
number of developing States
have started their accelerated
industrialisation. This was
slowed down by the crises of the 1980s
and by the structural adjustment programmes recommended by the international financial institutions.
The latter felt that the industrial policies
and the public companies were inefficient, favoured benefits and harmed the
budgets. The commercial opening up
simultaneously carried out exposed the
industrial sectors to global competition.
In the poorest countries, these sectors
were often found reduced to exploiting
a small number of natural resources. As
noted in the latest annual report by the
United Nations Industrial Development
Organisation (UNIDO), the added
value per capita of the manufacturing
sector, in dollars in 1995, in the low
income countries was, in 2002, 33 dollars, compared to 5,839 in the industrialised countries.
Unequal result
The international institutions argued
that the growth might come from other
things than the industrialisation for
which the poorest countries do not have
a "comparative advantage". Foreign
investments, in particular, are, in theory, beneficial due to their domino effect
on the rest of the economy and their
capacity to change its structure. A lot of
countries therefore opened up to
foreign direct investments (FDI) in the
1990s.
The result was, however, unequal.
Unsurprisingly, the investors generally
went to low income countries where
their investments would be the most
profitable: in natural resources.
According to the latest report from the
UNIDO on FDI, in 2004, Angola,
Equatorial Guinea and the Sudan,
alone, received almost half the FDI
flows to the low income countries,
obviously due to the increase in the prices of oil rather than these countries'
good governance and development
strategies.
In any case, the percentage of the poorest countries in the world's FDI flows
stagnated in 2004 at 2%.
In most of them, over the decade 19902000, the aid flows exceeded the FDI
flows…
The FDI have not therefore changed the
economic structure of these countries.
On the contrary, their concentration in
the natural resources' sector has increased dependency, with the price volatility causing repeated budgetary deficits,
aggravated by the tax gifts that are often
given to the multinationals in a context
of global competition to attract them.
Industrialisation is returning to the
debates: haven't the strong growth
countries (such as the Asian countries)
taken off with industrial policies, even if
these were targeted on exporting? FDI
and industrialisation separately have
had mitigated results: why not link them
by guiding the FDI towards industrialisation? This is the suggestion made by
Mr Ricardo Hausmann, director of the
Centre for International Development
at Harvard University, in a recent analysis of South Africa.
This is even truer given that technological innovation is one of the driving forces of world growth. The poorest countries are handicapped by their low level
of savings, their small number of graduates in scientific and technical disciplines and the tiny percentage of their
resources devoted to research and development (R&D).
This has even decreased in SubSaharan Africa where, according to the
UNIDO, R&D has gone from 2.2% of
all R&D of developing countries in
1996, to 1.9% in 2002. As recently
shown by Mr Philippe Aghion, economist at Harvard, with Diego Comin and
Peter Howitt, technological progress in
the poorest countries cannot only come
from foreign investors, as these better
know the innovations developed at the
world level, but it must be deployed
with the local banks (which assumes
local saving), as these are better placed
to adapt the technology to the receiving
country. These considerations should
inspire the future programmes of international institutions.
A. S.
(*) Researcher at the Centre national de
la recherche scientifique (CNRS),
UMR EconomiX, university Paris-X
In Le Monde
Energie & Mines
187
November 2006
ANALYSIS
Analysis
Gas investments are tripling
to 27 billion dollars/year
Middle East and North Africa
The investments required for gas projects in
the Arab countries are
estimated at
102.7 billion dollars in
the period 2006-2010,
i.e. an annual average
of 20.5 billion dollars.
T
he figures represent almost
triple the 36.5 billion dollars,
or an annual average of
7.3 billion/year, estimated for
the period 2002-2006.
According to the details provided by the
Arab Petroleum Investments corporation (Apicorp), the majority of the new
investments (64.1 billion dollars, or
62.4% of the total) will be allocated to
projects in the production downstream:
LNG, GTL and petrochemical industries based on natural gas.
The same expansion is observed in Iran
where the investment needs of the gas
sector should increase to 5.7 billion dollars a year by 2016, according to the
new estimates which have just been put
forward by Mr Resa Kasaizadeh,
Minister of Oil and executive director of
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188
November 2006
the National Iranian Gas Company
(NIGC). This brings the total amount
of gas investments in the Middle East
and North Africa to almost 27 billion
dollars a year over the coming years.
This phenomenal increase in investments is the result of exceptionally
quick development of the gas exports
and production in this part of the world,
as well as the strong increase in proven
reserves. The latter have surged by
33.7% in five years, going from 60,380
billion cubic metres (37.9% of the world's total) at the start of 2000 to
80,720Gm3 (45.1% of the world's
total) at the start of 2005.
Over the same period, the production
sold from these countries has gone from
301.4Gm3 (12.1% of the world's total)
in 2000 to 433.5Gm3 (15.4% of the
world's total) in 2005, i.e. a 44%
increase in the space of five years.
The priority granted by the countries of
the Middle East and North Africa to the
gas sector is motivated both by domestic needs which are increasing at a rate
of 3.5 to 4% a year, which would take it
from 311Gm3 in 2005 to 630Gm3 by
2020, and by a large export potential,
particularly in Qatar, Algeria, Iran,
Egypt and Libya.
In total, and given their reserves, the
low production cost and their geographic location, this region's countries
might, according to the estimates of the
International Energy Agency (IEA),
almost quadruple their exports in the
next 25 years, bringing them from
132Gm3 in 2005 to some 440406Gm3 by 2030.
In any event, these countries have got
off to a great start to contest Russia's
dominant role in the world's gas supply,
especially given that, on the one hand,
the proven Russian reserves have practically not moved for ten years or so,
whereas those of the Arab countries and
Iran are quickly increasing and, on the
other hand, Russia must grant enormous investments to ensure the slack is
taken up in a good number of ageing
deposits that have been mined for decades. This is particularly the case of the
Ourengoy and Yambourg deposits
which currently supply Europe.
Whatever the fact, the rivalry between
Russia and the exporting countries of
the Middle East and North Africa is a
blessing for the western countries that
are increasingly preoccupied by the
Gazprom monopoly over the Russian
gas exports and concerned about ensuring the geographic diversification
of their imports which will rapidly
increase.
N. S.
In PGA
Overseas
Chakib Khelil : “We want to talk
directly with the distributors”
LNG producers and consumers meet in Washington
A meeting between
LNG producing countries and American
consumers was organised in Washington
with the participation
of several ministers,
including Mr Chakib
Khelil, with the purpose of putting the two
main players from the
gas industry in
contact with each
other, listing the difficulties and examining
the possibilities of a
fruitful dialogue capable of helping to overcome the obstacles
and tensions that
exist on a segmented
market subject to the
rules decreed by the
consumer countries.
Organised by the Abraham Group, an
international strategic consulting firm
in the energy sector, directed by the
former American secretary (George W.
Bush administration), Mr Abraham
Spencer, this seminar, entitled
“Producer-consumer summit on
LNG”, brought together, other than
the Algerian Minister of Energy and
Mines, the current president of OPEC
and Nigeria's Minister of Oil
Resources, Mr Edmund Dokouro, the
Qatari Deputy Prime Minister and
Minister of Energy and Industry, Mr
Abdellah Ben Hammad Al Attiyah, the
under-secretary for Gas Matters at the
Egyptian Ministry of Oil, Mr Hany
Soliman, with the participation of the
main managers of American associa-
tions and companies operating in the
gas industry chain.
The American gas market is in full
expansion, but it is still faced with tensions which have a negative impact on
its organisation, its efficiency and its
stability. Out of a total gas purchasing
volume, which is around 300 billion
cubic metres a year, we import over
25% of our needs and the volumes will
increase by 2030, stated Mr Abraham
Spencer, adding that his country needs
more visibility in the near future and
also needs to bring the legal framework
in line with what is happening in other
parts of the world. In his opening
speech, he defended the idea of a fruitful dialogue between producers and
consumers, without intermediaries,
because, he stated, this is the best way
to control the current contingents of
the fragmented gas market and bring in
line the expectations of producers and
consumers.
We want to establish a dialogue directly with the consumers, i.e. the gas distributors and no longer, as has been
done up to now, with the administrations which, often, do not consider the
points of view and concerns of consumers, explained Mr Khelil.
Without a market and long term
contracts which guarantee significant
revenues, the gas producing countries
cannot alone finance the projects
without satisfying the additional expected demands. The security of supplies
and the guarantee of satisfying the
demands cannot be the sole business
and sole responsibility of producers,
explained Mr Khelil.
We have to move towards the creation
of a world gas market that is more open
to producers and consumers that share
the risks and the profits, further defended Mr Khelil, who, citing the efforts
made by Algeria, through the series of
reforms put in place and the large
investments granted, indicated that it is
also the responsibility of the consumer
countries to get involved in the deve-
lopment of the gas chain.
Mentioning the different transparencies in the hydrocarbons, energy and
mines sectors and the different open
sectors to reinforce, particularly, the
national gas industry, he emphasised
that the message given in Washington
was to say that Algeria is a reliable
country which has always honoured its
commitments.
To a question on the importance of the
Algerian-American cooperation, he
replied that out of a volume of annual
gas imports of over 200 billion cubic
metres, Algeria only holds 5%.
The American market is in full expansion. We want to increase our gas sales,
but also sales of other products. We are
looking to establish long-lasting relations and get involved more in the
transportation, distribution, transformation or selling activities, which are
more cash-generating, said the
Minister.
Questioned on the possibility of an
opening up of a representative office of
the sector in the United States, as there
is in Europe and Asia, and as was the
case in Houston (Texas) in the first
years of Sonatrach's activities, he felt
that currently such a representative
office was not considered as it is not
financially justified.
The United States is still a major outlet
for the gas industry, but the producing
countries present in Washington, as
well as certain consumer representatives, remarked that what is most urgent
is to move towards a more open and
more competitive world market.
Energie & Mines
189
November 2006
OVERSEAS
Overseas
Algeria elected to the
Executive Committee
International Energy Forum
Algeria was recently elected to the
Executive Committee of the International
Energy Forum (IEF), whose headquarters are in Riyadh (Saudi Arabia), we
learn from a source from the Ministry of
Energy and Mines in Algiers. Algeria's
election has enabled it, for the first time,
to take part in the deliberations of the
Executive Committee in its 11th session
held last September, specified the same
source. This session was particularly
dedicated to questions related to the
internal operating and the forum's work
programme for the year 2007. The forum
is a body which brings together the
Ministers of the producing countries' and
energy consumers from industrialised
countries and developing countries for a
“global dialogue” on energy. In this form,
the Ministers deal with questions related
to energy security and links between
energy, the environment and economic
development. Created in December 2003,
the Secretariat of the IEF is an international entity to promote and ensure a continuity of this unique ministerial dialogue
on energy in which over 60 countries participate. The Secretariat also plays the
role of coordinator in the energy data
bank (Joint Oil Data Initiative, JODI) in
which several world organisations participate such as the Apec (Asia-Pacific), the
IEA, the Olade (Latin America), OPEC,
Eurostat and the Union Nations' statistics
department. The 10th Forum which
brought together Ministers from 59
countries, including the Minister of
Energy and Mines, Mr Chakib Khelil, met
in Doha (Qatar) from 22 to 24 April. The
next meeting will be held in the Italian
capital, Rome, in 2008.
World growth is not flagging
Despite the upsurge in oil prices and interest rates
The world's economy continues to grow at a sustained rate of
approximately 4%, demonstrating a surprising resistance to the
increase in oil prices and interest rates.
Growth benefits everyone, but the geographic distribution of
this creation of wealth is changing. Initially we see the increasing percentage taken in the world's Gross Domestic Product
by countries such as China, India and the USSR which have
growth rates of between 6% and 11%.
In second place, the hierarchies tend to move inside the group
of the largest industrialised countries itself. American GDP has
increased by 2.5% annually in the 2nd quarter of this year compared to 5.6% in the first quarter, as the upsurge in the price
of oil made its effects felt on consumption.
The United States is turning over slower than Europe, which is
recovering, whereas Japan is picking up speed. On the Old
Continent, the economy is getting back into shape, unemployment is falling and citizens are in better moods. Japan, finally,
seems to have once and for all broken away from the long period of stagnation and deflation in which the bursting of the
stock market and property bubble precipitated from the start of
the 1990s.
If, however, the economic hegemony of the United States
seems really contested, the threat would come less from a
Europe which remains handicapped by its structural rigidity
than from the new couple made up of Japan and China, with
the first relying on a modernised industrial and financial system, and the other on an inexhaustible pool of cheap labour
and, particularly, on the formidable energy of its people.
Energie & Mines
190
November 2006
Long-terme Supply Contracts
markets
Producer/Consumer Dialogue Conference Washinbgton, June 2006-10-16
The Backbone of a Secure Market
By Dr Chakib Khelil
Minister of Energy and Mines of Algeria
Source : Shell
Source : BP "transforming our fossil energy future 2005"
Source : International groupof LNG importers (GIIGNL) : "The LNG industry in 2005"
Source : IEO 2005
Source : CEDIGAZ 2006
Source : Andy Flower, PFC, CVX
☞
Energie & Mines
191
November 2006
MARKETS
markets
☞
Source : CEDIGAZ 2006
Source : EIA 2006
Source : EIA
Energie & Mines
192
November 2006
markets
☞
Energie & Mines
193
November 2006
MARKETS
markets
☞
Energie & Mines
194
November 2006
ANALYSIS
Analysis
Hedge Funds are at the centre
of a lively controversy
Are they making the markets work or disrupting them ?
What is a hedge fund ?
Literally, these are funds which use risk
hedging techniques, also used to speculate on the financial markets: short selling (of shares borrowed to be bought
back at a cheaper price), arbitrating
between two assets, negotiating derivatives enabling an asset to be bought at a
price determined in advance: futures,
options, etc. The use of these techniques is called alternative management
(compared to the traditional investment
in shares and bonds).
There are several types of hedge funds:
some are specialised in the simultaneous short buying and selling of shares
(long-short equity strategy), others in
investment related to bets on the global
macroeconomic evolution, others in the
arbitrage of convertible bonds into shares, or looking for special situations
such as the restructurings… The “alternative funds of funds” invest in several
hedge funds to spread the risks.
