montage n° 4 - Ministère de l'énergie et des mines

☞ such. Such a definition also assumes that we talk to people whoexpress a symmetric need. But what have changed since the start arethe rhythms, the speeds and therefore the perception that the humanbeing today has spaces and temporalities. Today, the human beingis confronted with urgent issues, pressing enigmas and menacingquestions from a new world to be built.The appearance of audiovisual and the incredible development ofthe new information and communication technologies have transformedthe individual's relationship with itself, its relations with societyand with the world.Becoming embedded in our daily lives, creeping into our privatelives, these new instruments no longer leave any respite for man andparticularly those who are destined to inform and communicate. With"live" attacks, they are summoned to retort in "real time" but, aboveall, they are required to anticipate and warn. They are no longer ableto be restricted in the dangerous position of the passive receiver. Theyare summoned to impose themselves as issuing, active, credible andtherefore respected agents.But faced with the frantic rush of events and facts, how can weremain ourselves in the midst of progress ? How can we resolutely jointogether whilst keeping our own integrity ? How can we safeguardour authenticity by offering it humbly, but with aplomb, to the universality?If the Old World is coming undone, the changes occurring underour eyes must not therefore be considered as a threat or an attack. Weneed to see in them the chances and opportunities offered, whichimply that we demonstrate clear voluntarism and give ourselves a dutyof producing results.So, this means assessing our actions and our products with thepublic, motivating the collectives of our companies and mobilisingthem, making our partners committed to our projects and henceoptimising our performances.Who does not see that the most deserving efforts, the most brilliantresults, the best designed products, the best intended projects are onlyof worth if brought in an appropriate manner to the knowledge of thepublic, clarified in their competence, their virtues and their aim? Asthe value of an action does not suffice in itself; it is condemned to usethe paths of notoriety to receive public acceptance of the recompenseor be blacklisted.

Such an approach naturally implies a breakaway from thetraditional frameworks of management and governance. It transgressesthe old conventions and shakes up old reflexes. It is somethingthat cannot be ignored.So, it is felt necessary to get out of the ruts of the past, to get awayfrom empiricism and, specifically with regards advertising, moveaway from the "virtual" to go in search of a rigorous analysis of thepublic's expectations using solid approach bases. It is therefore importantto consult people on their aspirations and to test their reactionsto our initiatives.This should lead us to reflect on the terms and conditions of anupdate in terms of opinion polls and motivation studies. We have themeans for such an ambition and the implementation of projects inthis domain might provide the opportunity to mobilise the immensesynergies of the sector. But we also need to awaken the citizen to theawareness of what is real, the new problems of sustainable development,ecology, preservation of the environment and new and renewableenergy savings.Finally, we have the duty of making them aware of the constraintsof the financial operator in a market economy system – an operatorbound to balance the accounts of the company it is responsible formanaging, triggering profits in order to ensure its development andthus contributing to national wealth. In this complex and sensitivefield of communication, significant progress has been made over thelast five years by our sector, and the accomplishments made areobvious, whether in terms of the abundance of new publications, newreflexes that are emerging, in line with the requirements of time, orinnovative approaches which aim to boost communication to the rankof a managerial function in itself.The time has therefore come to address and place down new milestonesfor the future, as although a lot has been done, there is still alot of grain to grind. It is in fact legitimate that, in this domain, wewant to present ourselves in a laboratory and in the shop window."C. K.

Table of ContentsEnergie&MinesNo. 6 - November 2006Performances 8■ 5 new hydrocarbon discoveries■ 7 petrochemical projects launched■ Tassili Airlines takes off■ Mines: an immense deposit■ Energy : Sonelgaz is using all its energy■ FDI: Algeria, the no. 3 Arab receiving countryReforms■ The APN adopts the amendments relatedto the hydrocarbons law■ New law on investment■ New law on industrial land■ The UGTA backs the social and economic pact40Case study57Engineering - the key todevelopmentOverseas 182■ Chakib Khelil : “We want have talks with the LNGdistributors”■ World growth is not flaggingMarkets■ Chakib Khelil : Long term supply contracts■ The surprising return of raw materials191Sustainable development 199■ Algeria, the world's capital for the environment■ Algeria's appeal to the UN■ Biofuel in BrazilIndustrial safety 209■ A circular from the Ministry of Energy and Mines■ Seminar on nuclear safetyPartnership 142■ Algeria-USA : Mohamed Bedjaoui launches anappeal to American investors■ Algeria-USA : Putting in place of an exportmechanism■ Algeria-Russia : President Putin in Algiers■ Algeria-Italy : Acceleration of the Galsi project■ Algeria-Spain : Catalan entrepreneurs in Algiers■ Algeria-France : Coface sets up in Algeria■ Algeria-United Kingdom : President Bouteflikain London■ Algeria-Turkey : A strategic partnership■ African partnership : The Nigal project is on track■ Algeria-Korea : A strategic partnershipHuman resources 214■ Chakib Khelil : “The IAP-CU, a place of capitalisation”Communication 221■ 1 st “communication” brainstorming session of the Energyand Mines sectorBooks 223■ La Nouvelle Attractivité de l'économie algérienneby Abdellatif Benachenhou■ Les Fondements théoriques du libéralismeby Hamid TemmarEnergie&MinesReview of the Energy and Mines sector ISSN 1112-4873 Legal deposit : 1094-2004No. 6 - November 2006Head of publication Sid Ali HattabiAssistants Halima Chehri (Secretariat), Lila Rahma (Documentation), Karima Oumaouche (Technical Coordination), Riad Fernani (Brochure)The following have been involved in this edition A. Aïdel, Youcef Aouissi, M. Bencharif, Hachemi Benyahia, Omar Boukhadimi, Samia-Kahina Bouzid, Paul Chaplin, SlimanDakar, Taoufik Ferhat, Réda Fettah, Ian Forsyth, Djamal Gharnati, R.G. Gonzalez, Alan Greenspan, Karima Hayati, Nasser Iguestira, Pierre Judet, Mohamed-Sofiane Kasbadji,Amel Kasdi Kheddach, Martin Kilmurry, Salim Korsan, Nedjoua Latif, Amine Maher, Sebastian Mallaby, Tarek Mokrane, Nazim & Chris, Abdelmoumen Ould Kaddour,Namhee Park, Jean-Marie Pinel, Abdelkrim Ramtani, Ahmed TobbecheEditing Ministry of Energy and Mines, Val d’Hydra, Alger Tel. : 021 48 82 56 Fax : 021 48 81 84 website : www.mem-algeria.org email : larevue@mem-algeria.orgSubscription and advertising department Tel. : 021 36 92 36 / 021 36 92 22 Fax : 021 36 07 97Circulation, advertising department Sarl BaosemDesign and production Alpha Design Photo-engraving Espace numérique Printing En-Nakhla Photo credits : Sonatrach, Naphtal, Sonelgaz, Alpha Design, APSThe manuscripts, photographs as well as any other document sent to or issued for editing are not returned and cannot be the subject of any claim.The articles published in Energy and Mines only commit their authors. Reproduction authorised provided the source is indicated.

performancesPERFORMANCESFive new hydrocarbon discoveries17 discoveries in 2006 - a recordDiscovery of crude oil andgas in the Berkine basinA discovery of crude oil and gas has beenmade by Sonatrach alone in the Berkinebasin further to the drilling of FDF(Feidjet Fares - 1) wells made in block402d.This drilling reached a depth of 324 mafter covering all planned objectives. Theformation test carried out on the lowerTrias clay-gravel reservoir (Tagi), in the3,019-3,027 m drilled interval, deliveredunder a choke of 32/64 output of11,167.8 m 3 /h of gas and 6.76 m 3 /h ofoil with surface pressure of 2,010 psi.This result confirms the potential largeamount of hydrocarbons in this part ofthe Berkine basin which will continue tobe the subject of an intense explorationand delineation activity in the course of2006. This discovery is the sixth onemade this year by Sonatrach alone afterHGAS-1 in the Amguid Messaoud basin,AHMN-1 and WEMN-1 in the Berkinebasin and GLSW-1 in the Oued Myabasin. It brings the total number of discoveriesin Algeria to 12, with Sonatrachhaving brought to light, since the start ofthe year through its partnerships, the discoveriesof TEN-1 and ISRS-1 in theIllizi basin, Sali-1 and KL-2 in theReggane basin, LES-3 in the Berkinebasin and MJB-3 in the Timimoun basin.Discovery of crude oil andgas in the Reggane basinThe Sonatrach association along with theconsortium Repsol-RWE and EdisonGas announces the new discovery of gasin the Reganne basin further to thedrilling of the Kahlouche-2 (KL-2) wellsin the North Reggane acreage (Blocks351 C-325-C).Several formation tests have been carriedout on these wells and have given the followingresults under choke 32/64 :Siegenian reservoir :Depth : 3,983m– Gas output : 763,000 m 3 /d– Surface pressure : 4,081 PsiTournalsian reservoir :Depth : 2,360 m– Gas output : 438,000 m 3 /d– Surface pressure : 2,649 PsiThis new discovery is added to the successof the previous ones on this NorthReggane acreage and confirms the majorpotential of this basin which seesTournalsian being produced for the firsttime.For this purpose, an intense explorationand delineation activity is planned whichwill be continued in the course of thenext two years. It brings the total numberof discoveries in Algeria, since the start ofthe year, to 11. Sonatrach has brought tolight 5 discoveries further to its ownworks and 6 through partnerships.Discovery of crude oiland gas in the Reggane basinA discovery of condensate gas has beenmade in the Berkine basin further to thedrilling of the AHMSW-1 well (AïtHamouda-South-West-1) in block 405aby Sonatrach on its own. This drillingreached a depth of 4,325m in theGedinnian after covering all plannedobjectives.Formation tests have been carried out onthese reservoirs and have given the followingresults under choke 32/64:Siegnian reservoir F6-drilled interval:4,014 - 4,116m:- Gas output: 12,093m3/h- Condensate output: 13.09m3/h- Surface pressure: 3,550 PsiStrunian reservoir F2-B-drilled interval:3,448 - 3,452m:- Gas output: 3,719m3/h- Condensate output: 1.16m3/h- Surface pressure: 575Psi.This result confirms the major hydrocarbonspotential in this part of the Berkinebasin, which will continue to be the subjectof an intense exploration and delineationactivity in the course of 2006.This discovery is the seventh one madethis year by Sonatrach after those ofHGAS, AHMN, GLSW, WEMN andFDF It brings the total number of discoveriesmade in Algeria to 13, withSonatrach having made, since the start ofthe year through its partnerships, the discoveriesof TEN, SL1, KL-2, LES-3,MJB-3 and ISRS.Discovery of oilin the Berkine basinThe national hydrocarbons companySonatrach has announced that, in partnershipwith the American Anadarko-Algeria, it has made a new discovery ofoil in the Berkine basin, in the Algerianeastern erg. "The Sonatrach associationand Anadarko Algeria CompanyLLC/ENI/Maersk, working on theBerkine El Haiad acreage, announces adiscovery of oil in the Berkine basin(block 404a) further to the drilling of theBir Berking Sud-1 (BBKS) well whichhas reached a final depth of 3,489m inthe Devonian", states Sonatrach in apress release. The output has been evaluatedas 4m3/h with surface pressure of230psi, further states the press release.This is the fourteenth discovery made inAlgeria since the start of the current year,7 of which have been made by Sonatrachalone and the 7 others in association withits partners.Two discoveries in BerkineThe national hydrocarbons companySonatrach has announced that, on itsown, it has made two new discoveries ofoil in the Berkine basin (oriental erg),bringing the total number of discoveriessince the start of the year to 17, i.e. anational record for a period of less than 1year. The first was made in the MenzelLedjmat (block 405a) acreage, and thesecond in the Rhourde Louh Sif Fatima(block 402b) acreage, stated Sonatrachin a press release. The output from thefirst, with a depth of 4,874 m, has beenevaluated as 11.20 m 3 /h of gas. As for theoutput from the second drilling, with adepth of 3,312 m, this has been evaluatedat 21.27 m 3 /h of oil and 3,549 m 3 /h ofgas. These two new discoveries bring thetotal number of discoveries made thisyear to 17, i.e. a brand new record inAlgeria, we note. Out of these discoveries,9 have been made by Sonatrachalone and 8 in association with itspartners.Energie & Mines8November 2006

