Algeria’s Energy Sector is a Giant with Feet of Clay

This article was published in The Arab Weekly 

The appointment of Moumen Ould Kaddour as the new CEO of the state Algerian oil and gas company Sonatrach was a bolt out of the bleu. Nobody was expecting Mr  Amine Mazouzi who had been appointed less that two years ago to get the sack. The name of the new incumbent was not even whispered in the corridors of power in the run up to the impromptu board meeting of Sonatrach called by the Minister of Energy Nourredine Boutarfa on 20 March. Like his immediate predecessors he is a competent technician but has no experience in upstream activities or in the commercialisation sector. 

Ould Kaddour’s appointment underlines the extent of infighting going on within Algeria’s leading circle. It sends a very confused message to Sonatrach’s foreign partners such as ENI, Total, BP and Statoil who are helping to explore and develop the country’s vast gas resources and, beyond the hydrocarbons sector, to those countries Algeria is committed to work with, the US, France, the UK, Italy, Saudi Arabia and Russia, to stabilise a North West African region beset by bitter civil strife (Libya) poverty and terrorism (Libya, Mali, Niger and Tunisia). 

Sonatrach is now into its sixth CEO is about as many years since the demise of the Minister of Energy Chakib Khelil for corruption in 2010. His downfall, engineered by the Département du Renseignement (DRS), was followed by that of the then CEO of Sonatrach and some of the company’s vice presidents. Mr Khelil fled Algeria to the US but reappeared in Algiers two years ago, part of a presidentially “sanctioned” rehabilitation process. Mr Ould Kaddour is very close to Mr Khelil and his appointment is seen as a further step in the rehabilitation of the former minister. A series of trials followed the dramatic events of 2010 but those ultimately responsible for the massive corruption charges detailed in front of the Algerian courts were never brought to trial or charges were dismissed. The second liners, including Mr Ould Kaddour were condemned to prison sentences and then  rehabilitated in a manner of speaking. The whole sorry affair left a bitter taste in the mouth of millions of Algerians. 

The new CEO of Sonatrach was in charge of Brown Root Condor (BRC) in the mid-2000s. This was a joint venture specialising in engineering work between Algerian companies (Sonatrach and the Nuclear Centre at Draria) and the British subsidiary (KBR) of Halliburton, a major US company chaired, until he became vice president of the US in 2001, by Dick Cheeney. BRC was alleged to have received large kickbacks from Sonatrach and Ministry of Defence for work carried out at their behest in Algeria  during the boom years induced by high oil prices. None of the senior culprits were held to account. The DRS did however press charges of spying for a foreign power (America) to get Mr Ould Kaddour condemned. 

After he left Algeria in the late 1970s, Mr Chakib Khelil worked at the World Bank, eventually overseeing the Latin America energy department after 1980. In the decade that followed Argentina and Bolivia came under huge pressure from the US government directly and through the World Bank to privatise state oil and gas companies, which they strongly resisted. It was during those years that the future minister forged strong links with Dick Cheney. 

Today, the energy sector is seriously weakened by the fact that neither the Minister of Energy nor the CEO of Sonatrach take key decisions. This occurs at the level of the private office of the Prime Minister Abdelmalek Sellal, a practice unprecedented in the history of modern Algeria. Prime Minister’s Mr Ould Kaddour’s appointment will further demoralise staff at Sonatrach and the Ministry of Energy. Both institutions were until a decade ago, the pride of Algeria. This key sector of the Algerian economy – its foreign income provides 95% of the country’s export income and covers 60% of   government budget income, has traditionally been led by men of the highest integrity and competence. Its engineers and managers enjoyed a high reputation internationally. In recent years however, many have taken early retirement or gone and worked abroad where their skills are appreciated. The culture of international engagement so characteristic of Sonatrach since it was founded in 1964 is vanishing as fear of denunciation following events since 2009 mean that no one at intermediate level dares take any decision. This pushes decision making to the top where the system is clogged. With recent ministers and CEOs a pale shadow of the predecessors, two key institutions of the Algerian state have been turned into giants with feet of clay. 

HMr Ould Kaddour’s  appointment may be no more than a minor episode in the endless settling of scores between Algerian security and the presidential circle: the powerful head of the DRS, General Tewfik Médiène was forced to resign 18 months ago after twenty years in the job. Rehabilitating people close to Mr Khelil is viewed by those close to a very sick Mr Bouteflika as yet another demonstration that they can make and unmake any senior official is Algeria. The president’s feud with the DRS and its predecessor the Securité Militaire go back to 1979 when, after president Houari Boumediène’s death, the SM blocked Mr Bouteflika’s candidature to succeed Colonel Boumediene, choosing Colonel Chadli Bendjedid in his place. 

These palace intrigues will have serious consequences for Algeria’s reputation abroad.  They send a very confused signal to foreign partners with whom Algeria is keen to discuss regional issues. How can such countries engage seriously about the future of Libya, the threat of terrorism in the Sahel and the challenges facing Tunisia with a country whose senior officials are on a perpetual merry go round - replaced at the drop of a hat by less competent officials, for reasons as petty as they are difficult to fathom.

D.L.: B-8439-2012