For the majority, they are only indirectly regulated through the supervision of
banks (of which they are creditors when
they take on debt).
In February, in the United States, the
Securities and Exchange Commission
(SEC), the markets' watchdog, asked
hedge funds with over 25 million dollars and with at least fifteen investors to
register with it, but a legal decision cancelled this obligation in June.
In Brussels, the European Commission
asked professionals to look into the
development of hedge funds; a report
was published in July. Their regulation
is the subject of concern for several
Member States, particularly Germany
and France, but a directive does not
seem to be the best option. In London,
hedge funds must be registered with the
markets' watchdog, the FSA (Financial
Service Authority). In France, about
thirty billion euros are invested in hedge
funds of French law (OPCVM with
relaxed investment rules, with or
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November 2006
without leverage, contractual OPCVMs
and alternative funds of funds), subject
to the specific rules of the French
Financial Markets Authority (AMF).
It is difficult to evaluate: a lot of them
are closed funds where the investors'
money is frozen for a contractual period
of at least one year. In two and a half
years (July 2003 to December 2005),
hedge funds earned over 25%, but the
performance of the open hedge funds
alone - in which the subscribers can
regularly withdraw their money, for
example every month - is almost half,
according to the calculations of the
European Central Bank taken from specialised Crédit Suisse Tremont indicators.
The International Organisation of
Securities Commissions (IOSC), which
governs the market regulatory authorities, intends to define common rules for
evaluating hedge funds' assets: "We will
strictly associate the hedge funds'
industry to this work in order to define
together the principles which the professionals must apply to themselves.
Standards should be adopted by the
summer of 2007, but controlling their
application will depend on the regulation specific to each country and the
existence of an obligation for the hedge
fund's management company to register”, indicated Mr Hubert Reynier,
director of international business and
regulation to the AMF.
chronicle
The surprising return
of commodities
The upsurge in commodity prices is in sympathy with the oil price
By Jean-Pierre Robin
It is unusual to calculate
the weight of the economic wealth produced in
a country in tonnes. We
prefer to express it in
billions of dollars or
euros !
H
owever, at the end of the
1990s, Mr Alan Greenspan,
the
chairman
of
the
American Federal Reserve
(FED), loved to remark that
the gross domestic product (GDP) tended
to weigh lighter, stricto sensu. The revolution of the "new information economy"
was then en route; we would only rely on
grey matter and the “virtual”. In the
spring of 1999, the oil price remained
stuck to the bar of 10 dollars a barrel.
Well-established experts thought that it
might drop to 5 dollars.
All these forecasts turned out to be incorrect. If it is still as hazardous as ever to
evaluate the American or global GDP on a
scale, we are undoubtedly seeing the
return of heavyweights in the economies.
Since the start of the 21st century, world
steel production has increased from 825
to 1,129.4 million tonnes; a 37% increase,
much higher than the planet's growth in
GDP, which we agree is exceptional. Since
2003, China has, each year, increased its
own steel production by a volume which
exceeds all the steel produced by Germany
and France combined!
The new world growth, boosted by the
needs of emerging countries, with China
and India in the lead, is deemed a glutton
of energy and raw materials. The delays to
be made up for are, it is true, immense, as
stated by Mr Patrick Artus, the chief eco-
nomist at Ixis bank, whose calculations
make people shiver : “If the Chinese had
as many cars per capita as the Europeans
do, they would have 33 times more (than
they have today), and their oil consumption would be more than twice the current
global production. We see the impossibility of obtaining the necessary raw material
resources." This is why the price of crude
oil multiplied by seven between 1999 and
2006. Copper, which was 1,500 dollars a
tonne five years ago, traded at 8,800 dollars on 11 May in London.
The upsurge in commodity prices is in
sympathy with the oil price, explains the
International Monetary Fund (IMF) in its
study on the world economic outlooks
2006: "Energy prices have contributed to
higher prices for many non-fuel commodities - for example, energy-intensive aluminium and steel, some agricultural commodities (through higher fertiliser prices),
sugar and edible oils (which are inputs in
the composition of ethanol, demand for
which has increased)." Sugar prices have
doubled in a year and are now dependent
on oil prices, since Brazil, the world's largest sugar cane producer, allocates half its
income to manufacturing ethanol.
Another phenomenon comes to the forefront to favour this contagion of prices,
states the IMF: "Investors are looking to
diversify on the product markets, in parallel to their traditional investments in shares and bonds, to protect against the risks
of inflation or volatility of the dollar.” The
fundamental function of commodity futures markets traditionally aims to ensure
their producers and their users have visibility on the future prices.
With the entry in force of investors and
hedge funds, 31% of the positions taken
on Nymex (the New York Mercantile
Exchange) are today due to speculators,
three times more than five years ago.
Hence the extreme volatility in prices
which led the tonne of copper to lose over
1,000 dollars in a day in mid-May. Hence
this alternating phase of heat waves and
cold waves as brutal as seen in the last
three months. Oil, precious metals, copper, nickel or maritime freight are affected. The prices of maritime transportation
practically tripled in 2003-2004, driven by
China's international trade needs. They
have seriously calmed down, partly for
very real reasons: it is estimated that the
world's fleet's capacities will increase from
7% to 8% in 2006.
Maritime freight is quoted on the London
market, which offers an entire range of
different indices, in accordance with the
roads and types of transport. This, of
course, is indicated in the Cyclope guide,
the real commodities bible, published
under the direction of Philippe Chalmin,
whose twentieth annual edition (2006)
has just been published. The list of commodities presented goes well beyond raw
materials proper. It includes all the products or services, including financial ones,
whose price may be quoted on a futures
market, because they are fungible. This
goes from gold to semi-conductors to pollution rights (CO2 emissions). J.-P R
Energie & Mines
197
November 2006
MARKETS
Markets
These Canadian diamonds
are to die for
The country is now the world's 3rd largest producer
The difficulties inherent in the rough climate of the Great
Canadian North are
not for nothing. It's
the rush towards the
diamond mines.
Rich in diamonds, as well as gold, nickel
and uranium, the sub-soil of these icy territories excites the greedy and stirs up the
fantasies as in the epic gold rush era.
Born hardly 8 years ago, the Canadian
diamond industry is today blooming.
Up to this year, Canada only had two
mines, but these produced high quality
rough diamonds. Now, in 2005,
Canadian diamond production exceeded
12.3 million carats worth 1.7 billion
Canadian dollars (i.e. 1.2 billion euros)
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November 2006
and, all of a sudden, the maple leaf country rose to third place globally of diamond
producers with 15% of the market.
In 1998, the Ekati mine, owned by the
Anglo-Australian BHP Billiton, opened
hostilities: located in full tundra, some
400km from Yellowknife, the capital of
the North-West territories, the mine knew
how to arouse envy. Today, the Ekati site
produces 3 million carats a day.
In the same region, a second mine came
to light in 2003. This mine, which enclosed 100 million carats, already ensures
65% of Canadian production compared
to 21% for Ekati. And that's not all: a
third mine started operating in July in the
neighbouring territory of Nunavut, the
domain of the Inuit. The company Tahera
Diamond invested 128 million dollars in
the project and the mine, now picking up
speed, has already produced 127,000
carats with, as an additional bonus, a 59-
carat diamond evaluated at over 400,000
American dollars.
Over a billion Canadian dollars have been
invested in this sector over the last 10
years: over 120 companies are in the running which invest some 250 million
Canadian dollars a year, i.e. 30% of the
world's prospecting budget. And the discoveries are multiplying both in the west
and more in the east in the north of
Ontario and Quebec.
Three new projects are currently in maturation phase and Canada is now committed to sizeable downstream and polishing
activities where it has its own stamp.
Algeria, the world's capital
for the environment
Sustainable development
Don't desert drylands !
Algeria, designated
the world's capital
for the environment,
hosted the official
festivities of the
World Environment
Day under the slogan
“Don't desert
drylands”.
Appointed by the United Nations
Development Programme (UNDP), as a
sign of recognition for the efforts it has
put into the environmental domain, as
host of this world event, Algeria seized
the opportunity to launch an appeal to the
international community to unite more in
the fight against desertification”, it was
indicated in Algiers. Algeria's appointment is also an extension of resolution
58-211 of the UN by which the General
Assembly had proclaimed 2006 as the
international year of deserts and desertification.
The desertification problem has become,
in the last few years, one of the major
concerns of the United Nations which has
devoted a financial package of 42 billion
dollars to face up to the challenges of
desertification in the world. Hence, an
international conference on desertification will be held in Algiers and will be a
new opportunity to sound the alarm on
the deterioration of the soil in arid and
semi-arid regions which cover over 40%
of the planet's land mass.
In this respect, Mr Kofi Annan, Secretary
General of the UN, indicated in a message on this occasion that “more than 2
billion people live on the ecological, social
and economic margins”. "Desertification
is hard to reverse, but it can be prevented”, he said, recalling the goals which
“the world's governments have pledged to
achieve by 2015” to ensure environmental sustainability. In Algeria, colossal
efforts have been put into the environmental domain, particularly in the protection of the ecosystems in the steppe
regions and improving the South so as to
restore the ecological, economic and
social equilibrium of these regions. The
steppe regions suffer from major socioeconomic delays which increase their
natural ecologic fragility, indicated the
Ministry of Land and the Environment.
The steppe is threatened by the overload
of ovine herds with 10 million cows deemed “very much greater” than the region's forage capacities, thus leading to the
deterioration of farming land, a destruction of the vegetal coverage and the alarming development of the desertification
process, it was noted. As for the Southern
region, which is spread over a surface
area of 2.07 million square kilometres, “it
requires greater efforts” to ensure it has
sustainable development.
This region, according to the sector's
managers, “must benefit from a global
and multi-sectoral development programme whose objective is to protect the
ecological balances, using all its potentials and resources at the right time to
improve the living conditions of its
populations”.
It should be recalled that Algeria, through
the United Nations Development
Programme (UNDP), has benefited from
a financial package of some 16.5 million
dollars for the period 2002-2006 designed to support its commitments in terms
of reducing poverty and improving the
environment. In Algeria, the UNDP has
launched 5 projects targeting the local
and community development of the
remote regions in an integrated environmental approach, it was pointed out.
The first project targets the preservation
and the sustainable use of the biodiversity in the national parks of Tassili and
Ahaggar for the period 2004-2007, whereas the second project targets the
conservation of the biodiversity and the
sustainable management of natural
resources in the drylands in Taghit,
Mergueb and Oglat Eddaïra to put an end
to the deterioration of the soil. It also
aims to assist Algeria in the putting in
place of a national biodiversity strategy
and the biodiversity action plan.
The UNDP, through the 3rd and 4th projects, is counting on the realisation of the
quality of the communication and infor-
mation on climate changes as well as on
the reinforcement of the national capacities for the integrated management of
municipal waste. The aim of the 5th project is to support the integrated local
development and promote sustainable
cultural tourism in the regions of the
South that is able to efficiently fight
against poverty, by improving the living
conditions of the citizens at the local
level. The United Nations Food and
Agriculture Organisation (FAO) has, for
its part, committed to help Algeria to prepare a sustainable management strategy
for forest resources, enabling them to fulfil their social, ecological and economic
functions and improve the training of
trainers from the General Forestry
Department.
The
United
Nations
Industrial
Development Organisation (UNIDO), as
an execution body specialised in helping
the transfer of technologies, has included
in its Algerian programme the improvement of the competitiveness and the promotion of a clean and sustainable ecological environment. The objective of this
support consists of helping the government to upgrade its policy in the conservation of a clean environment, by ensuring the rational use and leading actions
to combat pollution and also waste management actions.
Hence, Algeria, a signatory country of the
Montreal Protocol, has benefited from an
amount of 14 million dollars from the
multilateral fund to finance 27 cooling
foam aerosol projects. The beneficiary
companies have been given equipment to
avoid the use of noxious gases during the
production process.
As support to putting in place and reinforcing the national capacities in the
domain of the environment, this project,
co-financed by the UNDP and Algeria,
tends to reinforce the capacities to combat industrial pollution and improve the
capacities in combating pollution.
Energie & Mines
199
November 2006
SUSTAINABLEdevelopment
DEVELOPMENT
Sustainable
Cry of alarm from the UN
World Environment Day
Deserts are threatened "as never before” whereas they could be a
treasure of resources for the planet through the production of solar
energy or medicinal plants, warned the UN in a report published on
the occasion of the World Environment Day.
"Far from being barren wastelands,
deserts emerge as biologically, economically and culturally dynamic, while being
increasingly subject to the impacts and
pressures of the modern world”, explained, on this occasion, Mr Shafqat
Kakakhel, executive director of the
United
Nations
Environment
Programme.
Deserts also "emerge as places of new
economic and livelihood possibilities,
underlining yet again that the environment is not a luxury, but a key element in
the fight against poverty and the delivery
of internationally-agreed development
goals”, he added.
At least one quarter of the planet's land
surface - some 33.7 million square kilometres - is considered as desert land and
is inhabited by 500 million people, according to the UNEP report.
But without careful management in the
future, the unique landscapes, ancient
cultures, flora and fauna in these areas
are at risk of disappearing, warned,
during a press conference in London,
one of the authors of the report, Mr
Andrew Warren, professor of geography
at University College London.
"What alarms me now is that they are
threatened as never before by climate
change, by the over-exploitation of
groundwater, salinisation and the extinction of wildlife”, he said. The overall temperature increase in desert regions of between 0.5 and 2 degrees Celsius between
1976 and 2000 has been much higher
than the average global rise of 0.45°C.
Temperatures in the deserts might
increase from 5 to 7 degrees by 20712100.
Drying rivers, inefficient water use such
as irrigation and population growth will
add to water shortages. Saudi Arabia,
Syria, Pakistan, the west of China, Chad,
Iraq and Niger will be particularly affected, predicts the report.
Road building, pollution, tourism and
hunting are threatening flora and fauna
and several desert species are disappearing or quickly reducing in numbers.
Other threats comes from political insta-
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200
November 2006
bility, leading to increased use of desert
areas for activities such as military training, prisons and refugee camps.
"These deserts are unique and dynamic
eco-systems and, if sensitively treated,
can provide the answers to many of the
challenges that we face today, whether
it's for energy, for food or for medicine,
said Kaveh Zahedi, Deputy Director,
UNEP's World Conservation Monitoring
Centre, based in Cambridge.