performancesOil upstreamHydrocarbons' prospecting developingprogramme in the north of the countryThe Minister of Energy and Mines, Mr Chakib Khelil, has announcedthat a hydrocarbons' prospecting and exploration developmentprogramme in seven wilayas of the north of the country has beendecreed for the period 2006-2010.ATo a question on Sonatrachabandoning prospecting inthe Sour El Ghozlane(Bouira) region, Mr Khelilindicated that the plan, which is part ofthe government's complementary programmefor the development of theHauts Plateaux, encompasses thewilayas of El Bayadh, Laghouat, Tiaret,Djelfa, Saïda, Khenchela and Tébessa.In this framework, he added, the nationalcompany Sonatrach will, both aloneand in partnership, carry out a seismologicalsurvey and the drilling of16 deposits in these regions in the sameperiod, confirming that there is anotherprogramme within the framework ofthe regional studies related to thedrilling of 47 shallow-depth wells.However, he stated, this programmedoes not concern the region of Dirah(Sour El Ghozlane). Sonatrach hadcarried out, alone then in partnershipwith the British company BritishPetroleum, a seismological survey, buthad to abandon this because, accordingto the Minister, the results obtainedwere not encouraging. The Ministerhas not however excluded the possibilityof resuming the prospecting andexploration activities in this region afterexamining the results and data recordedwithin the framework of the 2006-2010 programme.He furthermore emphasised that theAgence nationale de valorisation desressources en hydrocarbures (oil) will,before the end of the year, launch aninternational appeal for tenders for theprospecting of oil regions with the possibilityof choosing acreages in thewilaya of Bouira. Mr Khelil indicatedthat Sonatrach operates the majority ofits oil fields, with the exception of threedeposits as they are not profitable, inaccordance with the hydrocarbons lawwhich forces Sonatrach to select whatdeposits to operate. Mr Khelil said, inresponse to a question on the pricing ofelectricity in the South, that the Statehas taken measures to reduce the electricitybill for all citizens and supportthe financial activities. In this respect,he pointed out that the government iscurrently carrying out a study to makea list of citizens who need the State'said, which will enable it to reduce “theelectricity bill for a limited number ofbeneficiaries”.Inaugurationof aSonatrachoffice inNigerThe opening ceremony of a SipexNiger Branch office took place in thepresence of the senior Niger authorities,led by Mr Mohamed Abdulahi,Minister of Mines and Energy of theRepublic of Niger, accompanied by hislast two predecessors and representativesof the Ministries of Defence, theInterior, Foreign Affairs, Trade,Finance and the Prefect/governor ofthe city of Niamey.The Algerian delegation was representedby the managing director of hydrocarbonsfrom the Ministry of Energyand Mine, the executive director ofoverseas activities from the SonatrachGroup and His Excellency theAmbassador of Algeria to Niger andmembers of the Sonatrach delegation.During this opening ceremony, bothrespective delegations made the officialinauguration and visited the SipexNiger Branch office, followed by asnack offered in their honour in theoffice of the managing director ofSipex and the handing over of gifts asa sign of friendship and recognition tothe Minister of Mines and Energy ofthe Republic of Niger and to his twopredecessors.Energie & Mines9November 2006

Energie & Mines10performancesPERFORMANCESOne of a kindSonatrach has initiated the firststage of the Gassi Touil project■ The oil company has signed, along with its partners Repsol and Gas Natural,the agreement on the creation of a liquefaction company.■ The project, of a value ranging between 2 to 3 billion dollars, will enable the factoryto be handed over in November 2009.One of the most importantstages in the accomplishmentof the integrated HassiTouil project, the establishmentof the gas liquefaction companyin Arzew, has just seen the signature ofdocuments related to its creation. Infact, this large scale project that is "oneof a kind”, as described by the Ministerof Energy and Mines, Mr ChakibKhelil, who co-presided over thesigning ceremony which took place inthe head office of the oil companySonatrach, in Hydra, also includes theUpstream, Downstream, Liquefactionand even Marketing branches.It is, however, the partners and no lessassociates of Sonatrach, the Spanishcompanies Repsol YPF and GasNatural, who will build 80% of the newfactory, whereas Sonatrach will coverthe remaining 20%. The new companywill be entrusted with ensuring themonitoring of the construction, in theArzew industrial zone, ex-GNL3 site,of a LNG factory comprised of a stringof drill pipes in partnership, with a 2ndstring of drill pipes, as an option, forthe liquefaction of natural gas comingfrom the Gassi Touil and RhourdeEnnous fields.With a completion timeframe of 54months and nominal capacity of 4million tonnes per annum, this factorywill use tried and tested technologyprocesses, particularly the thermo-chemicalprocess with extractions of LPG,ethane and enriched gas and helium forrecycling. The commissioning of thisnew structure has a fixed completionamount that varies between 2 and3 billion dollars, according to theChairmen of Repsol YPF and GasNatural, respectively Mr BruffauAntonio and Salvador Gabarro, presentduring the signing ceremony. It will beNovember 2006handed over in October 2009 and willbe commissioned from the start of themonth of November. Highly satisfiedwith the conclusion of the agreement,Sonatrach's Chairman, Mr MohamedMeziane, stated that this was part of “adynamic of boosting, as much as possible,the value of our hydrocarbonresources, whose increase in liquefactioncapacities, the doubling of the refiningcapacities, the large petrochemicalprojects are, with the enlargement ofour base of reserves and our presenceabroad, an essential strategic focus".For their part, the directors of the twoInformation on GassiTouilAs a reminder, the integrated Gassi Touilproject was awarded to the Spanishconsortium comprised of Repsol YPFand Gas Natural further to the publicopening of the tenders on 17 November2004. With a duration of 30 years and adevelopment period of 54 months, thecontract signed between the two groupsincludes, in addition to the constructionof the liquefaction factory, the drilling of52 development wells, the renovation ofthe 15 existing wells, the construction ofsurface facilities for the processing(extraction of condensate and LPG,decarbonisation), of 22 million cubicmetres a day of raw gas as well as theconstruction of transport capacities ofaround 6.5 million cubic metres a yearof natural gas. It is also planned that thethree partners will also be responsiblefor the marketing of these quantities ofgas; additional quantities which are partof Sonatrach's objective to finally exportsome 85 million cubic metres a year ofNG and LNG by 2010, whereas currentlythis figure is some 65 million cubicmetres annually. The construction of theliquefaction factory there presents thefirst milestone in the sealing of the ambitiousintegrated Gassi Touil project.Spanish companies made praiseworthyspeeches on their partnership withSonatrach. Whilst the chairman ofRepsol YPF focussed on the considerablefinancial and strategic aspect, thechairman of Gas Natural was morepolitical, particularly making referenceto the fact that this agreement “enablesus to reinforce and improve even morethe excellent relations which havealways characterised the collaborationof Repsol YPF and Gas Natural withthe Algerian government and withSonatrach”; a collaboration which will,among other things, enable the consortium,according to Mr Gabarro, to havein the long term a large percentage ofclean gas “with which we will improvethe coverage in upwards scenarios, andwill increase the guarantees to providea flexible and efficient gas supply to ourlarge customer base".Hence, the integrated Gassi Touil project,as well as the project concerningthe hydrocarbons exploration block inthe zone of Gassi Chergui West, bothwith Repsol YPF, assume, for theseSpanish companies “direct access, forthe first time, to the natural gas reservesto cover the increasing demand ofthe energy markets where we operate",also stated Mr Gabarro who indicated,finally, that, a posteriori, the constructionof the Maghreb-Europe gas pipeline,also driven by his group of shareholders,and the permit allocations forGassi Chergui and more particularlythe integrated Gassi Touil project "reinforceour relations of cooperation andfriendship with the Algerian government".

