Algeria Seen Offering 10 Permits in 1Q07 Oil Block Round

ORAN, Nov 27, 2006 (Dow Jones Newswires)

A fresh round of bidding for Algerian oil and gas exploration licenses is expected around the first quarter of next year, an official said Monday.

The round would be the first under a new hydrocarbon law that would toughen tax terms for foreign oil companies.

Mustapha Benkhemou, strategic director of Algeria's Energy Ministry, reiterated Monday that the national agency awarding the licenses -Analft- "should be ready to organize the bid round in the first quarter of 2007".

Benkhemou told Dow Jones Newswires on the sidelines of Algeria's oil and gas conference here that the auction is contingent on decrees of the new hydrocarbon law being issued as due in December.

There should be about 10 oil permits to award, said a source close to Algeria's national oil and gas company Sonatrach (SON.YY).

After a long and animated debate at Parliament, Algeria in October voted amendments to a 2005 hydrocarbon law, which sets a new investment environment for foreign companies.

The round was initially planned at the end of 2005, but was postponed after the debate on the amendments.

Amendments to the law were meant to strengthen control of the State and Sonatrach over exploration projects. Algeria boasts the world's eighth largest gas reserves.

From now on, Sonatrach will own at least 51% of all new exploration projects. In addition, a windfall tax on marginal profits generated above $30/barrel will be levied. The tax will range from 5% to 50% of profits.

Market participants fear that economics of exploration projects in Algeria will be negatively impacted; but a more accurate assessment is difficult without reading the decrees, they said.

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