Deserts could become the carbon-free
powerhouses of the 21st century, harnessing the wind and sun.
A desert the size of the Sahara could capture enough solar energy to meet the
entire world's electricity needs, according
to Mr Zahedi.
"Animals and wild plants are new sources
for pharmaceutical research, industrial
products and agriculture”, indicated the
UNEP.
The Nipa, a plant harvested by the
Cocopahs people in the north-west of
Mexico produces large yields of a grain
about the size of wheat. "This vegetal
species could make a major contribution
to food security and thus become the
greatest gift offered by the desert to the
rest of the world”, indicated the UNEP.
Plants discovered in the Neguev desert
can help to fight against cancer and malaria. Others, found in Morocco, Arizona
and Argentina, also have medicinal properties. "The pharmaceutical potential of
desert plants has yet to be tapped”,
according to the report.
Message from the Director
General of the
Organisation for the
Prohibition of Chemical
Weapons to Mr Chakib
Khelil
“Thank you very
much for the support you have given
to the Convention on
the Prohibition of
Chemical Weapons”
"Dear Minister,
I am delighted with our recent bilateral
meeting held during the visit I made to
Algiers from 20 to 22 February 2006 and
greatly thank you for the support you
have given to the Convention on the
Prohibition of Chemical Weapons.
Our bilateral meeting, particular the fruitful discussions we had in Algiers, are
proof of your commitment to work in close
collaboration with the Technical
Secretariat of the Organisation for the
Prohibition of Chemical Weapons
(OPCW) and the key role which your
Ministry plays in the national efforts for
the effective implementation of the
convention. In this perspective, I would
like to emphasise that the Technical
Secretariat is ready to cooperate with the
Ministry of Energy and Mines to achieve
our common objectives.
I hope that you will be able to visit us at
the OPCW headquarters, in The Hague,
in the near future.”
M. Rogelio Pfirter
Chronicle
A major challenge of the century
Controlling the clean development mechanisms
By
Sliman Dakar *
"The earth is blue
as an orange”
(Paul Eluard)
T
he planet is shrinking, space no
longer counts and the clock is
ticking. This is the reality of
globalisation such as is happening under our eyes and which
acutely poses the question of dialogue,
collaboration and cooperation at the entire humanity's scale, of which the interdependence of interests and the community
of fate have become a burning and pressing proof.
Hence, mobilisation at an international
level is deemed imperative to protect, for
example, the planet from global warming a major challenge for sustainable development. It is within this framework of global
international action, therefore, that falls
the successive ratification by Algeria of the
United Nations Framework Convention
on Climate Change in June 1993 and the
Kyoto Protocol, as of its entry in force in
2005.
The time has now come to recall all the
efforts made, in these last few years, by
Algeria at the various institutional, legal
and regulatory levels thanks to the reforms
introduced in the Energy and Mines sector and which grant priority to the preoccupation of sustainable development.
The law on energy savings, constant
improvement of energy efficiency, the
promotion of renewable energies and the
reduction of our energy systems' negative
impacts are all indissolubly related objectives.
In the aftermath of this major law, a national energy savings programme, up to
2010, was drawn up, whose impacts will
have a catalysing effect in favour of the
voluntarist objectives which the sector has
set down within the framework of the
Kyoto Protocol.
But that's not all : over these last few
years, a whole series of laws have been
promulgated which govern the electricity
and gas sector, the domain of renewable
energies and the hydrocarbons sector:
they have all been drawn up whilst being
mindful of ensuring that the reforms
undertaken are fully consistent. All these
laws have, in common, a concern for establishing the environmental dimension,
which thus takes on, in each of them, a
new priority within the framework of our
energy policy.
This is therefore a very obvious desire to
set up a series of international institutions
and their prescriptions and recommendations.
Algeria is, thus, determined to mobilise all
the potentials of the energy sector so as to
contribute efficiently to the international
greenhouse gas reduction programme,
whilst respecting the timetable used by the
Kyoto Protocol.
This includes the urgent putting in place
of the Designated National Authority - the
centre of the system which will be responsible for ruling on the projects eligible for
the financing mechanisms provided by the
Protocol - the clean development mechanism - and for submitting these projects
for validation to the international body
concerned.
The objective is to finally put this institution in place as quickly as possible. This
authority will definitely be an invaluable
support and an irreplaceable tool of our
action within the framework of the implementation of the protocol.
Considerable effort has been put in by the
Energy and Mines sector in favour of promoting sustainable development: the
LPG-fuel, compressed natural gas, unleaded petrol promotion projects, for example, are thus part of the implementation of
a national energy consumption model.
This model favours the priority use of
clean fossil fuels, such as natural gas,
which we have in abundance, and LPG;
but it also grants specific importance to
the development of the national potential
in terms of renewable energies: the promotion of solar energy is thus undergoing
spectacular acceleration with, particularly,
the launch of the important hybrid solargas power plant in Hassi R'mel, among
many others that are eligible for the clean
development mechanism's financing.
How can Algeria's pioneer role in the
international action targeting the total elimination of flared gases - something
which will be done by our country in 2010
- and in the action related to the impounding of carbon gas fail to be noticed given
the experience initiated by Sonatrach in
association with BP and Statoil on the In
Salah acreage, for example ?
We can further mention the drawing up
and implementation of an ambitious HSE
policy including, particularly, large-scale
projects in the domain of industrial safety,
the action targeting better control of town
development and territorial planning with
the Hassi Messaoud city relocation project, finally, the preoccupation of protecting the coastline against the major risks
of marine pollution through the creation
of a specialised multinational company,
whose vocation will be to intervene
against accidental spills of hydrocarbons
on the African coasts.
We now need to draw up a systematic
inventory of the projects eligible for the
CDM financing in the domains and activities in relation to the development of the
energy sector, such as the renewable energies, energy savings, “clean” fuels, the
recovery of flared gases and the recovery
of CO2. We must move fast.
Algeria is therefore clearly showing its
determination to fully adhere to the international recommendations and prescriptions which aim to promote clean development.
It calls upon its partners in favour of
mobilisation around the investment
opportunities which the Energy sector
offers in Algeria. We are greatly counting
on their experience and their contribution
to the identification of common projects
eligible for the clean development mechanism.
We have the right - or better still, we have
the duty - to launch such an appeal since
this means protecting and saving the Blue
Planet…
S. D.
(*) Expert consultant
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201
November 2006
SUSTAINABLEdevelopment
DEVELOPMENT
Sustainable
Resolute action to promote
clean fuels
Algeria very quickly adopted an approach favouring the protection of
the environment and has resolutely committed, in this framework, in
favour of the actions launched at the regional and international level.
By
Salim Korsane
It has therefore ratified all international
agreements related to the protection of
the environment and the fight against pollution. It has therefore joined the nations
which have ratified the Kyoto Protocol
and, in March 2006, put in place its
Designated National Authority (DNA).
At the legislative level, as of 1983, Algeria
decreed a law on protecting the environment which was then taken up again in
2003 with the adoption of a new law on
the environment and sustainable development.
As for the energy sector, the environment
is at the centre of its energy strategy and
the entire legislative system put in place
provides for provisions favouring the protection of the environment, prohibiting
and penalising non-conformant practices
and actions.
Hence, the three new laws decreed between 2001 and 2005 by the Ministry of
Energy and Mines - the mining law, the
electricity and gas distribution law and,
finally, the hydrocarbons law - comprise
large chapters on the environment and
put in place efficient and autonomous
institutional instruments, whose main
mission is to ensure the application of the
law and the regulations.
The Hydrocarbons Regulation Authority
(ARH), created within the framework of
the hydrocarbons law, has the main mission of ensuring respect of the rules in
terms of health, safety and the environment (HSE).
With regards clean fuels, Algeria has,
since the 1980s, committed to improve its
immense LPG resources, a vast LPG-fuel
development programme by putting in
place the regulatory and financial instruments to ensure the full development of
this product and create the appropriate
infrastructures throughout the entire
national territory. The very complex and
expensive programme launched - a whole
network of plants had to be created, wor-
Energie & Mines
202
November 2006
king on the legislative and regulatory
aspect, the technical, industrial and safety aspect and hence leading, without restriction, uses to adhere to this new product - is experiencing sustained growth,
with a rate of 20% a year.
The number of vehicles running on LPGfuel currently exceeds 150,000.
Secondly, it is important to cite unleaded
petrol which is produced in the Skikda
refinery with a capacity of 1 million tonnes a year.
This product is distributed throughout
the national territory, mostly by the national company Naftal, a subsidiary of
Sonatrach, and by other national rival
operators. We should also mention the
vast revamping programme for the
Algerian refineries (Skikda, Arzew,
Algiers and Hassi Messaoud), since
2004; a programme which will eventually
lead to the production of fuels that
respect the most modern standards
(European and American standards) so
as, on the one hand, to be exported to the
developed countries and, on the other
hand, to contribute to improving the quality of the environment in Algeria.
With regards refineries, it would be useful
to point out the new Adrar refinery project. With a capacity of 12,000
barrels/day, this new infrastructure will
produce clean fuels, respecting the strictest standards.
This refinery, built in association with
foreign partners, will supply the south of
the country but may also export its products to Sub-Saharan Africa.
Algeria is also planning the construction
of 2 other refineries - the Skikda 5million tonne condensate refinery and the
Tiaret 15-million tonne refinery - modern
projects which will be commissioned in
the next few years.
Neither has natural gas for vehicles been
left out; an entire regulatory system is
already in place and numerous pilot tests
have been carried out.
The project is currently reaching launch
stage at the local authorities and corporates' level. In a later stage, the general
public will be targeted by large-scale operations.
Furthermore, we should mention the
Tinhert GTL project, of 34,000 barrels/day for which an appeal for tenders
has already been launched. This project
will produce products that respect the
strictest specifications.
Finally, it would be interesting to mention
the initiative of a private Algerian operator which wishes to construct a bio-fuel
production plant, from dates. This national operator, which will work in association with a large public company, is at an
advanced stage in the maturation of its
project which will benefit from the attention of the public authorities.
This project will enable Algeria, shortly,
to make use of bio-fuels in the transportation activities and to access the technology related to this new method, whilst
offering new perspectives to date producers.
S. D.
First bio-gas
production test
Sustainable development
Ghardaïa
The first manure-based bio-gas production test has been carried out in the
Algerian South in a farm located in El
Ateuf (Ghardaïa).
Initiated by the Ghardaïa renewable energies' research unit, this experiment, the
first of its kinds in the South, according
to the project manager, was carried out as
an experiment into producing biologicalbased gas produced from a fermentation
of animal organic materials in an arid
region.
This hydrocarbon, resulting from an
anaerobic decomposition process and a
bovine waste fermentation process, may
be improved and used as a fuel for heating, explained the project manager
during the demonstration given in front
of numerous farmers and cattle breeders
from the M'zab region.
Obtained at the end of a long bovine
organic materials' fermentation process,
stored in an open oxygen-free ditch, this
bio-gas is comprised of over 70% methane, he specified. This manure-based process, which has been wide-spread in
Europe since the last century, was introduced in Algeria in the 1930s, emphasised the source, indicating that the original
feature of this test which lasted over a
year is the adaptation of the fermentation
process's system to the arid and dry weather conditions of the Algerian South.
The experiment aroused specific attention from farmers concerned about reducing their electricity bills.
Service stations and LPG-fuel
courted by the private sector
Distribution of oil products
The construction of service stations and their extension to LPGfuel are taking the lion's share in the amount of authorisations
granted and accomplishments made in the oil products' distribution and storage infrastructures.
According to the figures reported by the Ministry of Energy and
Mines, a strong increase is recorded with regards the projects to
construct service stations, extend the services of these stations to
the distribution of LPG-fuel as well as sustained interest in the
creation of asphalt plants and butane gas distribution and storage centres.
Hence, with regards the construction of service stations, the
number of authorisations issued went from 27 in the first half of
2005, to 40 in the corresponding period in 2006. The increase
in the retail margin granted to the service providers as well as the
gains generated by the related activities of the stations mainly
explain an unfailing trend. More interesting still is the interest
which the consumer - in fact the car owner - has in LPG-fuel.
The strong demand for this product is leading promoters to
invest in the construction of LPG-fuel distribution infrastructures, greatly encouraged by a now reasonable retail margin as well
as by the programme initiated by Naftal on giving service stations financing means and finally a powerful promotion campaign to the general public.
Hence, 23 authorisations related to the distribution of LPG-fuel
were issued in the first half of 2006 compared to 16 in the same
period of the previous year.
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203
November 2006
SUSTAINABLEdevelopment
DEVELOPMENT
Sustainable
Bio-fuel - tomorrow’s
petrol in Brazil ?
Renewable energies
After sugar cane, gold,
cotton and even coffee,
Brazil has got bio-fuel
fever. A law signed in
2004 will make it compulsory, as of 2008, to
add 2% bio-fuel to a litre
of diesel. By then, the
country therefore has to
quadruple its current
production of 200
million litres.
Bio-diesel is a fuel produced with oil
seeds. The main ones used, in the
United States and Europe, are soya
and canola seeds. But Brazilians wish
to make the most of their tropical
plants that are easy to grow by small
farmers. The production of bio-diesel
is now constantly increasing: 600
petrol stations already sell the new mix.
In a poor region of Brazil, the oil company Petrobas has started an innovative
experiment which mobilises 5,000 farming families. "We have the oil wells
the entire world dreams of having in its
garden and, what's more, it is inexhaustible!”, rejoices Livania Frizon,
from the Canudos “agro-village”, a collective farm located in Ceera Mirim,
100km from Natal, the capital of the
State of Rio Grande do Norte.
Alongside the rows of papayas, bananas and cassavas, farmers have planted
several hectares of “pinhao manso”
(Jatropha curcas), a tree that originates
from this semi-arid region, whose fruit
contains 38% of an oil designed for
producing bio-diesel. Even in sandy
soil, this plant produces three tonnes of
seeds per hectare and offers two annual
harvests. "The sun, considered here as
a punishment for agriculture, is now a
blessing”, explains Livania. Petrobas
has provided the cooperative with the
seeds which became, in Canudos,
1,200 feet of “pinhao manso”.