performancesChakib Khelil :“We have the capacities to export2 million barrels / day by 2010”Mr Chakib Khelil, Minister of Energy and Mines, stated inBiskra that "given the oil deposits currently being refurbished,we will be able to ensure the exporting objective of 2million barrels/day of crude oil by 2010".Mr Khelil made a working visit to the wilaya of Biskra wherehe particularly placed down the first stone of the pumpingstation in the region of Selka (Biskra).On this site, he emphasised that "this infrastructure of thenational company Sonatrach will enable it to achieve thislevel of production (2 millions b/d) and reinforce the transportationto the Skikda refinery of 5 million tonnes of gas a yearin view of exporting it to Italy". The Minister of Energy andMines also revealed the extension and renovation of fiveHaoud El Hamra stations, in Hassi Messaoud, wilaya ofOuargla, passing through the station of Djamaâ, wilaya of ElOued, Selka in the wilaya of Biskra and Barika, wilaya ofBatna, up to Skikda.Mr Khelil started his visit in the wilaya of Biskra by given the“starting signal” to the natural gas supply of 3,698 householdsin the centre of the commune of Tolga.Chakib Khelil inauguratesthe SP2 pumping station in LaghouatThe Minister of Energy and Mines, MrChakib Khelil commissioned the SP2pumping station located 25km to thenorth-west of the city of Laghouatwhich should increase the LPGtransportation capacity of the IZI oilpipeline from 6 to 9MTA.The works, which are of major importancein the LPG chain, support the newnational strategy for marketing hydrocarbonsaiming to achieve the objectiveof increasing LPG exports to 3 milliontonnes a year. This equipment, with anoutput of over 1,010m3/h, has beenrealised by the subsidiary of theSonatrach Group “Eterki, Batijic,Batiko” within a period of 30 monthswith a cost of over 1.5 million dinars,whilst taking account of protecting theenvironment. The station "is the firstplant in Algeria which releases no pollutionand recovers the oils and over pollutedproducts”, stated the Minister,adding that the entire station is fittedwith a remote surveillance system thatcan determine all anomalies.Taking advantage of this inauguration,the Minister, accompanied by theChairman of Sonatrach and executivesfrom the energy sector, inquired aboutthe operating of the station using multimediasupport before looking at thepumping stages with his own eyes. Itshould be noted that this project hasenabled the creation of 350 jobs.Seven petrochemical projects launchedPublic opening of the technical tenders of seven petrochemical projectsThe days of 16, 17 and 18 April 2006 saw the holding of two sessions, in parallel, to open the technical tenders of seven petrochemicalprojects falling under the Downstream Activity. These relate to the following projects :1. Ethane steam cracking plant project2. Methanol production plant project3. Fuel oil and linear alkyl benzene recycling plant in Skikda4. Crude oil refinery project in Tiaret4. Naphtha steam cracking project in Skikda (Skikda olefins)6. Purified terephthalic acid and terephthalic polyethylene plant project (PTA/PET) in Skikda7. Propane and polypropylene dehydrogenation project in Arzew.The tender opening commissions (COP1 and COP2 Downstream), after evaluating the conformity of the tenders presented, deemedthe technical tenders proposed by the tenderers admissible in accordance with the regulations in force. These tenders relate to:1. The ethane steam cracking plant project - tenders proposed by Basell Plyolifine GMBH (in consortium with Zamil, Shaw-Stoneand Webster), Itochu Sabic, Total Petrochimicals, LG Petrochemicals, Exxon Mobil.2. The methanol production plant project - tenders proposed by Basf, Sabic, Man Ferrostaal and the Consortiums lot and Vitol, ZamilGroup and Sojitz, Almet SPA/QPIC/Sotraco/Mitsui/Lurgi/PPSI.The opening of the technical tenders for the Tiaret new crude oil refinery project has been the subject of a four-week report. Theappeal for tenders report on the purified terephthalic acid and terephthalic polyethylene plant project (PTA/PET) was declaredunfruitful. The report for the technical tenders' opening days, which tool place from 16 to 18 April 2006, is summarised as follows:• Ethane steam cracking project : 6 tenders received• Methanol project: 6 tenders received• Fuel oil recycling project (with LAB) : 2 tenders received• Naphtha steam cracking project : 2 tenders received• PTA/PET project : no tenders received• New refinery project : opening of tenders postponedEnergie & Mines11November 2006

performancesPERFORMANCESChakib Khelil visits the Skikdaindustrial zoneThe Minister ofEnergy and Mines,Mr Chakib Khelil,made an inspectionvisit to several projectsthat have beencompleted or are stillunderway in theSkikda industrial zone.Energie & Mines12The first stage of this visit was the projectto construct a condensate plant witha capacity of 5 million tonnes and aninvestment of 28.06 billion dinars,19.55 billion of which in foreign currencies.The first stone of this infrastructurebuilt over a 45ha site was put in placein August 2005 by the President of theRepublic, Mr Abdelaziz Bouteflika,during his visit to the wilaya.Carried out by the Chinese company,the works started in December 2005and were completed in July 2008.Mr Khelil also inspected the project toconstruct a condensate storage plantwith a capacity of 300,000 m 3 of naphthaand 9,000 m 3 of natural gas.Another project inspected was the seawaterdesalination station which, oncecommissioned, will provide 10,000 m 3of drinking water daily to the populationof the wilaya, 75,000 m 3 of which to thecity of Skikda and 25,000 m 3to theindustrial zone. Of a total cost of over100 million dollars, this project will enablethe creation of 500 permanent jobs.Upon his arrival at the Polymed plant,which annually produces 130,000 tonnesof high density polythene andemploys 161 workers, the Minister wasgiven explanations on the productionprocess which started in May 2005thanks to an investment of 268.7 milliondollars. This plant is faced with difficulties,particularly financial ones, he wastold on the site.In the crowd, Mr Khelil inspected thehelium gas plant and the electric stationwhich are in operating phase. The commissioningof the helium gas plant startedon 25 May 2006, with a capacity ofNovember 2006600 million cubic feet of helium gas, aswell as 40 tonnes/day of nitrogen gasand 100 tonnes of liquid gas.This plant was constructed as part of theAlgerian-German partnership with 51 %owned by the foreign partner and 49 %owned by Algeria (Sonatrach). TheMinister was also given explanations onthe management of this plant.In the electric power plant, Mr Khelilwas given an overview of this plant'soperating process, aiming to reinforcethe electric network at the national level,whose production capacity is estimatedat 825 megawatts and whose actualcommissioning date was 17 July 2006On the other hand, the Minister, whenin the industrial zone, inquired about thestatus of the natural gas liquefactionplant and inspected the plant of thenational petrochemical company(ENIP) before going to the commune ofFelfla, where he inaugurated the educationalblock of the Institut algérien dupétrole (IAP - Algerian Oil Institute)and placed down the first stone of itsadministrative building and studentarea.The Minister also inquired about differentequipment in oil technique resoucesmade available to the IAP studentswhich, from 1981 to the end of July, hashad 567 graduates. “Several projectswhich are currently being studied will beannounced before the end of the currentyear”, confirmed Mr Khelil in a shortstatement to the press, at the end of hisvisit, specifying that “the realisation ofthe other five projects, in the industrialzone, is being done in accordance withthe programme outlined” and will be“ready in 2007-2008”.

performancesSatellites - an invaluable tool for surveillance,research and explorationSonatrach and the Algerian Space Agencysign a cooperation agreementA master cooperation agreement in terms of using and applyingspatial technologies in the oil and gas activity has been signed inAlgiers between the national hydrocarbons company Sonatrachand the Algerian Space Agency (Asal).This agreement, signed by the Chairman of Sonatrach, MrMohamed Meziane, and the managing director of the Asal, MrAzzedine Oussedik, must enable the national company to usespatial technologies in the surveillance of its facilities as well asfor its oil exploration projects.The agreement covers several domains, particularly oil researchand exploration, the cartography of the facilities, the preservationof the environment as well as the training of thepeople in these jobs. "With regards the geographic cartography,we particularly need satellite images for our exploration works inAlgeria and abroad”, said Mr Meziane, adding that the needsalso related to “the high resolution data for processing and interpretingseismic data”.Congratulating the progress made by Algeria in the domain ofspatial technologies, Sonatrach's chairman emphasised that hiscompany will endeavour to “carefully use these technologies toincrease the level of Sonatrach's performances”. Asal managesthe Algerian satellite Alsat 1 whilst awaiting Alsat 2 and Alsat 3.For his part, Mr Oussedik was delighted with the technical supportand equipment provided by Sonatrach to the agency sinceits creation, which has enabled the Asal to draw up “withdiscernment and optimism” an "ambitious and scientifically coherent”15-year draft programme (2006-2020).Designed with the users, particularly the Energy and Minessector, this draft programme, which will shortly be examined bythe Government Council, combines financial objectives andenvironment concerns, he added.Transportation of liquid hydrocarbons betweenAlgeria and TunisiaNew contract betweenSonatrach and TrapsaSonatrach and the Tunisian companyTrapsa have signed a new contract, inTunis, related to the transportation,from the Algerian-Tunisian border, ofAlgerian crude mainly coming from theIllizi basin (Zarzaitine) to the port ofSkhira, in Tunisia. The contract inquestion is concluded for a one yearperiod and will take effect as of 1January 2007. It will be tacitly andannually renewed, unless one of theparties demonstrates in writing, twomonths at least before its expiry date,its intention to end the contract ormodify it with a rider. Within the frameworkof this contract, Trapsa willcover, on Sonatrach's behalf, all operationsrelated to the use of its pipeline,namely :• The transportation of crude oil fromthe intake point to the maritime terminalof Skhira;• Its storage before loading onto tankers;• The pumping operations required forits loading on the tankers;• The drawing up of the tankers' loadingdocuments;It should be reminded that the firstAlgerian crude oil transportationcontract was concluded betweenSonatrach and Trapsa on 15 December1991.Energie & Mines13November 2006

performancesPERFORMANCESAerial survey campaign in Timimoun and RegganeSonatrach and Shell will shortlystart the worksThe company Shell AlgeriaReggane and Shell AlgeriaZerafa will, in associationwith Sonatrach, shortlystart the works on theZerafa blocks (Timimoun)and Djebel Hirane(Reggane) in the AlgerianSouth, indicated the nationalhydrocarbons companyin a press release.These works consist, stated Sonatrach,of an aerial survey campaign for measuringthe magnetic and gravimetric fieldsfrom the El Goléa airport.At the end of these works, the Anglo-Dutch company Shell will have surveyedsome 70,000 km over the Zerafa blockand 35,000 km over the Djebel Hiraneblock.Shell also plans to acquire, this year,two-dimensional seismic data on1,430km over the Zerafa block, addedthe press release, specifying that thedrilling works are planned for the year2007.These two blocks were awarded to Shellfor an amount of 61.6 million dollars, atthe end of the 6th appeal for tenders inApril 2005 after stiff competition withworld oil competitors which covetedthese acreages on which discoveries aremade.According to Sonatrach, "this projectmarks the start of an important explorationprogramme in partnership betweenSonatrach and Shell which hope towork together to highlight and increasethe value of new hydrocarbon reservesin Algeria".Other than these two blocks, Shell isalso on course for the integrated GTL(Gas to liquid - conversion of gas intoliquid for the production of clean fuel)project in Tinerhert (far south) whoseinvestment cost is estimated at morethan 3 billion dollars.The two companies are also bound by amemorandum of understanding on thecooperation in the domains, particularlythe oil and gas exploration and production,training in the upstream anddownstream (petrochemistry, refining,etc.), the transportation of hydrocarbonsand the marketing of liquefiednatural gas (LNG).The company Bombardier will supply the company with 4, 70 seat planesTassili Airlines takes offTassili Airlines, a subsidiary of the Sonatrach Group,and the Canadian manufacturer Bombardier signed,in Algiers, in the presence of Mr Chakib Khelil,Minister of Energy and Mines, and Mr Meziane,Chairman and CEO of Sonatrach, a contract for thesupply of 4 Q 400-type, 70 seat planes.The operation was concluded after an opening session ofthe tenders from the international appeal for tenders launchedby Tassili Airlines in January 2006. This took placeon 10 June in the presence of Mr Mohamed Meziane,Chairman and CEO of the Sonatrach Group. The acquisitionof these planes is part of the development strategy ofthe subsidiary Tassili Airlines providing for a programmeto purchase a diversified fleet of planes. In an initialphase, this means 70 seat planes which will be handedover during the third quarter of 2007 and initially assignedfor transporting para-petroleum oil personnel and then,later on, public transport.In accordance with the rules and procedures in forcewithin the Sonatrach Group, the first so-called technicalphase, enabled three potential suppliers to be retained,fulfilling the technical conditions of the brief, namelyAirbus (France), Bombardier (Canada) and ATR (France).The opening of the tenders at the end of the second socalledfinancial phase was organised at Sonatrach's' headoffice in Algiers.The company Bombardier was therefore selected to deliverthe four planes. Whilst awaiting their receipt, theCanadian manufacturer has committed to make availableequivalent capacities to the company Tassili Airlines invery short timeframes.Energie & Mines14November 2006

