Algeria plans strategy to cope with oil price drop
Opec member Algeria says it will launch a new “economic growth model” for the next four years focused on reforming the tax system to bring in more revenue and reduce dependence on energy exports.
The plan is part of longawaited moves to diversify the North African economy away from oil and gas, which account for 95 per cent of export revenues and 60 per cent of the state budget.
A sharp drop in global crude oil prices has pushed the government to cut spending for 2016 by 9 per cent and plan further cuts over the next few years.
“The new economic growth model is based on a revised budget policy backed by the improvement of revenues from ordinary taxation,” the presidency said in a statement after a cabinet meeting chaired by President Abdul Aziz Bouteflika late on Tuesday.
That measure will help “cover, by the end of 2019, operating expenditures as well as irreducible expenditures for public infrastructure”, it said.
Algeria has already suspended several infrastructure projects to ease financial pressure since oil prices started falling in mid-2014. The government posted a record budget deficit of about 16 per cent of gross domestic product (GDP) in 2015, and its foreign exchange reserves are expected to fall to $116 billion by the end of 2016, from $136.9 billion (Dh502.4 billion) in May. The government says GDP (gross domestic product) grew 3.9 per cent in 2015, just below its 4 per cent forecast, but a little faster than 2014 growth of 3.8 per cent. It put 2013 growth at 4.2 per cent.
The International Monetary Fund put growth at 3.7 per cent in 2015 and expects it to slow to 3.4 per cent this year.
The new model aims to boost investment in “high value-added sectors” such as agribusiness, renewable energy, services, digital economy, industry, mining and downstream activities in the hydrocarbons sector, the statement said. It did not give details.
Algeria will also mobilise “additional resources on the local financial market, including bond issues”, the presidency said. raq is negotiating with ExxonMobil Corp and Petrochina Co to develop two oilfields in the south of the country as it seeks to maintain overall production at about 4.8 million barrels a day for the rest of 2016, Deputy Oil Minister Fayyad Al Nima said.
The companies have submitted offers to develop the Artawi and Nahran Omar fields, which Iraq’s Oil Ministry hopes will produce a combined 550,000 barrels a day, Al Nima said Wednesday in an interview in Baghdad. The fields together are pumping about 70,000 barrels daily, and the ministry wants to start the project in six months, he said. Al Nima assumed the duties of oil minister after Adel Abdul Mahdi suspended his participation in the cabinet in March.
Iraq, Opec’s second-biggest member, is producing 4.78 million barrels a day, with 4 million barrels coming from fields in the south, Al Nima said. The self-governing Kurdish region in northern Iraq contributed the remainder, pumping more than 700,000 barrels a day independently of the central government, he said. Exports from the south are averaging 3.19 million barrels a day, and the ministry sees shipments reaching 3.2 million by month-end and staying at about that same level until the end of the year, he said.
Battling insurgents
Iraq is trying to expand oil production amid lower prices and a military campaign against Daesh insurgents, who control large chunks of territory in the north.
The country’s largest oilfields are mostly in the south and physically insulated from the fighting.
Iraq pumped 4.3 million barrels a day of crude in June, an increase of 32 per cent from its average annual output in 2014, data compiled by Bloomberg show. Iraqi Kurds are exporting 520,000 barrels a day via Turkey’s Mediterranean port of Ceyhan, Al Nima said.
They use their own pipeline, as the Baghdad-operated link to Turkey from the northern oil hub of Kirkuk has been shut down due to the conflict with Islamic State.
Iraq, which holds the world’s fifth-biggest crude oil reserves, is in separate talks with Petrochina and Korea Gas Corp to reach a final agreement to build a refinery with a capacity of 300,000 barrels a day and to develop an oilfield in Nasiriya in southern Iraq, Al Nima said.