To the 142 small farming families of
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November 2006
Palheiros III, another rural community
near Upanema (250km from Natal),
the oil company provided castor bean
seeds. Assis Gama, the president of
Palheiros III, proudly visited the 300hectare castor bean plantation. "It
requires hardly any upkeep and, in two
years of useful life, one foot provides
six harvests, he explains. This enables
us to improve wild land, alongside our
vegetable and fruit crops.
The castor bean, which grows on raw
land, ensures additional income for the
small farmers. The latter are encouraged by Brasilia to improve their land
which was given back to them at the
time of the reform, thanks to the family agriculture credits. "Our challenge is
to organise the production of the raw
material, as we will soon have a large
bio-diesel plant in Rio Grande de
Norte, and certainly one in each State
of Brazil”, says Ulisses Soares, a geologist at Petrobas.
Intense research
The site where the small farmers' harvests converge is only experimental for
the time being. It only takes up a few
hectares in the immense Guamaré refinery. The entirely innovative industrialisation process has required an investment of 8 million euros by Petrobas.
"Nobody has ever succeeded in produ-
cing bio-diesel from the mamona seed,
or others, but only from oil”, explains
Mauro Silva, the engineer in charge of
the tests. Started in July, they should
last eighteen months. A test on 100
tonnes of different oil seeds will be carried out each month, as the aim, in
Guamaré, is to produce a cheap and
reliable bio-diesel.
"There is intense research, with the castor bean and the pinhao manso adapted
under the Equator, but also with palm
oil, or even bovine sebum, in addition
to the ethanol produced by cane
sugar”, emphasises the agriculturist
Paulo Morelli, responsible for supervising the bio-diesel programmes at the
Ministry of Agriculture, in Brasilia.
With no ambition to become a “Biodiesel Emirate”, Brazil wishes to share
its research with tropical countries
which might also benefit from bio-diesel, such as Angola, Thailand and
India.
China, the new ethanol
exporter country
Sustainable development
Large oil importer
China is making the most of the upsurge
in the prices of crude oil of which, today,
it is a large consumer, to invest in “biofuel”, just like in a country such as Brazil.
With the fever affecting the crude prices,
American deficits have caused a real
explosion of investments in the substitution energies.
Hence for the current year, China should
exceed the 500,000 tonnes of exported
ethanol produced from corn and cassava
seeds, which is equivalent to a production
of 11,000 barrels/day. Traders on the
international markets are counting on a
production of 900,000 tonnes (19,000
barrels/day), whereas last year China did
not export ethanol and was therefore
unknown on this market. Subjected to a
dehydration treatment, in certain countries of the Caribbean, Chinese ethanol is
delivered to the American market where
the product is used as an additive to a
cleaner fuel. Today, China is the 3rd largest producer of ethanol after Brazil and
the United States.
1 CO2 capturing experiment
in a coal-fired power plant
in Denmark
st
Fight against the greenhouse effect
Developed by the wind power plants, the
chimney of the Elsam company's electricity plant, in Esbjerg (Denmark), planted
in the middle of coal hills, continuously
spits out a clear smoke plume. In its organism, a derivation has been made to
direct 0.5% of this smoke towards a small
"gas plant”. Cascades of filters, absorbers
and regenerators coated in stainless steel
have been assembled to trap most of the
carbon dioxide (CO2) produced from the
combustion of coal which powers this
420 megawatt plant.
Running for several weeks and inaugurated on 15 March, this pilot plant is the
first enabling the capturing of CO2 - the
main greenhouse gas - in the smoke from
the coal-fired power plant. The objective?
To ensure that this post-combustion procedure will enable the cost of capturing
CO2 to be divided by two, bringing it between 20 and 30 euros a tonne (Le
Monde, 16 September 2005).
This prototype is part of the European
Castor (for capturing/storing CO2) project, led by the French Petroleum Institute
(IFP) which brings together about thirty
partners, industrialists and research
firms, from eleven countries. Financed
over four years (2004-2008) by 16
million euros, 8.5 million of which are
financed by the European Union, Castor
aims to validate the technologies designed
for the large industrial plants - electric
Geological storage
plants, steel plants, cement plants, etc. whose activity produces 10% of Europe's
CO2 emissions.
This means ensuring that these technologies are competitive with the European
price of CO2 emission permits (currently, 27 euros/tonne). The industrialists
subject to emission quotas must, in fact,
either pay in case these quotas are exceeded, at the price of the time, or have
invested in the capturing and storage procedures in order to reduce their emissions.
In the Ejberg plant, this means finetuning the technologies already developed
by the oil companies. "The restricting factor is the energy needed to regenerate the
solvent which is used to trap the CO2”,
indicates Pierre Le Thiez, IFP's Castor
manager. Several amine-based formulations, that are already patented, will be
tested there.
Castor also plans to study for CO2 geological storage sites: the Casablanca oil
reservoir
(Spain),
the
AtzbachSchwanenstadt natural oil deposit
(Austria), the Snohvit aquifer (Norway)
and the K12B natural gas deposit operated by Gaz de France along the Dutch
coasts. It is imperative to ensure that
these various reservoirs are watertight in
the long term.
Similar projects are multiplying throughout the world. In 2030, fossil fuels will
still represent over 80% of the energy
used. Those which are able to trap CO2
at its source (22% of the emissions come
from industry, 39% from electric production) will have powerful leverage over the
future world market of the “rights to
pollute”.
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205
November 2006
SUSTAINABLEdevelopment
DEVELOPMENT
Sustainable
Kyoto thresholds exceeded
Contrasting balance in Europe for reducing greenhouse gases
Emissions of greenhouse gases increased by 0.3% in 2004 in
the Union, particularly
due to the
Mediterranean countries which are largely
exceeding the thresholds fixed in Kyoto.
Is the European Union becoming a bad
pupil in weather classes? Up until now it
has managed to stabilise its greenhouse
gas emissions, but the last report, published by the European Environment
Agency, on 22 June, shows a deterioration in 2004: the emissions for the Union
of 15 increased by 0.4% between 2003
and 2004, and by 0.3% for the Union of
25, integrating the Eastern European
countries.
Unless it acts a lot more strictly, it is likely that Europe will not respect the Kyoto
protocol. Whereas it committed to
decrease its emissions by 8% in 2010
compared to 1990, the reduction was
only 0.9% between 1990 and 2004.
The main countries responsible for these
emissions are Germany, the United
Kingdom, Italy, France and Spain. But
not all of them are dunces. Hence,
Germany has successfully greatly reduced
its emissions by improving the efficiency
of its energy system and closing down
numerous plants in the former East
Germany. It is therefore close to its
objective (to have reduced its emissions
by 21% in 2010).
The United Kingdom should also achieve
its objectives (-12%) since it has reduced
its emissions by 14% by substituting gas
for coal in the power plants. But this
movement is now finished and London
might see its emissions increase.
Indeed, the price of coal has increased
much less than the price of gas, which
makes this fuel attractive for the electricity producers.
Bet taken up in France
France, for its part, has achieved its
objective, which is 0%. But effort must
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206
November 2006
still be put into it, since transport is continually increasing its emissions and numerous fossil-fuel based electricity production plants will be commissioned in the
coming years.
Those who are having a negative effect on
the European scale are the Mediterranean
countries. Thus, Spain, in spite of a large
amount of wind power plants, in 2004
saw its emissions increase by 48% compared to 1990, whereas only a 15%
increase was authorised. Italy is not doing
much better (+12% compared to -6%
authorised).
In total, Europe must turn itself around if
it wants to respect the Kyoto objective.
This is the condition of its credibility in
the international negotiations for extending the protocol beyond 2012.
How can we convince China, India or
Brazil to commit to it if the Europeans are
not
keeping
their
promises?
Furthermore, in March 2005, the Union
adopted an objective to reduce emissions
for the developed countries from 15% to
30% in 2030 compared to 1990. This will
require a significant amount of effort.
France and the United Kingdom have
even published an objective to reduce
emissions by four by 2050, i.e. a reduction of 3% a year.
Whilst Europe is floundering, the United
States are doing worse. According to the
forecasts published on Tuesday 20 June
by the Energy Information Agency, North
America, which already emitted, in 2003,
16% carbonic gas more than in 1990,
would achieve a figure of 54% in 2030.
With the increase from emerging countries, the entire world would increase
from 21 billion tonnes of carbonic gas to
44 billion tonnes in 2030. If these forecasts come true, the planet will indeed
experience climate change in 2030.
Hervé Kempf
En route to an oil-free
Sweden
Sustainable development
This is the objective of a governmental commission
Run by the Prime
Minister, Mr Göran
Persson, a commission responsible for
developing a programme of measures
aimed to reduce
Sweden's dependency
on oil has just published a report whose
visions seem to be
particularly audacious.
The commission is counting on a reduction of 40 to 50% in the use of oil in road
transport thanks to the use of bio-fuels
and improved technologies.
This is the first challenge set down by the
commission - but it is not the only one.
Hence household heating will no longer
use hydrocarbons and industry itself is
called upon to reduce its consumption of
oil products by 25 to 40%.
In the analysis produced by the Swedish
commission, the oil price's influence on
growth and the creation of jobs and the
role which this commodity ensures in
terms of peace and security in the world
are essential factors, but there is also, and
above all, the threat that the combustion
of fossil fuels has an impact on the living
conditions of future generations, and particularly its effects on climate changes.
economy. The commission's experts have
been greatly influenced by the analyses
which stipulate a reduction in conventional resources, particularly due to the
increase in the consumption of the
European Union's countries and the
United States, but also the appearance on
the international oil and gas market of
emerging countries such as China and
India.
The discovery of new sources of oil will
be increasingly difficult, estimate these
experts, whereas the security of supplies
will be increasingly threatened by political
problems.
The recommended measures which count
on the use of “green gold” and the new
technologies in terms of renewable energies should not affect the conditions of
sustained growth, or those of the international competitiveness of the Swedish
Energie & Mines
207
November 2006
SUSTAINABLEdevelopment
DEVELOPMENT
Sustainable
Preventing earthquake-related
risks in Maghreb
Algeria-NATO civil cooperation
Within the framework of the Algeria-NATO civil cooperation and the
Mediterranean dialogue, an International Workshop on improving the
safety of buildings during an earthquake in the Maghreb region was
held in Algiers and brought together almost 220 participants, thirty of
which international experts particularly from NATO member countries
(12 countries represented) and scientific experts from the Maghreb
countries (Algeria-Morocco-Tunisia) and from the Mediterranean basin.
This workshop is part of the strategy
drawn up by the Algerian public authorities to increase the effectiveness of its
actions, namely :
• The overall reduction of the risks
resulting from natural or technological
catastrophes on the characteristic economic infrastructures of the most
exposed zone, i.e. the Tellian fringe.
• The prevention of major risks with,
on the one hand, the re-examination in
2003 of the regulatory and legislative
framework concerning the construction standards and the para-seismic
rules, institutional improvement, the
emergency and specific provisions to
be decreed for the vulnerable areas
and, on the other hand, in 2004, the
promulgation of the law on preventing
major risks and managing catastrophes
within the framework of sustainable
development.
• The continuous improvement of
knowledge of major risks and accessibility of the data and results of the
actions undertaken and integration of
the international experience, particularly that of the countries of the
Mediterranean basin.
The themes dealt with and developed
during this workshop are the following:
1. Improvement of the safety of schools
in the Maghreb region.
2. Use of analytical and empirical techniques in evaluating seismic damage in
public buildings.
3. Evaluation of the seismic risks in
urban areas and the RISK-EU project
(earthquake risk evaluation scenarios
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208
November 2006
and its application in the cities of the
European Union).
4. Para-seismic design of buildings.
5. Estimate of the damage caused by an
earthquake in Maghreb and information on the building by satellite image.
6. Seismic micro zoning of the city of
Rabat.
7. Catane earthquake study scenario,
in Italy (high risk city in the
Mediterranean) and study into the vulnerability of public buildings.
8. Compulsory insurance programme
against earthquakes in Turkey.
9. Seismic evaluation and revision of
the Turkish seismic code.
10. Reduction of the seismic risk in
France : Need for local action plans
(Nice) and national action plans so
that the local policies and decisionmakers can effectively deal with and
monitor earthquakes.
11. Seismic risks and evaluation of the
vulnerability of urban areas Application to the city of Barcelona.
It is in the perspective of preventing the
major risks and managing catastrophes
that the exchanges of experiences and
technical and legal tools between
the countries and international
bodies consolidate the cooperation
programme.
This workshop worked on identifying
the bases of Algeria-NATO cooperation in the domain of preventing major
risks and on creating a permanent
communication network between the
different participants and making use
of it to explore all the opportunities
offered by virtue of the civil emergency
plan, and to identify, in accordance
with the sectors concerned, the specific
needs of the country in view of progressively putting in place permanent
emergency and response programmes
for the major risks. For an initial cooperation,
the aid requested by Algeria from NATO is
focused in the domain of the consolidation of
public buildings, given that property in the large
cities of our country is mainly old, and that
NATO has capitalised quite a lot of experience
in terms of intervening in the areas which have
suffered natural catastrophes, particularly
through the drawing up of a programme against
natural risks.
At the end of the works of this workshop, the
working groups issued the following main
recommendations :
1. Evaluation of the seismic hazard through
creating a project on the Iberian-Maghreb
region sponsored by NATO with adequate
financing committing all teams interested by
evaluating the seismic hazard at the regional
scale with the objective of :
• Drawing up the seismicity balance with the tectonic, netotectonic and seismotectonic analysis.
• Better knowledge of the attenuation laws
(acceleration, speed, replacement).
• Carrying out seismotectonic analyses (fault
geometry - breakage mechanisms).
2. Para-seismic design of works with the introduction of the concept of interactivity of the
regions and zone-based investigation of the surrounding soil and studying old buildings with
the drawing up of a set of recommendations for
the renovation and reinforcement works on the
basis of a detailed expert study and surveys on
the materials, in view of reducing the seismic
risk.
3. Evaluation of the resistance of the buildings
to seismic activities by making area maps in the
Maghreb region.
4. Para-seismic improvement to be dealt with
together between the countries of the
Mediterranean basin with the support of NATO
for putting in place a technical regulation for
improving buildings in Algeria.