performancesThe constraints linked to the investment examined by a workshopbrought together by the MEMAn economic situation favourableto mining investmentThe workshop devotedto examining theconstraints linked tothe investment in themines sector inAlgeria has seen alarge participation ofrepresentatives fromthe mining authorityand mining operatorsfrom the public andprivate sector, (nationalsand foreigners).The participants were keen to point outthe current economic situation that isfavourable for the investment in themining sector in the world. This favourableperiod, marked by the increase inthe prices of metal, must be profitableto the Algerian mining sector to developits mining potential and increasethe investment, particularly in miningexploration. The debate on the subjectrevealed a number of constraints including:1. Slowness in the administrative proceduresand particularly those relatedto :• the payment of foreign currencies forpurchasing equipment, services, etc.• the granting of mining permits,• the issuing of consumption authorisationsupon receipt of explosive substances.2. Insufficiency of qualified humanresources in the director and executivecategory of mining jobs.3. Constraints linked to the bank financingsystem and to access to credit.4. Direct access to mining exploration,particularly for young companies.5. Access to the geological documentationparticularly for the sites put up fortender.6. Lack of information on the businessclimate in Algeria for the foreign investorsand persistence in the false imageof the country's situation, particularlyin terms of safety.7. Lack of knowledge of the mininglegislation by the decentralised administrativestructures (tax services, environment,forests, agriculture, etc.)8. Constraints linked to the usagerequirement upon receipt of explosivesubstances which have negative environmentaland financial effects, particularlyfor the large operations.9. Overlapping of mining control prerogativesbetween the DMI engineersand the mining authority.10. The populations' growing oppositionto the mining activity which deservesbeing looked into.11. The addition costs of inputs (dieseland explosives) for the plants located inthe south of the country.Recommendations were also formulatedby the participants, including :• Organisation of study days on thesubject of the constraints linked to themining investment with all the playersand parties concerned.• Assistance to mining investors, bythe mining authority, from otherauthorities.• Development of training courses inmining jobs.• Opening the direct access to miningexploration particularly for the substancesother than the industrial substancesby encouraging young explorationcompanies.• Updating of the regulation on the useof explosive substances, particularly forthe large mining operations.• Encouragement of certain areas ofthe mining activity such as the onedesigned for the production of marbleand decorative stone.• Establishment of a system for sharingthe costs of the inputs for the mineslocated in remote areas, particularlythose in the south of the country.• Bringing closer together the ANPMdepartments of the mining operatorsthrough receiving applications formining permits at the regional branchlevel.Energie & Mines15November 2006

performancesPERFORMANCESReports and prospects for mining activitiesMines : an immense depositof opportunitiesDue to the persistent constraints in the domain of importing specialisedequipment, qualified personnel and bureaucratic slowness, it is not yetpossible to give the Algerian mining sector its full capacities.It is from this finding that theexperts set about trying to findthe best options to overcomethese obstacles during a daydevoted to the development prospectsof the mining and quarry sector inAlgeria. This initial meeting, which washeld in the hotel El Aurassi, broughttogether operators from various backgroundsand with private individualstatuses, as well as foreign partners,such as the Australian GMA, theEgyptian Orascom and the Indian steelcompany Mittal Steel, which enabledthem to become fully aware of theconstraints encountered by the investors.The Minister of Energy and Mines,who attended this meeting, will callupon these operators to group togetherinto a professional association to“contribute to developing the sector”,as happens in most parts of the world.Indeed, for Mr Chakib Khelil, themines sector is a particular sector, withits specific investment and mineralresources' exploitation rules “whichare, by definition, non renewable andaggressive for the immediate environment”.For this reason, in his opinion,all mining operations have a limited lifecycle, regardless of extraction techniquesand methods used.At the end of the 1990s, this life cyclemeant that Algeria, who has alwaysbeen considered as a mining country,suffered a chronic deficit of mainmining operations, anarchic operatingof mines and quarries in the absence ofa reliable mining register and inadequateregulation, as well as a lack ofspecialised labour and the lack ofinvestments in this sector.The situation has greatly changedsince, and the Minister pointed out thatthe improvement that has taken placein the mine and quarry sector is not ofa short term nature due to the increasein the price of metals, “it is rather thedirect consequence of a new conceptwhose key words are transparency andcompetition”. This concept has rightlyentailed the putting in place of a newlegislative and regulatory frameworkput in place in 2001 - the date onwhich the mining law was promulgated.Furthermore, the mining developmentand exploration activity has resumedwith the participation of foreign partners.Currently, five projects of this type areunderway, in association with foreignpartners, confirmed Mr Chakib KhelilMines, a booming sectorSeventeen mining companiescreated in El OuedSince the promulgation of the law on mines in2001, which approves the opening of this sectorto private investments, 17 mining companiesand 13 other mining exploration companieshave been created in the wilaya of ElOued, indicated the Direction de l'industrie etdes mines (DIM). This authority issued 17mine operating permits in 2005 throughoutthe wilaya, indicate its managers.These permits have concerned the mining of11 salt deposits, located in several sites in thecommunes of El Meghaier and Oum Tiour, 4sand mines in the communes of Stil, Djamaâand Hamraya and 2 permits for clay and gypsumin the communes of Sidi Amrane andOued El Alenda. Furthermore, the samedepartments of the DIM granted, in the year2005, 13 mining exploration permits throughoutthe wilaya.In 2005, according to the same source, over72,000 tonnes of salt and over 20 tonnes ofclay, some 73,000m3 of sand and 200,000m3of gypsum were produced, according to thereports of the operators in this domain. Itshould be noted that the wilaya of El Ouedhas a large mining variety, particularly saltwhich, in addition, presents the particularity ofbeing renewable, located in the two largeChotts de Marouane and Melghigh, located inthe north of the wilaya, sand for the constructionand gypsum as well as clay.The DIM managers emphasise that “the whiplash” provided by the law of 2001 to this sectorin the wilaya has particularly enabled thewilaya to become self-sufficient in certain productsand master the production process, inaccordance with international standards.Hence, the production of salt in El Oued canreach over 1.5 million tonnes, which is sufficientto cover the domestic market's requirementsfor nutrient salt and industrial salt andproduce a surplus for exporting.The same applies for the other productswhose local production can also cover theconstruction and public works' requirements.This can all create positive impacts on thelocal economy and create jobs, add the samesources.Energie & Mines16November 2006

performanceswho pointed out that the development ofthe Ghara Djebilet iron deposit "wasstarted up in the framework of a recentcall for expressions of interest".And, for the first time in Algeria, it is aquestion of carrying out a geophysicalaerial survey which will be financed by amining company within the frameworkof its mining exploration activities,announced Mr Khelil, emphasising herethat this all demonstrates an economicrecovery in the sector. “It is also an indicatorof confidence from foreign investorsin the system and instruments putin place”.Mr Khelil also talked about the chapterof the creation of two agencies to regulateand promote the sector's activities,specifying that these agencies havedeveloped modern instruments tomanage and control our resources;agencies which have been able to develop,to date, a geological and miningdatabase, a reliable mining register andmanaged, in a modern way, the controland monitoring instruments in the environmentaldomain and in the domain ofa rational use of the resources.Hence, there are plenty of new opportunitiesoffered to this sector, althoughstill far behind the energy sector; a sectorwhich must therefore "be shaken up”- hence the usefulness of this daythrough which the Minister also calledupon the foreign investors to come “aslong as they act in compliance with theregulations and within the framework oftransparency and competition”, he finallystated.We should finally point out that the sector,whose investment is deemed highlycapitalistic, is nevertheless highly performing;we only have to look at thecurrent boom in the prices of metals andraw materials, such as gold, copper,iron, lead, etc. on the international marketsto realise this.The Minister callsfor the miningprofessionals to grouptogether in anassociationThe Minister of Energy and Mines, Mr Chakib Khelil, hascalled upon the operators working in the mine and quarrysector to organise themselves into a professionalassociation to contribute to developing this sectorwhich has experienced a “significant economic recovery”thanks to the law of July 2001 on mines."I ask all operators working in the mine and quarry sector, regardless oftheir status, to organise themselves, just like similar institutions known inthe world, into professional associations in view of providing the contributionto the development of this sector”, said the Minister during the worksof a day on the situation of the sector in 2005 and its outlooks.Mr Khelil reminded the operators of the efforts made by his department toboost this specific sector through its specific rules on investing in andusing mining resources which are non renewable and aggressive for theimmediate environment. He also reminded them of the “difficult situation”this sector is in, characterised particularly by a “chronic deficit of the mainmining operations, anarchic operating of mines and quarries, non-specialisedand ageing labour, as well as the cease in investment”.Mentioning the positive impact of the mining law of 2001, which providedfor the opening up of this sector to national and foreign private investment,Mr Khelil confirmed that “this opening up has enabled the sector toreport some 2.5 billion dinars to the State within the framework of awardingof mining permits, to create 17,000 jobs by the private sector, theinvestment of 50 million dollars by foreign partners and the creation of theAl Abed Ecole des mines for training in mining jobs”. He also mentioneda boost in the development of the Ghar Djbilet iron deposit (Béchar) anda pick in mining and exploration with 5 projects underway with foreignpartners."This shows an economic recovery of the sector and is also an indicatorof confidence from foreign investors in the system and instruments put inplace", confirmed the Minister who announced that the sector was currently"on the right track" and that new opportunities for its developmentwere being put in place. In this respect, he added that "foreign investorsare welcome in the mining sector, as long as they act in compliance withthe regulations and within the framework of transparency and competitionwhich we have put in place”.Nevertheless, the Minister regretted the persistence, in spite of the effortsmade, of "exogenous or endogenous constraints which are proving to bebarriers to more investment in this sector", calling upon the participants to“identify them and debate them to produce useful recommendations”.Energie & Mines17November 2006

