ALGIERS, Sept. 21 (Xinhua) -- Algeria's Council of Ministers recently adopted the amendments on the hydrocarbon law 05-07 of 2005 in a bid to encourage foreign investments. But local analysts said the bill is unlikely to bring about a lot of changes in terms of tax relief as foreign oil companies anticipate.
"This bill aims at maintaining the attractiveness of our country in terms of investment, by adapting its legislation in line with the evolution of oil industry, in terms of market and introduction of new technology techniques," according to a statement of the Council of Ministers.
Dr. Abdelmalek Serrai, an academic and economist, said that the amendments are "a hand extended to foreign companies to invest in Algeria."
The latest version of the bill has opted for a "relative" flexibility and tax relief that would encourage foreign direct investment (FDI), Serrai said.
But the lack of details about tax incentive measures in the new bill has reduced some other experts' optimism.
"It might be better to wait until further explanations be provided on the issue of taxation of foreign oil companies wishing to invest in Algeria, when the bill will be introduced to the parliament (on Sept. 25 by Prime Minister Abdelmalek Sellal)," Abdelhamid Mezaache, economist and former official at the Ministry of Energy, told Xinhua.
"For the moment, I can't tell much on the issue," said Mezaache, who also worked in the state-owned energy giant Sonatrach.
Meanwhile, another energy expert Abderrahmane Mebtoul, said that "the amendments do not apply to oilfields currently under production, which remain subject to the usual tax regime," and their tax incentive measures "encourage exploration and exploitation in rugged areas where the use of sophisticated means are required."
Seeing no "revolutionary" amendments comparing to the original version of hydrocarbon law 05-07 of April. 28, 2005, Mebtoul criticized the maintaining of 51/49 rule, which makes it mandatory for Sonatrach to be involved in all of the country's energy development projects and entitles it with a 51 percent stake in production and refining contracts with foreign firms.
"One should not expect a flow in terms of foreign investments in the domain of exploration in offshore and non-conventional gas, " Mebtoul said, adding that "I expect limited investments, if not nil, with these amendments."
In this regard, during his working visit to Algiers last week, Representative of British Prime Minister for Trade and Investment, Lord Jonathan Marland, was quoted as saying by local media that " British companies will always respect local laws relating to foreign investment ... as it is up to the Algerian government to make its own laws and it is for the foreign companies to decide whether to invest here, by taking several issues into consideration."
But Marland still said that he was "convinced that Algeria is a country which offers significant opportunities."
Yet, for Mebtoul, such statements do not reflect the reality, " as the tenders launched between 2008 and 2012 failed to attract big international companies."
Only three tenders for the exploration and exploitation of hydrocarbons have been launched since 2008. The first tender that was launched in 2008 granted four blocks, the second held in 2009 awarded three, while only two blocks were granted in the last tender in 2011.
Another focus in the amendments concerns about the windfall- profit tax, deemed as an unattractive fiscal measure by foreign investors.
According to the law, profits accrued by foreign firms when oil prices are above 30 U.S. dollars a barrel will be taxed at between 5 and 50 percent depending on total output.
Algerian Minister of Energy Youcef Yousfi told the national radio that the tax incentive measures mentioned in the bill "do not concern the windfall-profit tax, but rather they are adapting oil taxation depending on the difficulty and the investments made for oilfields development."
"We aim through such measures to boost the development and exploitation of medium oilfields located in rugged areas, and unknown plants, such as offshore ... Such amendments have not been dictated by foreign pressure, but rather by national sovereignty to serve our own interests," he said.