5. Efficient development of prevention to enable
the damage caused by natural catastrophes to be
attenuated, to improve the resistance and safety
of buildings during an earthquake.
In this framework, in Algeria :
• An initial measure consisted of adapting,
thanks to the lessons learned from the
Boumerdès earthquake, the para-seismic regulation in force.
• The second measure consists of making it
mandatory to draw up civil engineering studies
for all buildings with the obtainment of the building permit.
Industrial safety
Chakib Khelil :
“Most accidents and
damage could have
been prevented”
Circular on preventing accidents in
the Energy and Mines sector
The laxity and passivity of executives of the Energy and Mines sector
have been strongly denounced in
the circular which the head of the
sector, Mr Chakib Khelil, has just
sent them further to the accidents
that have recently occurred in the
sector's installations.
The finding is harsh: human fault is
the cause of it and, in spite of the
onerous actions undertaken, neither men nor the installations are
saved.
Mr Khelil required company managers to be always on the look out, as
experience has proven that a repetition of accidents is often difficult
and their surprise effect considerably reduces the chances of them
being overcome.
He insisted on vigilance as a policy,
and moreover on anticipation to
prevent accidents recurring. Now,
it should be noted that, in most
cases, the accidents and irreversible
damage which have resulted could
have been prevented and, consequently, avoided.
We are inclined to interpret this
type of behaviour as being a result
of laxity and passivity in which a
good number of workers and
managers wallow; otherwise, how
can we explain that the extrusion of
inflammable products coming from
old leaks are not eliminated and the
places which have been the source
of this have not been decontaminated over time, with the required
speed?
Everyone has been instructed to
carry out a systematic sweeping of
the places under their responsibility, to draw up a situation report,
enabling all the possible sources to
be identified and located and to
immediately start the appropriate
maintenance works.
Mindful of preserving all assets and
determined to put an end of this
worrying situation, sanctions will
be imposed on all those contravening who fail to execute this directive. Managers, as those initially
responsible, will be held responsible
in case of an event resulting from
the non-observation of this instruction. Any other argument attempting to dissimulate or unduly justify
the occurrence of an accident of
any kind whatsoever will not be
accepted.
Energie & Mines
209
November 2006
INDUSTRIAL SAFETY
Industrial
safety
Guarantees, nuclear safety
and security on the agenda
Seminar in Algiers with the support of Comena and the IAEA
The Ministry of Energy
and Mines, in collaboration with Comena, has
organised the guarantees, nuclear safety and
security. According to
the Ministry of Energy
and Mines, this means
taking advantage of the
foreign experience to
refine the nuclear bill.
Representatives from the Ministries of
National Defence, Agriculture, Justice,
Health, Transport, Foreign Affairs,
Water Resources and Higher Education
and State Institutions (police, DGSN,
customs), as well as the chairmen of
Sonatrach, Sonelgaz, Sarpi, Enac, GTP,
BRC, the ORGM, Naftal, the SEC, the
Appue, Alnaft, Crec, the ANPM and the
ANGCM also participated in this seminar. This meeting, which was also attended by experts from the IAEA
(International Atomic Energy Agency)
and Comena (Atomic energy commission) was the opportunity to discuss the
different stakes and challenges of
nuclear energy and the practices and
legislations related to nuclear safety and
security. In these three days, Algerian
experts learnt about foreign experience
in these domains. "The standard
contract between Comena and the IAEA
will enable the Algerian nuclear bill to be
enhanced - albeit well advanced - by the
most recent data in terms of nuclear
safety and security", emphasised the
Minister of Energy and Mines, Mr
Chakib Khelil, during his opening
speech at the seminar.
Mr Mohamed Derdour, the atomic energy commissioner, for his part, noted that
“this meeting gave the opportunity to
express our needs in terms of dealing
with nuclear activities and exchanging
ideas and experience in this domain”.
Energie & Mines
210
November 2006
Preventing nuclear
terrorism
During his speech, Mr Chakib Khelil
spoke again on the threats of nuclear
proliferation aggravated by terrorism.
"Nuclear terrorism is now recognised
as a potential threat. It is essential to
demonstrate extreme vigilance in the
physical protection of nuclear materials
and facilities", he particularly emphasised, revealing that "Algeria has given
its commitment to participate in the
international efforts designed to combat
terrorism, as demonstrated by the ratification of nuclear materials, which was
the subject of a presidential decree
promulgated in 2003”. Furthermore, the
Minister indicated that “just like the 186
signatory countries of the non-nuclear
proliferation treaty, Algeria respects this
treaty, scrupulously, and is ready to
sign the additional protocol”.
Finally, it should be pointed out that a
seminar of this type was organised last
year in Algiers during which Mr Chakib
Khelil insisted on the importance of
protecting persons and the environment in the use of nuclear energy for
peaceful purposes.
74 projects financed
by the IAEA
Mr Merzak Remki, director of the
Comena Cooperation, presented a
report on the cooperation with the
UN Atomic Energy Agency. Hence,
he announced that 74 bilateral
cooperation projects have been
financed by the IAEA from 1980 to
present day at a cost of 10 million
dollars, some 79% of which has
been used to purchase equipment,
11% designed for experts and 10%
for training.
It should be recalled that these projects concerned different business
domains such as energy and mines
(8 projects), human health (13 projects), water resources (4), agriculture (11), the environment (4) and
technology (28 projects).
For the 2007-2008 support programme, Algeria has submitted 14 projects in the same sectors, revealed
Mr Remki.
A contract to make
the GP2Z plant more
secure and reliable
Sonatrach/IHI-Itochu
Sonatrach and the Japanese
company IHI-Itochu signed, in
Arzew, in the presence of Mr
Mohamed Meziane, Chairman
and CEO of Sonatrach, the
EPC contract to make the
Arzew GP2Z gas plant more
secure and reliable.
As part of the vast programme to secure
all Sonatrach plants against the risks
inherent in the hydrocarbons industry,
this project will enable the consolidation
of the process to modernise and improve
the operating and performances of the
plant.
The project, whose accomplishment is
guaranteed by the Sonatrach/Ihi Itochu
agreement (clauses guaranteeing the
works once entirely renovated and
brought up to international standards)
consists of :
1- Replacing the worn equipment with
others that fulfil international standards
2- Adding other equipment to ensure
flexibility in the operating of the plant
3 - Relocating certain equipment
4- Reinforcing the foundations of the
equipment
5 - Improving the control system and the
safety systems of the facilities.
During the agreement signing ceremony,
the Chairman and CEO of the Sonatrach
Group shared his peace of mind: "I am
sure that we will be able to count on the
skills and experience of Itochu and IHI to
complete a GO2Z plant in the best timeframes, that is totally conformant to
international safety standards with the
guarantee of optimum reliable operating”, he stated. The engineers, technicians, executives and the Management of
the GP2Z plant are all responsible for
their own safety and for the safety of their
unit. Thanks to this renovation and securisation point, they have reliable facilities
to produce more and better in the best
conditions. "It is up to them to scrupulously ensure its preservation and the
Management of Sonatrach are already
ensuring they are helped for their part",
concluded the Chairman and CEO of
Sonatrach.
"The GP2Z renovation is part of our LPG
development strategy”.
During the agreement signing ceremony
between Sonatrach and Ihi Itochu, the
Chairman and CEO of the Sonatrach
Group, Mr Mohamed Meziane, revealed
the importance of improving the Arzew
plant (GP2Z) which, on the one hand, is
part of Sonatrach's LPG development
strategy, a business segment on which the
Group is a world leader, which it “intends
to conserve and enlarge to improve this
product as much as possible” and, on the
other hand, the vast programme to secure all of the Company's infrastructures
and plants. Mr Mohamed Meziane initially emphasised the links between
Sonatrach and its Japanese partners, stating:
“(…) welcome to this site, which is not
foreign to them, the IHI-Itochu delegation, two of our oldest partners, which
have supported us in the construction and
realisation of numerous industrial projects for over thirty years, particularly in
the Downstream. We have our Japanese
friends in engineering, procurement and
construction and we congratulate them
for the quality of the work provided.”
The Chairman and CEO of Sonatrach
shared his satisfaction as to “the good
desire of the Japanese companies to participate with Sonatrach in investment
projects, and not only in the EPC”.
Recalling that Itochu is present in the
development of the Ohanet deposit,
Mr Meziane considered that “there are
still a great many investment opportunities in partnership both in the Upstream
and the Downstream, in Algeria and
abroad, which we can take together in the
form of the most diversified partnerships”.
“For the time being, he concluded, I am
sure that we will be able to count on the
skills and experience of Itochu and IHI to
complete a GO2Z plant in the best timeframes that is totally conformant to international safety standards with the guarantee of optimum reliable operating”.
The GP2Z renovation, an
application of the Sonatrach
Group's new approach
The Arzew GP2Z lifting, a historic gas technology
plant, complies with the new overall and systematised approach of safety and environmental issues
which guides the Sonatrach Group. This is even its
first application in the gas sector. GP2Z was, in
fact, the subject of an audit carried out from 2004
by an international group of experts on production
and safety facilities. The results of this radioscopy
enabled the Group to determine the best ways to
improve and secure the operating conditions.
These particularly include the actions entrusted to
the Japanese consortium Ihi Itochu to upgrade the
plant's safety and control systems and equipment
to international standards.
This, as emphasised by the Chairman and CEO of
Sonatrach, during the signing ceremony, of the
agreements between Sonatrach and its Japanese
partners, means “not remaining at standstill, i.e.
continuing, as was still done up until recently, to
expect an accident to happen, to live the tragedy
and intervene afterwards". Sonatrach's infrastructures must therefore strictly comply with the HSE policy and the provisions of the General Directive on
the safety of personnel and facilities. "This policy,
further indicated the Chairman and CEO of the
Sonatrach Group, must be systematised and become the rule. It implies identifying the minor risks in
the analysis of almost-accidents and effectively
implementing preventative action plans to avoid
incidents or major accidents recurring.
The process was announced
in 2001 by the Minister
of Energy and Mines
Protecting Sonatrach's assets from the risks inherent in its activities. On 28 February 2001, Mr
Chakib Khelil, Minister of Energy and Mines, when
he became the head of Sonatrach, announced the
process of renovating the company's facilities and
upgrading the company's facilities to protect its
groups, its assets and the environment from the
risks inherent in its activities. "I remind you that, for
this, you have contributed significant financing
which will, in the period 2006-2010, reach over half
the 1.2 billion dollar package which we are going to
devote to the Sonatrach HSE plan. The health of
our colleagues does not, indeed, have a price and
the preservation of our working tool is a guarantee
of creation of wealth and the sustainability of our
Group.... Sonatrach, with this in mind, is putting in
considerable effort and making very large investments in the domain of HSE to improve the operating safety of our plants, protect the health of our
workers and protect the environment."
INDUSTRIAL SAFETY
Industrial
safety
“Algeria's programme
is totally transparent”
According to the Algerian governor to the IAEA
Nuclear energy is a renewable, clean, sustainable
and economic source,
according to Mrs Taoues
Ferroukhi, Algeria's ambassador to Austria and governor to the Council of
Governors of the
International Atomic
Energy Agency (IAEA), who
spoke on national radio's
waves, stating that “Algeria
is capable of facing up to
the stakes which exist
today for energy itself”.
These stakes consist, in the world, she
added, of looking for alternative sources of oil and gas insofar as this means
protecting the environment from the
global warming phenomenon and from
pollution. "Algeria fully complies with
this specific context”, confirmed
Algeria's governor to the Council of
Governors of the IAEA.
"Furthermore, most industrialised
countries, which have renounced the
nuclear option, are today in the process
of returning to the question to develop
research programmes", she stated to
emphasise the importance of this energy as an alternative and renewable
source. Today, in the world, there is
even a “very significant renewed interest” in the nuclear option in the scientific sense, according to Mrs Ferroukhi,
who insists on the socio-economic
nature of nuclear power. She emphasised in substance that Algeria, who
signed the treaties related to disarmament, non-proliferation of nuclear
weapons and weapons of mass destruction, is carrying out research to develop
nuclear energy for peaceful and scientific purposes, focussing on the
Algerian scientific programme audited
periodically, she added, by the IAEA
inspectors.
"Algeria is a member of the IAEA where
it is working to develop this source as a
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212
November 2006
socio-economic development factor
whilst respecting the clauses of the
agreement signed by each of its members", emphasised the governor of
Algeria to this agency. The guarantee
agreement, signed by the member
countries, stipulates, according to her,
obligations and responsibilities for each
of the member countries. "For these
countries who are members of this
agency, this means committing to promoting nuclear energy for peaceful and
scientific purposes, guaranteeing the
safety of the plant, according to the
optimal standards and submitting their
programmes for periodic inspection by
the IAEA inspectors”, she indicated,
emphasising the commitments made by
each of the members of this
International Atomic Energy Agency.
Hence, this nuclear technology, which
is causing controversy today, is deemed
necessary for economic development.
Algeria is currently looking into developing its research programme, according to Mrs Ferroukhi, in view of producing water from seawater desalination and electricity.
Through this energy it is also attempting to discover a process to fight
against the phenomenon of desert
locusts. With regards the safety of its
two research reactors, Algeria, she
added, is complying with all the conditions required by the IAEA in this
domain. “Algeria's plants are up to date
with regards safety in relation to its
level of development”, she added,
whilst indicating that our country is
opening wide its doors to auditing its
nuclear research programme.
“Transparency is key”, she said, confirming that all activities are published in
the Official Journal. “The more
transparent we are, the more assurance
we give”, she concluded.
Industrial safety
Sonatrach signs 12 insurance
contracts for the company's assets
Five Algerian companies, one of which is private,
share Sonatrach risk
These policies' premiums have increased by 14% compared to the
2005-2006 financial year, where 3.5 billion dinars were recorded.
■ Five Algerian companies, one of which is private, share Sonatrach
risk, through 12 contracts.
■
The national hydrocarbons company
Sonatrach and 5 Algerian insurance companies have signed 12 insurance
contracts for the company's assets for the
periods 2006-2007 and 2006-2009 and
for a total amount of 4.65 billion dinars.
These contracts, which entered in force
on 1 July, cover the oil and gas facilities
of Sonatrach and its subsidiaries, the
activities as well as the furniture and buildings of the company.