performancesPERFORMANCESUpcoming reopening of the El Abed zinc-lead mine (Tlemcen)An investmentof 1,200 million dinars■ Signature of a master agreement between the Ministry of Energy and Minesand the mineral and geological resources exploration and operation officeof the province of Henan (China).■ Sonatrach has a 10% share in the capital of the new company.■ The modernisation of the école des mines in El Abed is also part of this programme.■ A production capacity of 1,000 tonnes/day in an initial stage.Closed since 2002 andtransformed into a schoolshortly after this date, theEl Abed zinc-lead minewill soon see its activity resumedbetter than before and its schoolbecome a real training centre forjobs in mining. Indeed, a masteragreement was signed between theMinistry of Energy and Mines andthe mineral and geological resourcesexploration and operation office(BEERMG) of the province ofHenan, in the People's Republic ofChina.The signing ceremony was boostedby the presence of Mr Chakib Khelil,Minister of Energy and Mines,accompanied by numerous executivesfrom the sector and Mr LiBaoquun, the BEERMG representative.Highly profitable, the investmentsassigned for the mine renovationproject are estimated at over800 million dinars, whereas the costof the geological exploration programme,which will be carried outover three years, amounts to 400million dinars, which gives a totalinvestment of 1,200 million dinarswithin the framework of this operation.This project also provides forthe Sonatrach Group to have a 10%share in the capital of the new companyof Algerian law. The Ministerand the BEERMG representative,after emphasising the project'sstrong contribution to the reinforcementof relations of friendship andcooperation between the two countries,focussed on the socio-economicimportance of the project,whose first consequences will bepalpable in terms of employment.The sealing of this operation willcertainly have significant resultsparticularly in this border region.That's not all as, according to theManaging Director of mines in theMinistry, Mr Bouarroudj, the training,which will be given on site inthe El Abed school, is of majorimportance as it will enable knowhowin the domain of mines to bepassed on.As a reminder, a subsidiary ofBEERMG already has two miningpermits in Béchar, namely theBoukaïs deposit and the second permitwithin the framework ofcontracts awarded is the manganesedeposit in Guettara.Beforehand, the visit of severalChinese delegates in situ and thespecialists, having travelled in thisframework, confirmed the interestand appreciated the potential andthe possibility of discovering newresources in the El Abed region.Now that the legal framework is inplace, the next stage relates to thecreation of the association withSonatrach (10%) and the materialisationof the fixed objectives, particularlya production of 1,000 tonnes/dayin the second phase.Finally, it should be noted that theoperating of this mine will overcomethe zinc deficit, by putting newquantities on the market. The deficitis mainly due to the closing of theChaâbet El Hamra zinc mine in thewilaya of Sétif.Domestic gold market85% of gold soldwithout a hallmarkIn a domestic market that consumes 12 to 14tonnes of gold annually, 85% of this importantquantity escapes control. This means that theblack market has never lost ground and thatthe points of sale of no less known “dellalat”are full of customers - often customers lookingfor good opportunities, ignoring the “golden”rule of having a hallmark. Given this state ofplay, the national operator of this preciousmetal, Enor (Entreprise nationale de traitementand extraction de l'or) finds itselfconfronted with the imposed world price andfluctuations of the black market hence fixingits rules. The production of this national company,which currently supplies 700kg of gold ayear from the Tirek mine and 3t fromAmesmessa, remains, unfortunately, far fromcovering the national demand and, hence, themarket is more focussed on importing, particularlycoming from the Middle East - unfortunatelyillegally. The national production is, furthermore,important in the Arab world with173.6 tonnes. The mining ensured by Enorhas opened up to partnership thanks to themining law of 2001. Hence, a Lebanese companyhas already invested in the market withtwo mines and a second one recently authorised.Furthermore, Enor intends to reinforce itsarea of operation.With regards the Amesmessa mine(Tamanrasset), the first gold bullion will beproduced in the second quarter of 2007. Thismine, run with the Australian company GoldMines of Algeria, has an annual productioncapacity of 3.2 tonnes.Energie & Mines18November 2006

performancesMining explorationFour foreign companiesenter the lists■ Gold, lead and zinc miningacreages concerned by the appealsfor tenders.Four foreign companies, two of which Chinese, have submittedtenders for the exploration and upgrading of gold, leadand zinc mining acreages (prospects) at the end of the openingof the international and national tenders. These appealsfor tenders, launched in July by the Office national de recherchegéologique et minière (ORGM) and its subsidiary Goldim,concerned “looking for partners interested in the explorationand upgrading of mining prospects”. Two of these appeals fortenders concern three lead-zinc prospects in the Guergourmassif in the wilaya of Sétif including the Boukhdema, KefSemmah and Aïn Sedjra deposits and the Isselfen gold prospectin Hoggar (Tamanrasset) which combines the Isselfenesouth 1 and 2, Seldrar and Iderekssi deposits. The thirdappeal for tenders concerns the copper and gold prospect ofTifraouine in the wilaya of Aïn Témouchent. For the three leadand zinc prospects, four companies, namely the Chinesehydraulic works company Shaolin and China Non FerrousMetal, the Moroccan company Managem and the British companyMaghreb Minerals have been selected out of the ninecompanies which submitted tenders. For the Isselfene goldprospect, two companies are in competition. These are theChinese company Shaolin and the British company MaghrebMinerals. The copper and gold acreage of Tifraouin has notreceived any tenders and has, consequently, been declared“unfruitful” by the tenders' commission. The opening of thefinancial tenders must be done in a month's time.Speaking at the opening of the ceremony, which took placein the presence of the secretary general of the Ministry ofEnergy and Mines, Mr Fayçal Abbas, the managing directorof the ORGM, M. Semiani, indicated that this operation is thefourth of its kind launched by his organisation. He remindedthe participants, in this respect, that the ORGM has alreadycontracted three partnerships with Algerian and foreign companiesaround the Tiririne gold deposits, with a Lebanesepartner (Zakhem) and In Abegui, with the subsidiary GHR ofthe Taures group and the copper-gold deposit of Tan Chaffaowith the subsidiary MTC of Maghreb Minerals. The explorationworks of these projects "are already at an advancedstage” specified Mr Semiani.Having obtained the necessaryauthorisationsEnor starts the firstexporting operationof Algerian goldAt the end of long administrative formalities, the Entreprised'exploitation des mines d'or (Enor) has obtained the authorisationfrom the Customs authorities to proceed with thefirst exporting operation of gold extracted and processed inAlgeria.Having been faced with difficulties of its production of goldleaking on the Algerian market, Enor had to turn towardsthe foreign markets where it has just placed a quantity of92kg of this precious metal.The spectacular increase in the price of gold, which has permanentlyincreased above the threshold of US$500 sincethe start of 2006, has reduced demand; on the other hand,the severe measures taken by the guarantee and tax authoritieshave ensured that there is a return of the local clienteleto the informal market.The time for the leaking of production has moved to almost3 months on average, which has a very harmful effect on thecash flow of the Tirek production plant. The financial riskhas become a reality.Given this state of play, Enor initiated approaches with theBank of Algeria and the Customs authorities to obtain theauthorisation to export and sell gold on the internationalmarket. This is a marketing alternative for Enor, enabling itto mitigate the financial risk.These approaches, after many actions, finally ended andafter several months and Enor obtained the authorisationfrom the Customs authorities for exporting the gold. Thefirst operation consisting of exporting 92kg of gold was carriedout on 8 September.Energie & Mines19November 2006

CHRONICLEGold in the wakeof oilByMohamed Sofiane KasbadjiIn the last few weeks,gold has appeared asa collateral victim ofthe downturn in oil prices.Having fallen toits lowest levels forsome months, theprice of oil has had animpact on the goldprice. Last spring, theounce reached historicheights on the Londonmarket, flirting with715 dollars, whichthen represented aspectacular leap of200 dollars comparedto its price at the startof the year.Just like oil, nothing thenseemed to be able to stopits ascent.Adding to an upwardsspeculation movement on all rawmaterials prices, demand for goldexperienced great impetus fromthe large emerging countries, suchas China and India.But, since the start of October,gold, in parallel with the price ofoil in strong decline, experienced ajust as considerable reduction, andis only worth 567 dollars, i.e. areduction of about 25% comparedto its peak at the start of the year.Now, although with the reductionof the price of the barrel, the inflationistpressures which threatenedthe economies of the large industrialistcountries dissipated, gold isthe ideal safe haven investmentagainst inflationist risks. It particularlyattracts all holders of fixedincome securities, whose value iseroded by the increased prices andcorrelatively by the depreciation inforeign currencies. In such conditions,a new reduction in the oilprice could draw the gold pricedownwards with it.On the other hand, a new upsurgein the barrel would benefit theprice per ounce. Some experts are,for their part, betting on a majorrecovery in the gold price.Counting on a reduction in interestrates in the United States, theybetter forecast a surge in the priceof gold which might culminate, intwo years' time, in a new record.These experts in fact consider thathigh interest rates penalise gold, asholding this metal does not giverise to payment of interest. It istherefore at a disadvantage comparedto coupon-bearing securities.Benefiting, furthermore, from anexpected increase in demand fromjewellers, the yellow metal couldreach a price of 700 dollars perounce in 2007 and 750 dollars in2008, with peaks of around 850dollars.M. S. K.Energie & Mines20November 2006

ELECTRICITYThe largest project initiated in the Algerian electric industrySignature of the HadjretEnnous contractual package■ The future plant must be commissioned in 2008 and will cost 826 million Americandollars.■ It is the consortium SNC Lavalin and the Emirate company Moubadala which willbuild it, owning 51% stakes in SKF.■ 70% of the investment will be financed by the banks BEA and Cnep, without a shareholders'guarantee. This is a first !The largest project initiated inAlgeria in the electric industry,and which should be commissionedin September 2008, wasofficially concluded at the end of thesigning ceremony of the first contractualpackage, which took place at the headoffice of the Ministry of Energy andMines in Hydra.This package, which will concern, therefore,the construction of the HadjretEnnous plant, is comprised of almost tencontracts, ranging from the partnershipagreement between the contracting partiesto the insurance contracts, includingthe articles of association of the new companycreated, the SKH, and the constructionand operating contracts.With a total capacity of 1,227MW, thenew plant will cost an investment estimatedat 826 million American dollars, whereasthe final capital of the new company,Sharikat Kahraba Hadjret Ennous (SKHSPA), is 248 million dollars, which representsthe equivalent of 30% of the investment.This plant will increase the annualcapacities of the Algerian electric powerplants by over 20%, as stated byMr Badaoui, vice president of SNCLavalin, who is the co-owner with itsEmirate counterpart Moubadala of 51%of the shares of this immense project.The financing of this investment will thereforebe ensured for an amount of 248million American dollars by the shareholderspro rata of their shareholding in thecapital of the company SKH and for anamount of 578 million dollars by theAlgerian banks, namely, the BEA, theBNA and the Cnep, on the basis of a norecoursefinancing, which implies that thecompany SKH must, throughout the operatingperiod, ensure revenues capable ofpaying its costs and repaying its debtwithout having recourse to its shareholders.And it is rightly this requirementwhich is the main source of “the complexityof raising the contractual package”,as explained by the Chairman ofSonelgaz, Mr Noureddine Bouterfa, whoindicated in this context the fact thatwhilst the phase related to the selectionfor the EPC contract, which was completedon 17 December 2005, by the selectionof SNC Lavalin, had not poseddifficulties due to the fact that it put twocandidates in competition with eachother, “the phase which took place lastFebruary, and today's phase, which haveput the investors in contact with the buyerof the electric power production fordrawing up the contractual package, hasin fact, according to Mr Bouterfa, thistype of project, where the risks matrix isbased on a win-lose situation, “each ofthe players do their best to place the riskwith the other player”.In other words, the State, the energybuyer, the fuel supplier, the constructor,the operator, the banks, the insurancecompanies, the investors… everyone triesto place the risk with the other player.For the Chairman of Sonelgaz, his group'sambition was to get the lowest pricepossible by transferring as many risks aspossible to the company SKH. “It is itsresponsibility to accept the possibility ofnot achieving the rate of return on capitalthat is hoped for”, he added, specifying,however, that, on the other hand, eachSonelgaz concession may incur anincrease in the price which, inevitably,would be passed on to the end consumer.Given this, and after negotiations,the price excluding fuel obtained wasDZD1,750/kwh. According to theChairman of the Sonelgaz Group, thisproject is important because it is the firstof its kind to have been concluded on thesimple signature by the Sonelgaz distributionsubsidiaries, without the State'sguarantee; subsidiaries which will buy theproduction from the new plant.With regards the Algerian partners, theteams responsible for the practical implementationof this project are far frombeing neophytes, since, according to MrBouterfa, these have already been involvedin sealing the Kahrama project a fewyears ago, and they also enabled thoseworking today within the framework ofthe BOO and the BOT to have a minimumamount of information and documentssufficiently drawn up to enablethem to initiate and conclude such projects.The Chairman did not forget to remindthose present, in this context that theKahrama seawater desalination project inArzew, together with an electric powerplant, “has been one of the most complexprojects to finalise given the crossed risksinduced by the particularity of having twobuyers which sampled two differentproducts - water by Sonatrach andelectricity by Sonelgaz”; a successful package,certainly, but which requiredimmense effort, according toMr Bouterfa. Finally, the different partiesto the contract, as well as the Ministerof Energy and Mines, Mr Chakib Khelil,did not fail to congratulate each other onthe conclusion of such an agreement eachhoping for other similar projects in thefuture, based particularly on transparencyand innovation in the different stages oftheir accomplishment.Energie & Mines21November 2006

