Algeria names new bank governor, oil firm chief

The nomination of the new central bank governor and Sonatrach CEO was meant to signal that, despite the protests, “Algeria is well-run” and stable, analysts said.
Sunday 24/11/2019
A view of the Central Bank of Algeria building in Algiers.        (Facebook)
Long-delayed reforms. A view of the Central Bank of Algeria building in Algiers. (Facebook)

TUNIS - Algeria’s Interim President Abdelkader Bensalah appointed new leaders for the Central Bank of Algeria and Sonatrach weeks before scheduled presidential elections.

Kamel Eddine Chikhi, a geologist and former director of the Algerian National Oil Institute, was named CEO of state oil firm Sonatrach, replacing Rachid Hachichi, who had led the company since April.

Benabderrahmane Aymane will take over from Amar Hiouani as central bank governor. Hiouani was appointed interim governor in April when central Bank Governor Mohamed Loukal was named Finance minister.

The appointments were made November 14, less than a month before December 12 presidential elections that will decide Bensalah’s successor.

Bensalah took over from ousted long-time President Abdelaziz Bouteflika after protests broke out February 22. Demonstrators have taken to the streets demanding a complete overhaul of the military-dominated political system that has ruled Algeria since independence from France 58 years ago.

Protesters oppose the government’s planned elections, arguing they will end with another regime-backed figure in power. All five approved presidential candidates served as senior officials under Bouteflika.

The protests compelled authorities to scrap previous planned presidential election dates in April and July. This time, the army command pledged to “guarantee all the conditions of success for the elections” and insisted that the process would be completed successfully.

Despite warnings from the government to avoid disrupting the process, demonstrations have intensified rallies and marches in opposition to the vote.

The nomination of the new central bank governor and Sonatrach CEO was meant to signal that, despite the protests, “Algeria is well-run” and stable, analysts said.

Oil and gas are Algeria’s economic lifelines, accounting for 95% of Algeria’s exports and 60% of the state budget resources and foreign currency reserves.

Chikhi faces the challenge of halting the decline of oil and gas production and defending Algeria’s oil markets in Europe, which are threatened by imports from the United States, whose shale gas sector is booming.

Aymane was called on to speed up long-delayed reforms in Algeria’s banking system and preserve its foreign currency reserves. Half of Algeria’s money in circulation is outside the banking system as the country lacks stable banks for savers and investors.

Algeria’s parliament approved legislation November 14 aimed at attracting more foreign oil investment and technology. Among the changes is the inclusion of a production-sharing contract system that proved successful in the 1980s. That system helped Algeria make some of its largest oil and gas discoveries, including development of the Berkine basin.

That law was scrapped in 2005, however, before being tweaked in 2006 and 2013. The later changes caused concerns about instability and pushed away foreign investors, causing the country’s oil and gas production to decline.

“I should use this opportunity to highlight that the new hydrocarbons law comes at the right time to add a new momentum to research and exploration activities and free the initiative of partnership,” Chikhi said during his inauguration ceremony.

“The great and sensitive responsibility that is incumbent upon us lies in the renewal of our oil and gas reserves that are shrinking from year to year during more than 10 years.

“Our efforts must focus on research and exploration as well as reassessing the proven reserves of Sonatrach with a view to compensating the volumes already consumed to be able to ensure the energy security of our country in the long term,” he said.

Chikhi said: “Efforts will focus on the optimal exploitation of our current output capacities to satisfy growing national demand and preserve our markets abroad, especially natural gas.”

Algeria has secured long-term natural gas export deals with seven partners, including in Italy and Spain where Sonatrach exported 51.4 billion cubic metres last year. This year, Algeria lost its crude oil market in Canada for the first time because of shale gas competition from the United States.

Shale gas deliveries from the United States to north-western Europe, including France and Great Britain — main markets for Algeria’s sweet Sahara Blend crude — doubled in the first 10 months of 2019, official figures show, reaching 1.12 million barrels per day in October versus 630,000 barrels per day the same period last year.

“As Algeria faces increasing competition in Europe from US shale barrels, it is having to seek a new home elsewhere,” said Noam Raydan, a geopolitical analyst.

The International Monetary Fund report said Algeria needs to prevent its oil and gas production from declining to keep export volume unchanged as well as maintain an average oil price of $116 a barrel to balance this year’s budget.

“The average price so far is maintained at around $60 the barrel but nothing in the current circumstances allows hope of a sharp rise,” said Algerian economist Makhlouf Mehenni.

“The stock of foreign reserves built during the years of high oil prices is shrinking rapidly by around $20 billion annually, the equivalent of the current account deficit due to rising imports. In the next year, around $50 billion will remain as reserves and nothing within three years. This deadline could be shortened by any decline in the prices of crude oil.”