These concern no less than 12 insurance
contracts, worth a total of 4.65 billion
dinars, which the Sonatrach oil group has
signed, at its company's headquarters in
Hydra, with 5 large Algerian companies
for the periods 2006-2007.
The protection of these immense assets
has, indeed, been entrusted to national
insurance companies; it is their responsibility to reassure on the international
scale. This protection entered into force
at the start of the month of July and will
concern the Sonatrach oil and gas plants,
those of all its subsidiaries, as well as its
multiple activities, also including the
upstream and downstream, transportation and even marketing.
For the financial year 2006-2007, this
insurance's premiums have in fact increased by 14% compared to 2005-2006,
which recorded 3.5 billion dinars. This
precision, made by the executive director
of the company Sonatrach, Mr Mohamed
Rezaïguia, also told the latter that
Sonatrach's risk on the national and
international markets is considered as a
“good risk”. Hence, the covering of the
industrial risks of the oil and hydrocarbon's treatment plants as well as the facilities of the deposits operated in association has been entrusted to the CAAR,
which was also awarded the covering of
the risks of the drilling equipment of the
subsidiaries of the ENTP Group and
Enafor, the covering of the risks of the
property and furniture assets, cars, etc.
With a package estimated in total at over
777 million dinars, this company has
taken the lion's share in the number of
contracts awarded, i.e. 5 in total.
It is, however, the reinsurance company
Cash which is, in fact, a joint venture
whose capital is shared between the
CAAR and Sonatrach, which won most of
the most expensive contracts, i.e. over
78.8% of the shares of this enormous
contract. An amount is devoted to covering the industrial risks of the LNG and
LPG plants, the Enip subsidiary's plants
and the Naftec refineries for a total
amount of 2.65 billion dinars.
Cash will also have to cover the risks of
the operating, production and pipeline
transportation facilities and worksite
engines for a value estimated at 620
million dinars.
For its part, the company CAAT, with its
4.3% of the shares given to it, won the
“liability and fuelling” project, as well as
the “foreign travel” insurance contract,
worth a total amount estimated at 181
million dinars. Moving away from its
usual "car" insurance niche, the SAA was
able to obtain a specific contract - i.e.
covering the risks of the towed tanks for
some 45 million dinars, which represents
the equivalent of 1.1% of the total
contract.
The only insurer for the private sector to
have won a place between these large
companies from the public sector, which
are nevertheless leaders in large capital
investments, the CIAR, for its part, will
insure, for an amount estimated at 4.06
million dinars, the covering of the wells
and transportation on bodies of the
parent company and its subsidiaries,
which is important given the contract
amount acquired, i.e. 4.7%.
Furthermore, it should be pointed out
that some of these contracts have also
concerned contractual periods fixed at 3
years instead of one year (2006-2009),
for the simple risks, such as automobile,
transport, property and furniture, missionaries, etc.
Speaking during this signing ceremony,
the Chairman and CEO of Sonatrach did
not fail to point out that this event “brings
to the forefront the issues related to the
various risks to which our industry may
be exposed"; risks on which it is important to highlight, in his opinion, “the
essential necessity which needs to be
accorded to the safety of our personnel
and those of our facilities".
Also, for Mr Mohamed Meziane, the
Algerian oil group has put too much
effort and means into “continuing to
accept that behaviour, neglect, a lack of
vigilance, and non-respect of the strict
rules decreed can endanger the health
and life of our colleagues, as well as this
invaluable industrial, commercial and
cultural asset, this working tool and this
source of wealth for our country"; a reference made to the tragic accidents that
occurred last year and that of previously,
warning those who contravene these
rules and also endanger the reputation of
a company known for being a “good risk”
on the world's insurance and reinsurance
markets.
Energie & Mines
213
November 2006
HUMAN resources
RESOURCES
Human
Mobility and capitalisation
of potentials
M. Mohamed Chawki Rahal, Vice President of the Marketing activity
Mr Mohamed Chawki
Rahal, who was both
head of SPC BVI and
the Sonatrach
International
Holding Company
(SIHC), is appointed
Vice-President of
the Group's
Marketing activity.
He was appointed as the replacement
of Mr Ali Hached, who will continue
to work at Sonatrach in other functions, on 17 June 2006, at the headquarters of Sonatrach's group division
by the Chairman and CEO of the
Group, Mr Mohamed Meziane. The
ceremony took place in the presence,
particularly, of the members of the
Executive Committee and Sonatrach's
central directors.
On this occasion, Mr Meziane gave a
speech in which he outlined the background of the new Vice-President,
after thanking his predecessor.
Mr Ali Hached is a former employee
of Sonatrach. As Prospecting
Director, then Vice-President of the
marketing activity, he will have been
“involved in all (our) Group's progress in the last twenty years and has
contributed to giving Sonatrach the
dimension and positions it has today
on the international market”. It is
under his responsibility that the strategic segment of Sonatrach's activities, i.e. marketing and international
trading, advanced towards its modernisation. "Mr Hached has undeniably
been greatly involved in the modernisation of the Marketing activity since
he was given this role, some twelve
years ago, in constructing new bases
and in assuring the management in his
capacity as general deputy director,
then Vice-President. This is a mission
that he has carried out successfully",
emphasised Mr Mohamed Meziane.
His successor, Mr Rahal, after wor-
Energie & Mines
214
November 2006
king in the gas transformation plants,
had a brilliant career in the engineering functions and in the development
activities,
particularly
in
the
Downstream, before becoming head
of SPC BVI, and then also head of the
Sonatrach International Holding
Company, SIHC. "Our hydrocarbons
maritime transportation and trading
operations have been given new impetus under his management”, revealed
Mr Mohamed Meziane, who emphasised that the “fleet managed by SPC
has been reinforced and modernised
and that the profits made by trading
and maritime transportation for the
Group have been growing steadily
over the last few years”.
Mr Rahal is now in charge of the
“operational Marketing activity which,
just as all Group activities and functions, is entering into a new phase of
adapting, internally, to the institutional framework defined by the hydrocarbons law and, externally, to the
quick evolutions in the different configurations of international markets”.
These appointments, which result
from the principle of mobility and
maximum
capitalisation
of
Sonatrach's human potential, contribute to optimising the objective of the
oil and gas group which is the “optimal promotion of our hydrocarbons,
all products combined, the supply of
the national market, and appropriate
support to the development of our
activities abroad".
Chakib Khelil, in a circular
addressed to all managing
executives of the sector :
“We have to adopt an
anticipation strategy in
terms of developing
skills”
"I feel it timely, even imperative, to make all
managers of the Energy and Mines sector
aware that the works of the parliamentary
day, organised by the parties of the presidential alliance on June 2006 at the seat of the
National Popular Assembly, in which representatives from companies in our sector participated, has led to a certain number of
recommendations aiming mainly at the promotion of education, training and continual
retraining, research and technological development, health and employment.
This initiative, which I personally would describe as constructive, must support us in the
need to adopt an anticipation strategy in
terms of developing the skills of human
resources and preparing employees for future senior positions through training in particular.
This is also a real opportunity for you to
ensure the mechanisms required for the
effective and efficient deployment of the
human resources you have are reinforced.
Furthermore, I reiterate my will to encourage
the development of female employment,
whose productivity and dynamics no longer
requires apology.
I call upon all managers to resolutely encourage the redeployment of women with deemed skills in the areas where our sector is
experiencing brain drains and losses which
are being increasingly felt. This particularly
relates to the areas of activities falling under
exploration, drilling, IT and project management.”
Human resources
“The API is a place for capitalising
on know-how”
states Mr Chakib Khelil
Seminar on oil expertise
“We are delighted to
have trained (and we
continue to do so) our
brothers and sisters
from other African
countries in our hydrocarbons training
structures”, stated the
Minister of Energy and
Mines, Mr Chakib
Khelil, during the inauguration of the works
of the “Oil expertise”
seminar, held at the
Mercure hotel, in the
presence of the
Chairmen of
Sonatrach and
Sonelgaz.
The Algerian oil institutes are open, he
added, to all Africans, in general, and
to people from members of the Appa
Producers
Petroleum
(African
Association), in particular. He further
emphasised that the Algerian Petroleum
Institute (API) is a “place for capitalising on and transferring the know-how
and experience required for the development and sustainability of the sector's companies".
The API/SPA ensures, in fact, operational training courses at an international level which fulfil the needs of companies, particularly in the domains of
upstream, transportation and downstream, hydrocarbons, oil and gas
savings, industrial safety and environmental engineering. Mr Khelil, in this
respect, emphasised that, in the last few
years, Algeria has increased the capacities of its institutes to face up to the
“expected growth in demand for access
Bab Ezzouar University
in these key establishments”. The meeting is part of the execution of APPA's
6th action programme and respects its
objectives and articles of association
which aim, he reminded the audience,
to reinforce the cooperation and
mutual support between the 14 member countries of the APPA. This meeting must enable, according to the
organisations, a progress report to be
made on everything which has been
undertaken in view of developing oil
expertise among the members of the
APPA which are “concerned about
improving their immense hydrocarbons' resources”.
The participants will also debate on a
"common approach" proposal aimed to
overcome the large insufficiencies
experienced in some member countries
in this domain. Hence, in the programme, themes mainly refer to the “decision-making support factor and leverage for creating added value”. The
experts will thus analyse the impact on
the processes and the optimisation of
the creation of added value. Hence, an
exchange of the experience gained by
member countries in the domain of
management, marketing, research and
capitalisation, and human resources
through up-to-date training courses
took place. This meeting must be officially recognised by recommendations
that aim to develop this expertise,
particularly in the African oil producing
countries, Mauritania and Chad, in this
case.
Energie & Mines
215
November 2006
HUMAN resources
RESOURCES
Human
First Master of Sciences’
graduates
Algerian Petroleum Institute
In the 40 years' since it
was founded, the API
has trained 4,000 engineers, 14,500 senior
technicians and technicians in about twenty
specialities of the
hydrocarbons industry.
There are over 180 graduate engineers
from different levels and specialisations in
the mines sector, no less than 28 of which
are majors who are part of the Algerian
Petroleum Institute's (API) 2006 graduation; engineers who received their
diplomas and awards at the headquarters
of this institute, in Boumerdès, in the
presence of the Minister of Energy and
Mines, Mr Chakib Khelil, the Chairman
of Sonatrach, Mr Mohamed Meziane,
and numerous senior executives from the
sector, and also from local authorities.
These graduates include, inter alia, specialised engineers from the ENTP and
Enafor, those from the Sonatrach-devoted specialised engineers' year, the PGS
of Naftal, masters from the ENSP, those
from the 1st year of a Masters of Science
in Asset Management, in partnership with
the Robert Gorden University of
Aberdeen (Scotland) and finally those
from the 1st year of the Master of Science
in Petroleum economics and management
in partnership with the French Petroleum
Institute.
This institute, which has, to date, trained
over 4,000 engineers and 14,500 senior
technicians. has been able to benefit from
high level technical cooperation, and a
South-South cooperation also which
train engineers from some 24 countries
throughout the world; engineers which
today occupy important positions.
For this purpose, the Minister of Energy
and Mines, who presided over this diploma awarding ceremony, insisted on the
role and importance of this institution in
his sector, given its significant contribution to training and retraining. Indeed, in
his opinion, a completely new system has
emerged, based on the definition of a
Energie & Mines
216
November 2006
human resources policy which relies on
different principles and which is that of
setting up the job exchange in all companies of the sector. "This procedure, in
addition to guaranteeing more equality
and transparency in human resources
management, is a favoured means of
detecting potentials and establishing professional mobility”, he said, explaining
that this mobility has become vital within
companies from the continental oil
groups, starting with the principle that by
establishing the diversification of professional careers, “we can have a sure way of
developing skills and increasing the
employability of the personnel at the
national and international level”.
Setting out the main focuses of the new
strategy imposed on his department,
Mr Chakib Khelil pointed out the fact that
the generalisation of the new recruits'
integration programmes, particularly the
executives, enable them to become operational more quickly, "it also enables them
to immerse themselves in the culture of
the company to which they belong”.
And, it is in this perspective that the
Minister announced the decision to
implement a medium terms process to
prepare employees for taking on, in the
future, key and strategic positions, particularly with regards the positions of specialists and experts “so as not to run the
risk of a shortage of skills”.
The same applies for the competent personnel loyalty option which will concern
the putting in place of performance-related pay mechanisms as well as related to
the level of contribution to achieving the
performance objectives of the Sonatrach
Group’s companies.
Training all personnel categories remains
a priority and, with regards the managers
in place, high potential executives, technicians and other execution officers, the
training must be a major part of their professional careers.
The last aspect of this human resources
policy, announced by Chakib Khelil,
which is not a first in the sector, resides in
the promotion of female employment;
employment which the Minister intends
to promote by all means, which includes
putting in place an observatory for promoting female employment, for which he
has inaugurated a new agreement in
Boumerdès.
In fact, in his opinion, job desegregation
is a source of financial efficiency, “with
equal competence and without discrimination, the same career development
opportunities are offered to our companies' female personnel. It is therefore an
obvious desire on our part to place
human resources at the centre of the
restructuring project of the energy
and mines sector, which is a strategic
resource”.
The Minister also inspected the operating
of the drilling simulation platform, a copy
of which the IAP Corporate University
acquired in 2005.
This 3D drilling station, installed in the
IAP premises, the only one of its kind in
Africa, as it costs an exorbitant amount,
enables student engineers to study all
possibilities and technical parameters
inherent in a real drilling rig, whether on
land or off-shore. The software accompanying it has already acquired a great
reputation, since several countries have
expressed their desire to send their engineers to get to know how to use it.
It is in this perspective that the Chairman
of Sonatrach did not forget to emphasise
the fact that the courses ensured by this
Corporate University have been carried
out in partnership with high level international training institutions, which clearly
improves this institute's capitalisation
pace.
Finally, the director, Mr Salah Kebri, did
not fail to emphasise that in spite of the
new missions that have devolved upon it,
“the IAP will not replace the academic
universities, it will complement them!”
Human resources
With regards the Algerian Petroleum Institute
Sonatrach, Statoil, Naftal and Naftec
are the main partners of this new
entity
Whereas it was part of Sonatrach from 1999, the Algerian Petroleum Institute has been given a new structure
with the signature, in January 2006, of a shareholders agreement for its reconversion into the “Algerian
Petroleum Institute”.