performancesPERFORMANCESChakib Khelil answers questions from the deputies52,000 of the capital’s householdswill be connected to the city gasnetwork by the end of 2009The minister of Energy and Mines, MrChakib Khelil, announced in front ofthe members of the Assemblée populairenationale (APN) that 52,000 householdsin the wilaya of Algiers will beconnected to the city gas network bythe end of 2009.To a question on the non-connection ofsome districts of Algiers to the city gasnetwork, particularly Dergana (BordjEl Kiffan), the Minister emphasisedthat the priority has been granted tothis city which will be connected to thenetwork in this vital way in 2007,adding that the additional economicprogramme 2006-2010 plans theconnection of 4,700 households in thecommunes of Rahmania, Mahelma andBouchaoui.To a question on the resumption of theoperating of the Oued Katrini oil fieldin Bouira, Mr Khelil indicated that thisfield's output, namely, 50m3, i.e. 300barrels/day "is low", adding thatSonatrach plans to import equipmentspecially designed for the low outputwells in view of improving their production."If this approach were to produce goodresults, it would be extended to the restof the wells”, he said. In the samecontext, Mr Khelil announced that the2006-2010 prospecting and explorationprogramme will be launched in thewilayas of Laghouat, Tiaret, Djelfa,Médéa, El Bayadh and Khenchela.With regards the construction of a fuelstorage and distribution plant in OumEl Bouaghi, the Minister indicated thatthis project is open to private investment,specifying that the constructionof such an infrastructure depends onthe wilaya's investment capacities.The wilaya of Oum El Bouaghi, whichis supplied with 70,000m3 of fuel fromthe region of El Khroub, has no storageproblem, emphasised the Minister,confirming that his department is readyto build the infrastructures “if the studiesconfirm its opportunity”.On the fringes of this plenary session,Mr Khelil indicated to journalists thatthe hydrocarbons law, currently withthe economic affairs, development,industry and planning commission, willenter into force at the start of 2007,after the signature of the applicationtexts.A 7th appeal for tenders for the prospectingand mining of hydrocarbonswill be launched at the start of 2007.Kanaghaz obtainsthe ISO certificationThe company Kanaghaz has just successfullyundergone the first monitoringaudit of its Quality Management Systemaccording to the requirements of thestandard ISO 9001 version 2000.This audit is part of the framework of thecompany's 2nd Certificate and demonstratesthe efforts put into continuallyimproving the quality of the services itprovides, namely the installation of gaspipelines.Energie & Mines22November 2006

performancesMr Chakib Khelil in BiskraIncrease in the production,development of exports andimprovement of the new energiesThe Minister of Energyand Mines, Mr ChakibKhelil, on a working visitto the wilaya of Biskra,announced that “theAlgerian State has setitself the objective ofincreasing the volume ofhydrocarbons exported,promoting the petrochemicalindustries andimproving the newenergies”.During a working sessionheld at the centre of thewilaya of Biskra, Mr Khelilemphasised that “themodifications made in the legislationconcerning mines, electricity andhydrocarbons have enabled nationaland foreign private operators to accesscertain activities along side the publicsector, hence developing investmentand employment”.The Minister indicated that there arecurrently “four electricity productionplants within which private operatorshave become partners”, adding that“another plant is managed with aforeign operator”.With regards the development of thepetrochemical industries, Mr Khelilindicated that "10 plants are in launchand completion phase, one of which isa fertiliser plant". He emphasised thatall the facilities "are given to investorswho can turn their ideas into reality inthe directions of their choice, by encouragingthem to quickly construct the oilproduct transformation plants"."The State has put considerable effortinto the domains of prospecting andproduction, which has enabled it toincrease production to 900,000 barrels/daycurrently, and in 2010, it plansto increase gas production to 85 billioncubic metres compared to 62 billioncubic metres currently", stated theMinister."The concern with increasing the productionis accompanied by anotherpriority - to increase the network ofequipment, particularly a new refineryin Adrar and another one planned inTiaret with a capacity of 300,000 barrels/day”,also indicated Mr Khelil."In the space of 13 months, 13 newdeposits have been discovered over thelast period, compared with 8 depositsin 2005”, further stated the Ministerwho emphasised “the encouragingeffect induced by these discoveries”.Mr Khelil reported on an electric powerplant project of 150 megawatts inHassi R'mel, wilaya of Laghouat; "oneof the most modern plants, entailing amost remarkable financial profitability”,emphasised Mr Khelil, indicatingthat “this project is planned within theframework of alternative energies tooil". He also announced a plant inOumache (Biskra) for the productionof hydrocarbon by-products, methanolalcohol (5,000 tonnes/year), but alsocoffee, dates and proteins for cattlefodder.Answering questions from the operatorspresent in the working session, theMinister mentioned the issue of thesupplies of the natural gas pipelinesand the increase in the price of copperelectric cables on the world market. Healso reported on the prospect of creating9,000 jobs in the energy and electricitysector.It should be reminded that the Ministerinaugurated the national gas networkof the city of Sidi Okba where 3,998households are supplied with power.Energie & Mines23November 2006

ELECTRICITYInterview with Mr Mustapha Guitouni, Chairman of SonelgazDistribution Algiers“Sonelgaz takes over the relief”New things are happening at Sonelgaz. The relief work which depended onsubcontractors is today taken over by the company, which just recently initiated anambitious training and recruitment programme. It might perhaps be important to pointout that out of the 250 new employees recruited by SD Algiers, 55% are women…Interview byA. FadilaEnergie & Mines24El Moudjahid : Sonelgaz hasset itself the objective of fullytaking over its relief work bythe end of 2007. What is, therefore,the importance of thisoperation ?M. Guitouni : You should be awarethat the relief work is Sonelgaz' baseactivity. It is a strategic activity for anycommercial company and we cannotleave it on the margin of Sonelgaz' restructuring.We can even compare it tothe company's piggy bank and thefavoured channel for the communicationand proximity with the customerbase.What are the missions of reliefworkers ?More than ambassadors of Sonelgaz,they are a friend and advisor of theconsumers. They give them informationand advice on the healthy useof energy and visually ascertain theproblems with our customers.You say that this is Sonelgaz'base activity. Why did yourecruit subcontractors ?We have been forced to make use ofsubcontracting since 1997 and in avery specific economic situation.Sonelgaz then had to confront workforceand recruitment problems andthis is what pushed it towards focussingon subcontracting. But over time, thisoption has demonstrated its limitationswith a fortuitous recruitment whichwas not based on training and qualification.We have even had wind of certainirresponsible actions by theseNovember 2006employees who devote themselves tofictitious relief work, provided they arenot moved.What would be the impact oftaking back responsibility forthis activity on the provisionof services ?When Sonelgaz itself ensured the reliefwork, there were a lot less frauds andsignificantly less complaints. The reliefworker is Sonelgaz' eye in the field andpicks up this customer base and restoresthe image of the company's brand.In the near future, Sonelgaz will haveto face up to inevitable foreign competitionand it is well known that it iseasier to stop an activity than to pick itback up. This is why we have initiated aprocess which grants a lot of importanceto the adaptation of the customerbase to our new services. The firststage is called the mixed relief periodwhich includes some serious subcontractorswith out relief employees,whilst awaiting for Sonelgaz to fullyoccupy the field.These employees will thereforebe given special training...Sonelgaz' future employees will begiven two types of training. One technicaland the other commercial. Thisenables Sonelgaz to settle the problemsin situ by avoiding moving subscribers.This will therefore reduce our lossesand reduce our debt claims whilstensuring quick and targeted intervention.This training is part of Sonelgaz'restructuring and its slogan is re-focussingon the human resource. It aims toimprove the company's performancesthrough the development of professionalismwith which we will be able toface our competitors. It is done in theSonelgaz schools and will soon betaken on by schools specialised in disciplinessuch as marketing and others.The recruitment targets senior techniciansand particularly female personnel.Housewives can also feel more atease with these young relief girls andour customs require it.Sonelgaz is therefore focussingon new services…Yes, it's no longer the employees whocut and cash in, but the employees whoadvise and guide the customer. This isthe objective of our new vision : todevelop the provision of service. Thecue we give to these young people isinitially to ensure sincere, fair andregular relief through which we alsointend to make our customers loyal.How many employees aretrained in Algiers and its surroundings?For the SDA which combines the regionaldivisions of El Harrach, Bologhine,Birkhadem, Belouizdad and the twowilayas of Boumerdès and Tipaza, wewill train 250 relief workers, 55% ofwhom are women. Currently a wave of50 employees have completed the trainingand will very soon starting workingat the Belouizdad level. They willstart on 1 July.The other relief workers are being trainedand will be gradually recruited atthe Bologhine and El Harrach level.Sonelgaz will take over the relief activityagain by September 2007.

ELECTRICITYWhat is the situation with SDAlgiers debt claims ?First of all I should remind you that cuttingoff power is considered as a last resort inour relations with bad payers. 70% of the600 billion centimes of debt claims whichSDA Algiers accumulates are backed by thepublic organisations to which we have proposedthe annual agreement which enablesthe payment of consumptions in advance.For private individuals, we offer the formulassuch as the DCCP which comprises apayment on the CCP account. Sonelgazwill thus spare its customers of any travelling.They will not even have to receive abill since the payments are taken directly onthe account.Your departments are also facedwith fraudsters...This is a penal crime prohibited by law. Noless than 15% of our customers commitfraud with illegal connections. Up to now,we have filed no less than 120 complaintswith courts but we remain available to discussthe regularisation of these illegalconnections, particularly in the shantytowns. The problem is, however, lookedafter by our departments who work in closecollaboration with the APC.Reminder■ 250 employees trained by SD Algiers.The first ones will be operational as ofJuly in Belouizdad.■ The impact caused by opening up refrigeratorscorrespond to lighting one lampfor one hour.■ 800,000 electronic meters will be installedby 2009 in the central region.■ Fraudsters represent 10% of the customerbase of SDA which has filed 120complaints with the courts for illegalconnections.■ SDA's debt claims amount to 600 billioncentimes, 70% of which are backed bypublic organisations.Sonelgaz, results and outlooksChakib Khelil“Few countries of our categoryhave achieved our levelof penetration in natural gas”"Today, the Sonelgaz Group looksnothing like it did ten years ago". It is inthese terms that the Minister of Energyand Mines, Mr Chakib Khelil, describedthe results announced by the electricityproducer. Making another comment onthe increase in prices claimed bySonelgaz, the Minister indicated that this“is completely legitimate”, based on thefact that this sector has an activity whichmust be financed by those who use its services.Hence, for it, it is the consumerswho have to participate 30% in the financingof the projects, “which is an internationalnorm”.With regards the need to grant subsidieson the consumption of electricity for theinhabitants of the South, the Ministerspecified that these subsidies are notwithin Sonelgaz' remit, but rather theState's, "as stipulated by the law on electricityand gas".Mentioning certain projects in progress,Mr Khelil pointed out that the interconnectionlinks with Italy and Spain arebeing finalised through discussions withSpanish and Italian groups at the sametime. Furthermore, the Minister dealtwith the problem of energy wastage,emphasising the necessity to continueawareness campaigns to enable the Stateand citizens alike to make savings.Indeed, in his opinion, there is no point inmaking investments which are not neededand which are likely to serve little, startingwith the fact that the realisation of1,000MW of electricity requires aninvestment of 500 to 600 million dollars.With regards natural gas, the Ministerindicated that he was satisfied with theresults obtained to date, stating that “fewcountries of our category have achievedour penetration level in natural gas”.Sonelgazinvestment perspectivesA total investment of almost 9 billionAmerican dollars is planned over the2005-2009 period, announced theChairman of the Group, stating, amongstothers, that 5.3 billion dollars will go toelectricity and over 2.2 billion dollars willbe reserved for natural gas. In addition,the Group's partners should ensurealmost 1.3 billion dollars in participationon the electric power plant projects.The Sonelgaz programme for this periodalso plans to produce almost 8,000MW ofelectricity production means, 1,500MWof which in replacement. Electricitytransportation will, for its part, see anadditional capacity in transportation andinterconnection lines of around 4,000kmfor the very high voltage (60KV) and 113new electric distribution and interconnectionpost plants.The distribution of the electricity, whichwill be ensured through medium voltagenetworks (10 and 30KV) and low voltagenetworks (200 and 380KV) will see amajor development, with more than69,000km of lines, 30,000 posts and1,250,000 meters.With regards natural gas, the realisationsfor the transportation and distributionnetworks are, respectively, 3,000 and24,000km, over 300 new public distributionsin addition to the 500 already existing.The growth outlooks are countingon increases of almost 7% for electricityand 5% for natural gas for the period2005-2009.Hence, the production of electricityshould increase from 33,638GWh, in2005, to 43,000GWh in 2009. The majorityof this energy, i.e. 70%, will be ensuredeither by Sonelgaz, or by social partners(up to 30%). The consumption ofnatural gas on the domestic market willincrease from 16.3 billion cubic metres in2005, to 17 billion cubic metres in 2009.With regards customer statistics, theseshould reach 1,250,000 subscribers forelectricity and 700,000 for natural gas.This could bring the total number of customersto over 7 million for electricity and2,800,000 for gas in 2009. The Group'stotal workforce, for its part, should reach60,000 employees, after its reinforcementthrough the recruitment of some 10,000new employees over the next three years.Energie & Mines25November 2006

ELECTRICITYConstruction of the Hadjret Ennous plantSonelgaz is using all its energyThe future plant must be commissioned in 2008 and needs aninvestment of 826 million American dollars. With Hadjret Ennous,the sector counts on commissioning eight other electric power plantsby 2009.This largest project initiated inAlgeria in the electric industry,and which should be commissionedin September2009, namely the construction of theHadjret Ennous plant, has been thesubject of a presentation meeting at thehead office of the Ministry of Energyand Mines.The Chairman of the Sonelgaz Group,Mr Noureddine Bouterfa, has in facthighlighted all the specificities of thisintegrated project which consists of theconstruction of this combined cycleplant, with a total capacity of1,227MW, but also of a large evacuationsystem for the electricity producedusing the 400KV technique and finallya gas pipeline intended to supply it withnatural gas.With a total capacity of 1,227MW, thenew plant will require an investment of826 million American dollars, whereasthe final capital of the new company,Sharikat Kahraba Hadjret Ennous(SKH SPA), is 248 million dollars,which represents the equivalent of 30 %of the investment. This plant willincrease the annual capacities ofAlgerian electric power plants by over20%. The financing of this investmentwill therefore be ensured for an amountof 248 million American dollars by thecompany's shareholders, namely theCanadian SNC/Lavalin and theEmirate Moubadala, which own 51 %of the capital of this immense project,and whose investment will be made prorata of their shareholding in the capitalof the company SKH, and for anamount of 578 million dollars by theAlgerian banks, namely, the BEA, theBNA and the Cnep, on the basis of ano-recourse financing, which impliesthat the company SKH must, throughoutthe operating period, ensurerevenues capable of paying its costs andrepaying its debt without havingrecourse to its shareholders. And it isrightly this requirement which is themain source of “the complexity of raisingthe contractual package”, asexplained by the Chairman ofSonelgaz, Mr Noureddine Bouterfa,who indicated in this context the factthat whilst the phase related to theselection for the EPC contract, whichwas completed on, by the selection ofSNC Lavalin, had not posed difficultiesdue to the fact that it put two candidatesin competition with each other, “thephase which took place last February,and today's phase, which have put theinvestors in contact with the buyer ofthe electric power production for drawingup the contractual package, hasactually been very difficult and timeconsuming.”In fact, according to Mr Bouterfa, thistype of project, where the risks matrixis based on a win-lose situation, “eachof the players do their best to place therisk with the other player”.In other words, the State, the energybuyer, the fuel supplier, the constructor,the operator, the banks, the insurancecompanies, the investors… everyonetries to place the risk with theother player.For the Chairman of Sonelgaz, hisgroup's ambition was to get the lowestprice possible by transferring as manyrisks as possible to the company SKH.“It is its responsibility to accept thepossibility of not achieving the rate ofreturn on capital that is hoped for”, headded, specifying, however, that, onthe other hand, each Sonelgaz concessionmay incur an increase in the pricewhich, inevitably, would be passed onto the end consumer.Given this, and after negotiations, theprice excluding fuel obtained wasDZD1,750, a price which remainsEnergie & Mines26November 2006

within the lower price bracket, excludingfuels, observed on the world market of thecombined cycle plants, as he indicated.According to the Chairman of theSonelgaz Group, this project is importantbecause it is the first of its kind to havebeen concluded on the simple signature bythe Sonelgaz distribution subsidiaries,without the State's guarantee; subsidiarieswhich will buy the production from thenew plant, since SKH can neither sell toother customers nor export its electricity.With regards the Algerian partners, theteams responsible for the practical implementationof this project are far frombeing neophytes, since, according toMr Bouterfa, these have already beeninvolved in sealing the Kahrama project afew years ago, and they also enabled thoseworking today within the framework of theBOO and the BOT to have a minimumamount of information and documentssufficiently drawn up to enable them toinitiate and conclude such projects.The Chairman did not forget to remindthose present, in this context, that theKahrama seawater desalination project inArzew, together with an electric powerplant, “has been one of the most complexprojects to finalise given the crossed risksinduced by the particularity of having twobuyers which sampled two different products- water by Sonatrach and electricityby Sonelgaz”; a successful package,obviously, but one that required immenseeffort, according to Mr Bouterfa.Hence, with the power plants which will befully commissioned this year (Naâma 160MW) and Berrouaghia (500 MW), theplants in Marsat El Hadjadj (80 MW),Oran (80 MW), Algiers Port (80 MW) andAnnaba (80 MW) which will be commissionedin 2007, and the Hadjret Ennousplant, the national electric system will bebetter consolidated to respond to anincreasing demand, felt Mr Bouterfa whospecified in this context that the peakdemand planned for 2008 (date on whichthe plant will be commissioned) will be7,600MW, whereas it reached 5,921MWlast winter. "However, the Chairman pointedout that other plants are also plannedin 2009, with the commissioning of theTerga (800MW) and Koudiet Ed Draouch(800MW) plants. A large scale programmewhich requires an investment estimated at2.8 billion dollars, according to theChairman who specifies that, by 2009, allthe prior work for the emergence of acompetitive market will be met.The Algiers Stock Exchange is emergingfrom a long period of lethargySonelgaz listed on theAlgiers Stock ExchangeSonelgaz' bond has been introducedon the listing of the Algiers StockExchange. This introduction, whichwill be followed by others, is the endof a considerable amount of workcarried out by the players on themarket within the framework of theestablishment of a financing methodthat is alternative to bank loans.This is what the chairman of theCosob, the MDs of the managementcompany of the Stock Exchange andof Algérie Clearing and the financedirectors of Sonelgaz and of theBNA confirmed, respectively MessrsSadmi, Rahni, Ismaïl, Choual andChougar in a press conference heldin the hotel El Aurassi.The latter, in fact, have turned tothis method of financing which presentsmany advantages for companies,banks and private individualsalike.The conference speakers, who werekeen to emphasise the importance ofthe bond market, which is a largesource of financing that is lessexpensive than the traditional financing,revealed that this first listingsession for the Sonelgaz bond wasdeemed fruitful since priced at101.10%, before continuing bysaying that the 1,500 lots ofDZD10,000 issued on the markethave been traded, corresponding toa value compromised ofDZD15,165,000.They also recorded 21 purchase andsale orders. The total amountsrequested for purchase are estimatedat 3,197 lots whereas those offeredup for sale represent 1,500 lots.During this press conference,Sonelgaz' finance director indicatedthat the company's bond loan issueda year ago has been preceded by theorganisation of a citizen awarenesscampaign, before adding that thisfinancing method will enableSonelgaz to initiate investment projectsthat can better respond to thedemand for gas and electric power.The speaker explained the use of thebond loan by the importance of thesector's development programme forthe next few years which will requireno less than 10 billion dinars Thesame director said, furthermore,that the difference between the operatingcosts and the prices is quitesignificant. This is borne bySonelgaz – hence the interest, heinsisted, in finding other forms offinancing. To this end, he did notexclude the launch of other operations.It should be reminded that Sonelgaz'bond was transmitted via bankcounters, thus enabling a saving ofalmost 120 billion dinars to be savedover the last three years.The Sonelgaz representative, inresponse to a question on the listingof the Sonelgaz bond on the StockMarket and its position on the bondmarket, said that his company is alarge industrial investor and will notleave the Stock Exchange.It should be noted that Sonelgaz'introduction on the Algiers StockExchange ends a depressed period,characterised by a stagnation in subscriptionswhich lasted almost fiveyears.Energie & Mines27November 2006