The purpose of the creation of this new training institution is to look after the needs of the Energy and Mine sector in terms of training, improvement, retraining and applied research for all disciplines. Hence, as of this year,
the API will become a joint stock company with capital of 1.5 billion dinars whose main shareholders are the
Algerian oil company Sonatrach (82%) and the Norwegian company Statoil (10%). The remaining 8% is equally
shared between Naftal and Naftec with 4% each. To date, there are 500 postgraduate engineers in this school,
whereas almost 3,000 days' training have been given to almost 6,000 people, totalling a volume of activity of
73,000 men-day, for the three schools, namely Arzew, Boumerdès and Skikda, through 37 different specialities.
This is why the Minister of Energy and Mines felt, on the day of its creation, that the API must become the place
to capitalise on the transfer of the know-how and the experiences required for the development and sustainability
of the companies of the Energy and Mines sector.
HUMAN resources
RESOURCES
Human
Mrs Leïla Berkane, chairwoman of the Women's Employment
Observatory (OEF) of the Sonelgaz Group
“We need to promote the principle
of professional equality”
In this interview
which Mrs Leïla
Berkane, chairwoman
of the Women's
Employment
Observatory (OEF) of
the Sonatrach Group,
kindly granted us, it is
deemed that the creation of the OEF, quite
recent if we compare
it to the Sonelgaz one,
is, in itself, a good
initiative likely to settle, in the future, a
great number of problems with which
female workers are
confronted, sometimes in silence, within
the subsidiaries and
units of the Sonelgaz
Group. Let's listen to
what she has to say.
Energie & Mines
218
November 2006
Can you give a short presentation of the Sonelgaz Group's
Women's employment observatory?
Mme Berkane : Mrs Berkane: The
Women's Employment Observatory
(OEF) was created on 1 February 2005
in application of the directive of the
supervisory ministry on promoting
female employment in the Energy and
Mines sector.
The OEF plays a supervisory role and
is a decision-making support instrument in favour of establishing the principle of equal opportunities in terms of
recruitment and the treatment at work
of men and women. For this purpose, it
is responsible for carrying out diagnoses and analyses on the situation of
female employment, to recommend
and monitor the implementation of the
actions to be carried out in order to
promote it at all levels of the Group's
activities.
To fully ensure its mission, this body
directly reports to the Chairman and
CEO of the Group; it is managed by a
chairman, appointed by the latter, and
comprised of 40 people representing all
the subsidiaries and departments of the
parent company, with the exception of
the works companies which have just
been reintegrated in the Sonelgaz
Group.
For its operating, the OEF has put in
place an executive office, comprised of
19 people, appointed from among its
members, and whose mission is to prepare and implement the observatory's
working programme.
You have been appointed the
head of the OEF. Do you think
that your career has prepared
you for this role?
It is true that the problem of female
employment essentially falls within the
domain of human resources management and policies and, therefore, kno-
wledge of HRM along with know-how
with regards the project approach and
leading teams are therefore assets for
this position. Personally, it is my experience and my years' service in the
company, and particularly my time
spent in the Human Resources
Department, in addition to the experience and highly diversified skills of
other members of the OEF, which have
enabled us to succeed in the mission
given to us.
As a woman, how do you
manage to reconcile the work
load at the head of the OEF
and your family obligations ?
Reconciling professional life and family
life is a real problem which affects all
working women throughout the world,
and more so for us here in Algeria.
Indeed, the lack or insufficiency of
child-care services for children of a
young age or school children very often
forces women to temporarily stop working to make up for the lack of availability of other options. This situation
undoubtedly contributes to slowing
down their professional career.
Personally, I am at a point in my life
where I am free of the constraint of
looking after young children (education, health, monitoring, etc.), which
enables me to free up a bit more time to
invest in my work with, sometimes, the
undeniable support, help and assistance which my nearest and dearest have
always given me.
To come back to the works carried out by the OEF, could you
tell us what it has done since it
was set up a year ago ?
To accomplish one of its main missions
which is to propose actions to be put in
place to encourage job desegregation
and professional equality, the OEF has,
in the absence of data on the situation
of female employment in the Group,
had to draw up, initially, quite an indepth situation report on the issue so
as to be able to therefore implement
solid, precise actions that are particularly adapted to the reality of the field
to act more effectively on the ascertained inequalities and therefore to progressively establish the principle of
equal opportunities. For this reason,
the works carried out by the OEF have
been carried out in two essential stages:
The first stage concerned the drawing
up of a situation report which relies on
two parts :
• The study of the comparative situation of men and women on the basis of
statistical data, with the aim of checking and measuring the extent of the
inequalities which exist between both
sexes in relation to access to the different jobs and particularly to the technical positions and positions of responsibility, to recruitment, to training, to
career development, to remuneration,
representation in the decision-making
and corporate bodies, etc.
• The study of the professional experience of women through a survey
which provides information on the problems encountered by the latter with
regards working relations and conditions, on the difficulties and obstacles
preventing them from progressing in
their career and on the way in which
they reconcile their professional life
and their family life.
This survey was also an opportunity to
collect suggestions from women on
how to improve their socio-professional situation and their career development.
This survey, the first of its kind in the
Group, was completely carried out by
the members of the OEF (from designing the questionnaire to processing
the results) and has concerned almost a
third (28%) of the female personnel,
representing all socio-professional
categories, job positions, subsidiaries
and regional structures of the Group.
It was carried out through organising
focus groups (discussion groups comprised of 8 to 12 people) and on the
basis of a questionnaire which was
given to the participants in these meetings and a brainstorming session on
the recurring difficulties encountered
by women in their professional life and
their suggestions to remedy this.
The second stage of the works consisted of identifying and analysing, from
this situation report, all the situations
which present disparities, of using the
answers from the women interviewed
and proposing solid actions which help
to progressively eliminate the ascertained inequalities. The action plan is
accompanied by a communication and
awareness programme to be carried
out by the observatory to ensure the
commitment and involvement of the
different players in the implementation
of the recommended actions and, over
time, to change the mentalities and
behaviours in favour of equal opportunities. This initial report is a database
that is full of information both for the
OEF and for the managers of the
Group and the social partner. It has
enabled us to ascertain the actions to
be carried out immediately and will be
used to define the actions to be carried
out in the future.
What findings have you drawn
from your diagnosis ?
The results we have come to fully justify the establishment of an observatory.
In fact, the situation report reveals that
women are in a minority in the Group,
they are almost absent in some units
and some workstations. They are mainly found, but far from being the majority, in the support functions such as
HR, finance/accounting, sales, etc.
They are found in certain functions
which offer no career development
prospects (secretariat, socio-cultural,
etc.). They are in a minority in the
technical sections and the basic business lines which offer the greatest
career development prospects. They
have unequal access to promotions and
to training which are a favoured means
of developing skills and hence of career
development. They develop slower than
men and are under-represented in the
management and top management
teams.
The survey, for its part, enabled us to
confirm the setback experienced by
women in terms of accessing training,
promotions, career development and to
list the difficulties encountered with
regards working relations and conditions. It also provided a few explana-
Human resources
tions as to the case of the difficulties
encountered by women and which,
in general, result from the non-application
of
the
regulations
and
methods and style of human resources
management.
Can you summarise the main
expectations of the Sonelgaz
Group's female workers ?
The expectations formulated by women
within the framework of the survey are
multiple and concern searching for
more equality between men and
women at work, more recognition and
consideration and the development of
support services to enable them to
reconcile their professional life and
family life.
1. Indeed, equality is demanded by
women :
• In working relations and conditions:
by asking to benefit from the same
chances and opportunities as men to be
able to fully invest themselves in their
work and be able to make progress
(assignment to positions in line with
their profile, fair assignment of tasks
and projects, rational use of women's
skills, particularly the executives,
making available working tools, dealing
with issue of transportation when travelling to work sites, etc.).
• In promotions by proposing to only
take account of the skills and performance criteria without distinction of
sex or other social type considerations
or others.
• In career development: by favouring
access to the senior positions on the
basis of the “Equal opportunities with
equal skills”.
However, they would like the company
to carefully study the career of those
who occupy positions mostly aimed at
the female population, that have a ceiling, and offer no career development
prospect.
• In access to training to all the socioprofessional categories and by putting
in place measures facilitating the participation of women in these courses
(alternate courses, near the place of
☞
work, etc.).
Energie & Mines
219
November 2006
HUMAN resources
RESOURCES
Human
☞ 2. Women demand :
• The putting in place of measures and
devices which enable women suffering
any form of harassment or being dealt
with disrespectfully to be protected
against such actions.
• The application of the regulation for
women in pre- and post-natal periods
and ask that they are not penalised in
their professional life due to their
condition (recognition and reward for
the effort put in, access to training, etc.
and particularly respect and consideration).
3. Supervision :
Importance is given to supervision. In
fact, women want their managers to
play the role of a good manager. i.e.:
supervising, guiding, monitoring, evaluating and listening to their personnel,
but, above all, being fair to work between men and women.
4. They want services to be developed
related to child-care, during and after
working hours and during the summer
period so as to release them of this
constraint, and to be more available for
work, to be able to throw themselves
into their activities, to be trained and
consequently, to develop.
What are the priority actions
to be carried out ?
Without going into details, the actions
target three types of objectives :
• The “catching up or re-balancing”
actions, with regard to the differences
ascertained between men and women
and with regards the structure of the
workforce (female minorities), and
promotions, access to certain job positions (technical jobs and positions of
responsibility), and career development.
• The actions that have to facilitate the
reconciliation between professional life
and family life; so that women do not
have to sacrifice one at the expense of
the other, but are given the opportunity and the means to reconcile the both.
• The awareness actions, designed to
involve the different players in equality
and to change mentalities and
behaviours in favour of professional
equality.
Energie & Mines
220
November 2006
What is the expected role of
the FNTIEG ?
The social partner has been identified,
by the OEF, as being one of the
key players in promoting equal opportunities.
For this reason, we want it :
• to place the principle of professional
equality at the centre of all the negotiations it has to carry out and related to
the aspects concerning access to jobs,
vocational training, promotions, work
relations and conditions and looking
after the specificities of female workers.
• to integrate, in the social report, the
criterion of gender (man/women) so as
to be able to detect all cases of discrimination and negotiate the actions to
be carried out to reduce the differences
found.
• to actively participate in the implementation of the action plan proposed
by the observatory and approved by the
managers of the Group and effectively
deal with actions related to the social
part, which would enable women to
reconcile their professional life and
their family life (child-care, transport,
etc.).
• to encourage the representativeness
of women in the union structures
through an awareness campaign to be
carried out aimed at the unions.
Are the outlooks promising for
the female workers of the
Group ?
From my point of view, yes, with
regards :
• The real commitment of the Group's
General Management towards promoting female employment which is officially recognised through:
• The commitment of the Executive
Committee of 7 June 2006, to examining the report on female employment
in the Group.
• The putting in place by the Chairman
of the Group of a mixed working group
comprised of managing directors and
members of the OEF in view of identifying, from the action plan recommended by the observatory, those which are
the most pertinent and can be quickly
accomplished.
This action plan, whose implementation is the responsibility of all the
Group's entities, will be the subject of a
decision which will be circulated from
the month of September 2006.
• The putting in place of the call for
applications' scheme, as a tool for
implementing the principle of equality,
will give the same chances to women to
integrate and be selected for positions
of responsibility of their choice.
• The massive recruitment plan currently being implemented is an opportunity to increase the percentage of
women in the group both quantitatively and qualitatively.
One word to conclude…
The union's commitment to the programme proposed by the OEF, which
we are looking for, will only accelerate
the establishment of the culture of job
desegregation and professional equality. This equality is a source of wealth
for the Group as it relies on the diversity and complementarity of the skills,
know-how and knowledge of the men
and women working it in. We are confident in this with regards the efforts
made by the FNTIEG, namely :
• The training of representatives of the
workers, including women, to enable
them to fully play the role expected of
them both at the federation level and
the CP level.
• The putting in place of a women's
section responsible for listening to the
socio-professional problems of the
female personnel and dealing with
them.
In News FNTIEG
communication
Communication, crucial stakes
and ambitious objectives
1st communication brainstorming session of the Energy and Mines sector
The first symposium on
communication in the
sector will be held in
December 2006.
Brainstorming on the
creation of a TV station
and a network of local
radio stations in the
sector's business
areas.
Under the aegis of the Minister of
Energy and Mines, a brainstorming session on communication has been organised in the El Aurassi hotel in Algiers.
Senior executives and managers from
this area in the Ministry and in decentralised agencies, companies, establishments and structures of the sector, as
well as the SG of the Ministry of
Communication took part in this important meeting which precedes the holding
of a symposium - the first of its kind on the same theme next December. Five
specialised workshops dealt with the different aspects and axes of communication to reach conclusions which will
enable the sector's approach to be guided, which aims to set up a communication strategy in synergy with its ambitions and its economic and social
dimension. This need, but also this
necessity to communicate is imposed in
a world where information forms the
event, guides it, modulates it in line with
the interest and impact sought after.
Communicating in total transparency
and in the appropriate time is a requirement which responds to a concern for
complementarity with society, and this
is the challenge taken on by the managers of the energy and mines sector who
seem determined to refine their policy in
this sense. A note in this sense will furthermore be sent on this subject to all
executives and workers in the sector by
the Minister of Energy and Mines,
asking them for suggestions on the subject. Mr Chakib Khelil, in his speech,
emphasised the progress made in terms
of communication by his sector in the
last four years and the persistent deficiencies at this level. The Minister indicated that communication must be esta-
blished as a “managerial function in
itself” - and hence the urgency for putting in place “new milestones for the
future”. "Our sector wishes to present
itself as a laboratory and window of the
communication landscape", the speaker
further added. The speaker, who focussed on the role and importance of information as being an essential issue", stated the need for training in an objective
of specialisation of communication executives. He also made reference to the
experiences of foreign groups from the
same domain and the revamping of
communication to support the expected
changes in the sector. For his part, the
Chairman of Sonelgaz spoke on “the
role of the managers and directors in the
implementation of the communication
strategy”.
Mr Noureddine Bouterfa talked about
the experience of his Group since 2001
- the year which saw the inauguration of
large structures in the electricity and gas
sector. In his opinion, a communication
plan must reconcile “objectives and stakes whilst associating the executives and
the social partners in the decisionmaking process”. Mr Bouterfa also
emphasised the importance of “regular
communication”.
In the same context, the Chairman of
Sonatrach, Mr Mohamed Meziane, talked about the interest of communication
which is deemed “as sensitive as it is
strategic”, indicating that the major
concern is “taking account of the necessary combination between the Group's
policy and the interests of the State". In
the same perspective, the speaker asked
for conformity to the international standards so as to be able to support the
current changes. The Energy and Mines
sector intends to set about this task by
launching, subject to adaptations of the
legal and regulatory framework, a television station combining the groups from
the sector and their Algerian or foreign
partners and a network of local radio
stations in the sector's business areas.
Acknowledgements
Messages sent to
Mr Chakib Khelil by...
Mrs Khalida Toumi,
Minister of Culture
“Dear Minister, thank you very much for kindly
sending me the fifth edition of your publication
Energy and Mines. I was delighted to find that
one page was devoted to information on the
archaeological and cultural heritage of our
country. I wish you every success with this
quality review. Yours faithfully.”
Mr Boudjemma Haïchour,
Minister of Post and Information
and Communication
Technologies
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Energie & Mines
221
November 2006
COMMUNICATION
communication
"Communication, a managerial
function in itself”
according to Chakib Khelil
Read in the daily newspaper “L'Authentique”
The Energy and Mines sector is in the process of
preparing a symposium on
“communication” to make
it a modern instrument,
not only for marketing, but
also for managing information internally, between
companies of the sector
and with regards the
public.
A working group run by Mr Sid Ali
Hattabi, the adviser of the Minister
representing all companies from the
sector and their subsidiaries, organised
a brainstorming session to encourage
the participants to innovate by looking
deep inside themselves to find new
ideas adaptable to the new circumstances and reality of the sector.
The Minister, Mr Chakib Khelil, participated in this meeting which he set off
by an austere, but educational speech,
presenting the different intrinsic
dimensions of communication.
He specified that the managerial function of communication serves “to circulate knowledge and lessons learned
in all domains either by the contribution to the development of the industry
and trade, or by the improvement and
the promoting of the social relations
inside the company and between the
company and society”. The challenge,
he concluded, is to quickly adapt to this
stage of globalised modernity so as not
to suffer it.
Mr Chakib Khelil made a detour on the
programme of reforms initiated by the
President of the Republic and in which
he specified that we need to free up
energies, skills and talents and promote freedom in all domains, but also preserve the values of solidarity and justice.
The brainstorming session may be held
Energie & Mines
222
November 2006
next July and the symposium
in the month of November
which, according to the speaker, would leave enough
time for the ideas to mature
and for new proposals to
germinate. With regards
the human resources dedicated to the communication function, the company training centre run by
Mr Taleb Abdelaziz
would have already preselected, outside the
sector, some 100 candidates potentially suitable for receiving
training leading to a
qualification for the
different segments
of the communication activity.
In this perspective,
Mr Chakib Khelil
spoke to give a
certain number
of clarifications
to position the
role of communication which
he considers to
be an expertise in
itself, just like all the other expertises, specifying that each person
involved must pay attention, by
differentiating, in the exercise of their
functions, public information and
confidential information. He added
that another approach must be considered in the sector's relations with all
the media and particularly the written
press.
For the Minister, communication has
an operational role on the basis of a
matrix-based organisation where the
programmes and presentation, awareness, explanation, marketing and
are
programmes
reconciliation
designed between
the different structures, between
themselves and with their environment.
Finally, he insisted on the fact that the
matrix-based culture in the domain
must be prioritised to reunite, for each
other, the luggage needed for a better
understanding of the ins and outs of
the sector.
Les Nouveaux Investisseurs
books
(The New Investors)
A book by Mr Abdelatif Benachenhou
The new attractiveness
of the Algerian economy
An economist of the stature of Mr Abdelatif
Benachenhou, the former Minister of Finances,
was needed to embrace in one go such a wide field
and to happily cover a theme which, if not arduous,
may be off-putting due to the complex realities of
an economy in the process of profound change.
The author's educative qualities are renowned: he
asks simple questions and gives them clear answers. This is why his last book should interest not
only specialists and the economic agents working
in Algeria, but also a very large public.
The questions: who are the new investors? Why
are they here now? What strategies have they chosen on the Algerian market? What obstacles are
they coming up against? How do they see the future of business in Algeria? What are they offering?
Initially, a tangible reality, but paradoxically misunderstood reality that is sometimes denied:
thanks to the liberalisation, new players in growth
are being deployed in Algeria. They are foreigners
but also Algerians. They invest, produce, recruit,
train, make profits and transform the rules of the
economic challenge. They bring hope to young
people and give reasons to think that the future
may be less uncertain.
The progressively more competitive markets procure goods and services of better quality for consumers and users at prices which might be better still
in exchange for a more dynamic competition.
What is undeniable, reveals Mr Abdelatif
Benachenhou, is the current attractiveness of the
Algerian economy for new investors. This phenomenon not only concerns the hydrocarbons' sector
whose new impetus characterises it due to the
brave reforms it experienced 5 years ago and make
it a model and the driving force of the new Algerian
economy.
This new commitment to
invest in Algeria concerns
highly diverse branches:
banks, fertilisers, telephony, cement, drugs,
steel, agro-food, electricity, seawater desalination,
construction of hotels, port services, etc.
After suffering far too long from the misdeeds of
terrorism, Algeria finally seems to have come out
of the tunnel and this renaissance process has been
even more palpable since the re-election of
President Bouteflika. The statistics thus show that
Algeria, in 2004, was the number one country for
attracting foreign investments in the south and east
of the Mediterranean. Our country is at the head
of the Mediterranean regions in terms of investment flows and this highly significant recovery is
largely due to the energy sector.
The author feels we need to go further: the pursuit
of the economic opening up to attract performing
investors as well as good economic regulation are,
he feels, the sole means of fighting efficiently
against poverty through growth and employment.
It is the State's responsibility to put in place judicious public support policies to maximise the positive effects of the opening up and minimise its
negative impact.
It currently has the means to do so, observes the
author, but it will not, perhaps, always have them.
A stimulating book which should mark the editorial activity of this year.
Salim Korsane
Energie & Mines
223
November 2006
BOOKS
books
Les Fondements théoriques
du libéralisme
(The theoretical foundations of liberalism)
Un ouvrage de Hamid Temmar
From “Globalisation”
to “Glocalisation”
Neophytes,
abstain.
The new work just published by Mr
Hamid Temmar, our Minister of State Participations and
the Promotion of Investments, is an academic essay designed for specialists, academics, doctors, professors and
researchers, and also “decision makers”.
In this theoretical essay, the author initially faces a difficulty of definition.
Hence, Mr Hamid Temmar considers the meaning of the
words "liberal” and “liberalism”; have we reached a stage
where one liberal theory alone is now imposed on the
nations making the latter physical frameworks for applying
decisions which are made elsewhere and on governments
making them spectators of an economic impetus that escapes them"?
In fact, our country's analyst often experiences difficulties
in understanding that the economic activity is done by selfish agents who are each looking to maximise their interests
on a market which is neither ever balanced nor fair.
Completely to the contrary, the market's trends, particularly those of the international market, naturally incline
towards a monopoly situation.
In short, we are at the centre of a question as to what the
theory can contribute to the explanation of the real and on
bringing the economic vision in line with the political
vision.
The profound geopolitical shake-ups which the world has
experienced in the last 30 years, the shocks which they have
induced, particularly economic ones, entailing brutal theoretical confrontations, are used as a thread for analysis by
the author who finally concludes in the words of a documented argument that there is no one liberal theory, but
liberal theories which thus confront each other virulently.
A truth, however, is imposed: the economic liberty as a
mandatory system authorising excesses not only on the
theoretical plan and more largely ideas, but also in the practice of public policies. This vision will have found its syste-
Energie & Mines
224
November 2006
matisation in the works of two theorists, Friedrich Von
Hayek and Milton Friedman who, more than economists,
were formidable controversialists.
Although today out of date, these extremists theses continue to be quoted and are used as references in the large
controversial discussions.
Hence, on the one hand, the supporters of economic efficiency, productivity and return on investment and, on the
other hand, those who consider that efficiency is not the
only objective of the economic system and that the
concerns regarding safeguarding purchasing power, the
distribution of income, solidarity and fighting against
inequalities are other forms of combat.
The new explanation results from the realistic theoretical
text which upholds efficiency and national solidarity as the
ultimate economic goals, with the new policies moving
towards simultaneous dealing with this two-fold concern:
economic liberty is, certainly, the driving force of efficiency, but the market remains an unstable place, a source of
imbalances and injustices which finally threaten the sought
after efficiency, hence the essential role of the State as an
institution monitoring everything from efficiency to social
balance.
As the nation's independence is precisely this capacity of
the "local" to impose its presence and its dynamics, then we
can deduce from this that the term "globalisation" is out of
date, as we now find ourselves in a situation of “glocalisation” - with the author wishing to mean by this that globalisation is initially done at the local level.
This, concludes Mr Hamid Temmar, means putting the
"local" in a position of receiving the world to the best of its
own interests. Herein resides the challenge.
Sliman Dakar
To protect humanity’s heritage
Sonatrach Tassili Foundation
The Sonatrach Tassili
Foundation plays an
essential role in protecting and preserving
humanity's heritage that of the Tassili
National Park. Other
than its own actions,
the country's number
one company also commits to approach its
foreign partners to get
them involved in protecting this natural and
cultural site - the only
one of its kind in the
world and classed by
Unesco.
This is what emerges from a meeting
for the expression of interest for the
protection and preservation of the
natural and cultural heritage of the
Tassili National Park, organised on 8
April 2006 in the O. Khouani auditorium of Sonatrach's headquarters, in
the presence of Mr Chakib Khelil,
Minister of Energy and Mines, in his
capacity as president of the Sonatrach
Tassili Foundation and Mrs Khalida
Toumi, Minister of Culture, the
Secretary General of the Ministry of
the Environment, the director of the
Tassili National Park and accredited
ambassadors in Algeria.
This meeting, which follows on from
the call for expressions of interest for
protecting and preserving the Tassili
National Park, launched by the president of the Sonatrach Tassili
Foundation for its preservation and
promotion activities of the world's largest classed natural site, should sign,
on this day, a letter of intent to partici-
pate in the protection of Tassili. About
thirty companies and organisations
from the Energy and Mines sector,
foreign partners of Sonatrach, as well
as companies from the public and private sectors thus signed this letter of
intent and commit to work together to
preserve and promote the Tassili
National Park.
Furthermore, an agreement between
the Sonatrach airline company, Tassili
Air Lines, and the Sonatrach Tassili
Foundation, was initialled so as to
make a helicopter available to the
foundation, for the requirements of
the National Office of the National
Tassili Park, dedicated to the protection, preservation and promotion tasks
of the national park.
The Chairman and CEO of the
Sonatrach Group, Mr Mohamed
Meziane, emphasised the growing
interest of the country's number one
company in preserving the national
heritage, in general, and in Tassili, in
particular, after paying tribute to Dr
Chakib Khelil, Minister of Energy and
Mines, and president of the Sonatrach
Tassili Foundation, who has made this
commendable initiative to launch a call
for expressions of interest so that "we,
the companies, combine our efforts
within the framework of protecting,
preserving and promoting the natural
and cultural wealth of Tassili: humanity's heritage".
"Sonatrach, within the framework of
its social responsibility, through its
foundation, has always confirmed its
commitment to contribute to the
efforts of preserving, promoting and
protecting this exceptional heritage for
which it intends to contribute more
and more actively, through its own
means or in partnership with other
companies”, he concluded.
Heritage
“We are proud
to participate in
preserving the
magic of Tassili”
In his ceremony opening speech, the
Chairman and CEO of the Sonatrach
Group stated : “For those who have
had the opportunity to visit it and for
those who have not yet done so,
Tassili is a magical place, and we, at
Sonatrach, our proud to participate
in preserving the magic.”
"But for us, oil producers, Tassili is
even more, as it is also, and first of
all, a place for producing knowledge
and reverting to sources”, he continued, adding that “it is practically an
open-air geological museum where
we continue to learn a lot about the
layers of the sub-soil where the
hydrocarbons, whose research and
exploitation are our basic business
activities, have been trapped for
several millions of years”.
“We are therefore, for more than one
reason, in debt to Tassili and, for
more than one reason, called upon
to preserve it”, he emphasised to
reiterate Sonatrach's determination
to continue its action in favour of the
park's office.
Energie & Mines
225
November 2006
HERITAGE
Heritage
An Algerian researcher develops
a new type of wind turbine
With the help of the Sonatrach Tassili Foundation
The Minister of Energy and Mines, Mr
Chakib Khelil, in the presence of the
Minister of Culture, Mrs Khalida
Toumi, on the fringes of the expression
of interest for the preservation and promotion of the natural and cultural heritage of Tassili, heard explanations
concerning an invention presented by
Mr Etsouri Kaddour, course manager
at the National Agronomics Institute.
The latter indicated that a lot of remote and impoverished villages, located in
the Algerian Great South, in general,
and in the territories of the national
parks of Tassili des N'Ajjers and
Ahaggar, in particular, cannot increase
the performance of their daily activities
and particularly those related to agriculture due to a lack of access to the
electric power required for the motorisation of their water wells.
To do this, the Sonatrach-Tassili
Foundation and the El Harrach
National Agronomics Institute are
cooperating to help a team of researchers complete their research, by
making a vertical axis wind turbine,
beneficial to improving the socio-economic conditions of the populations of
the Great South. This work comes
Energie & Mines
226
November 2006
from the results of research which takes
account of the special weather conditions and the fragility of the ecosystems
of the Saharan regions. According to
Mr Kaddour, the vertical axis wind turbine works in all wind directions and
without a guidance mechanism. The
targeted aim is to reach the small producers and improve their daily life as
well as participating in the thriving of
their farms. The objective does not stop
here as this work is introduced in the
national economy, by adapting it to the
more energy-consistent projects.