performancesPERFORMANCESChakib Khelil“The drinking water shortagewill be overcome by 2009”The drinking water shortage will beovercome by 2009, countrywide,through the national desalination programme,stated, in Chlef, Mr ChakibKhelil, Minister of Energy and Mines."By 2009, this programme plans theproduction of 1,800,000m3 of water"added the Minister who specified that“the different production plants, beingbuilt, particularly in the west of thecountry, will in the future produce1,200,000 m 3 to which 600,000 m 3 willbe added in a second stage".With regards satisfying the domesticmarket's need for electric power, theMinister of Energy and Mines remindedthose present that “important projectsare being completed and otherswill shortly be launched to totally satisfythe market's needs in terms of electricpower”.“However, he noted, the challenge withwhich the domestic market is confronteddoes not reside in the volume ofproduction, but in the national electricpower transportation capacities, whichremain below the domestic market'sactual needs”. To overcome this malfunction,Mr Chakib Khelil mentionedthe solution of the interconnection betweenthe different production sourcesof the domestic network, which will beundertaken through the upcomingimplementation of the east-westconnection corridor.With regards the management of electricpower, the Minister emphasised theadvantages for the consumers, generatedby the reorganisation of theSonelgaz company, which finds itself,thanks to its new “holding company”status, able to simultaneously ensurethe production, transportation and distribution.According to the Managing Director of Andi3 billion dollars of FDI in 2006"Sixteen large foreign direct investment (FDI) projects representinga value of 612 billion dinars are expected for 2007”,stated, on the waves of national radio's Channel 3, MrAbdelmadjid Baghdadi, managing director of the Agencenationale de développement des investissements (Andi), whoemphasised that Algeria is attracting more and more internationalcapital in the sector excluding hydrocarbons. The discussionsunderway have made significant progress, accordingto Mr Baghdadi, who feels that the new investment cost is “oneof the most attractive” in the south region of theMediterranean. Hence the renewed interest of businessmenwho are starting to become aware, in his opinion, of the financialpotentials of Algeria and the profits they might gain fromit. These large investments planned in Algeria, next year, mainlyrelate, according to the same source, to the strategic sectorssuch as industry, tourism, energy, seawater desalination andfertilisers. In this respect, he did not fail to recall the percentageof these investments in the Cherchell Hadjret Ennousselectric power plant project. "By the end of 2006, we expect 3billion dollars of foreign direct investment or in the form ofpartnership”, further announced the MD of Andi, saying thatthe volume of foreign investment is significantly increasing inAlgeria which recorded 2 billion dollars in 2005. With regardsArab investments, for which Algeria is starting to become a prizeddestination, the speaker focussed on the success of theEgyptian investments (Orascom), Kuwaiti investments(Watania), Saudi and Emirate investments, as an illustration.In this framework, he emphasised other sectors excludinghydrocarbons such as telephony, chemistry, property andservices. We should point out that Algeria has never stoppedadapting its legislation in this matter to respond to the aspirationsand complaints of potential investors. "The new investmentcode provides for new attractive measures in this respect,particularly customs and banking facilities, access to propertyand support before, during and after the investment”, he specified.About ten one-stop service counters are currently opennationally to receive the investment applications and respondto the concerns of businessmen, in the place itself chosen tocarry out ones investment project. "The last one-stop servicecounter to date was recently opened in the wilaya of Béjaïa”,he stated, to highlight the new policy to promote investmentsin Algeria. There is still a certain constraint to be lifted in thismatter, particularly access to property and certain bureaucraticpractices and this is one of the roles of the one-stop servicecounters which must get more involved in the investmentdevelopment process in all circumstances.We should indicate that in case of problems with these branches,the promoters are authorised, according to the newinvestment code, to start recourse before the Minister ofSupervision. This new legislation, which has just be promulgated,makes no difference between a national investor and aforeign investor at any time in the project, i.e. the creation,support measures and profiles.As to the transfer of their profits, they are not subject to anycondition, or limit once the fiscal and social obligations havebeen settled. This is why this code is deemed very attractive bythe financial operators.Energie & Mines28November 2006

performancesAccording to a studyAlgeria is the no. 3 Arab country in termsof attracting foreign investment flowsAlgeria is the numberthree Arab country interms of attractingforeign investmentswhich amounted to34.2 billion dollars in2005, indicated aBritish study whoseresults have just beenpublished.Algeria is ranked behind theUnited Arab Emirates,known for their modernlegislation as well as theiropenness to foreign investment, andEgypt, the most populated Arab countryand reputed for its financial openness,reveals the study entitled “Worldinvestment prospects to 2010: boom orbacklash" drawn up by EconomistIntelligence Unit from the reviewEconomist Magazine in collaborationwith the “world investment programmeof the University of Columbia”The investment flows towards Arabcountries, in 2005, reached 34.2 billiondollars, indicated the study before predictinga 6.7% increase for the currentfinancial year to 36.5 billion, i.e. 3% ofworld flows or what is equivalent, as acomparison, to the investments attractedby a single country such as Canadaor Hong Kong.The study furthermore warns againstthe payment at the end of the decade ofthe world direct investment flows, likelyto reach 1,200 billion dollars in thecurrent year, emphasising in passingthat this situation would benefit industrialisedcountries who would see theirshare rise to 70% to the detriment ofthat of developing countries which iscurrently around 35%. Most of theseinvestment flows since the start of thisyear related to acquisition and purchasetransactions of which the UnitedNew confidencefrom investorsAlgeria is in third place in terms of foreign direct investments (FDI) in theArab world, according to a study which has just been published in the Britishreview Economist Magazine.Algeria comes after the United Arab Emirates and Egypt in the ranking establishedby this study, which estimates the total amount of investments madein the Arab world, in 2005, at 34.2 billion dollars, an amount which shouldclimb to 36.5 billion for 2006. This study confirms the constant improvementin Algeria's attractiveness in terms of FDI whose projects do not only concernthe hydrocarbons sector, but also affect other activities apart from that of oil.Investor's confidence in our country is related to numerous factors which, inparticular, are the reinforcement of the stability and the numerous opportunitiesthe market offers in a context marked by a significant improvement in thecountry's economic situation. Investor's confidence is explained also by theimprovement of the business climate, further to the implementation of thereforms in the different domains. Other than the benefits provided by theinvestment code in terms of taxation, repatriation of profits, etc. the reformsinitiated by the modernisation of the authorities and the banking system havehad very positive effects in terms of transparency and quality of service. Theadaptation to the international standards and the upgrading process arebeing continued, still in view of a successful integration into globalisation.The five year economic recovery programme, which must entail expenditureof around 100 billion dollars, represents a significant work load for the financialoperators who are also counting on the growth in consumption further tothe creation of numerous jobs and to the improvement of household income.In addition to the rich potentials available, Algeria's comparative advantageswill be reinforced with the accomplishment of important projects in thedomain of infrastructures (east-west motorway, railway, ports and airports,dams, etc.). This modernisation effort in terms of infrastructures is alsoaccompanied by a serious work with regards improving skills and qualifications- another essential asset to take up the challenge of performance andcompetitiveness. With the installation of companies from Europe, the UnitedStates and Arab countries in Algeria, the snowball effect is leading to a multiplicationin the number of investments.States is the number one beneficiarywith a large attractiveness of directinvestments (a quarter of the world'sdirect investments between 2006 and2010). As for Europe, it would remainat the head of the direct investors in theglobal markets whereas the developingcountries the most in sight such asChina, Brazil, Mexico and India wouldconsolidate their positions in thisdomain.Energie & Mines29November 2006

performancesPERFORMANCESExports, excluding hydrocarbonsA volume of 788 million dollarsas of 30 September 2006The value of exports, excluding hydrocarbons,was estimated at 78 milliondollars, 70% of which represent semiindustrialisedproducts, on 30September of the current year, revealedthe Managing Director of theAssociation nationale des exportateursalgériens (Anexal). Mr Mohamed BeyNasri, who was speaking on the wavesof national radio's Channel II, feels thatAlgerian exports, excluding hydrocarbons,remain very low and do notreflect the national economic potentialsin spite of a certain improvement in thisperformance compared to 2005, andemphasised that the Algerian State hasimported the equivalent of 500 billiondollars over the last twenty years, whichhas led to, according to him, the fragilityof the national policy in the domainof exports and the absence of a clearvision able to encourage the privateinitiative. The MD of Anexal feels thatit would be judicious to consider a strategyin the sense of promoting anddiversifying exports, excluding hydrocarbons,by starting with the creationof a Ministry which would be exclusivelyresponsible for foreign trade.On the basis of the current state ofplay, Mr Nasri considers that it wouldbe utopian to claim a volume of 10billion dollars of exports, excludinghydrocarbons, by 2010 such as forecastby certain parties. On the other hand,he confirmed that the partnershipagreement with the EU has not giventhis expected impetus to foreign tradeand that the national economy remainsdominated by a rigid mentality whichgoes against Algeria's economic objectivesat the regional and internationallevel. The Algerian exporters' representativeforecasts an increase in the valueof Algerian imports in the next fewyears in relation to the increases expectedin the price of wheat and milk.Ould Abbès“Over 1,453,000 permanent jobs createdbetween 2000 and 2005”Over 1,453,000 permanent jobs have been created duringthe 2000-2005 period through job creation support schemes,announced, in Algiers, the Minister of Employmentand National Solidarity, Djamel Ould Abbès."The three job creation support schemes, such as the generalinterest activities (IAIG), the local interest seasonal jobs(Esil) and the high intensity labour public utility works(Tup Himo) have enabled the creation of 1,453,593 permanentjobs in the period 2000-2005", stated Ould Abbès,during a workshop presenting the results of the study intohousehold life and measuring poverty. The Minister addedthat these three schemes have "mobilised over 66.6 billiondinars over the same period”. On the pre-employmentcontract (CPE), Mr Ould Abbès indicated that this schemehas undergone a growing evolution in the number of jobscreated, increasing from 8,917 jobs in 2000, to 48,718jobs in 2005. He also emphasised that the activities financedwithin the framework of the micro-company have permittedthe creation of 145,714 jobs during the period2000-2005.Mentioning, furthermore, the importance of the surveyinto the standard of living of households and the povertymeasurement, the Minister indicated that this is part of theframework of the National Conference to fight againstpoverty, organised in October 2000. In the same context,Mr Ould Abbès reminded people of the content of themillennium declaration, adopted during the extraordinarysession of the Millennium Summit, on the large actionswhich humanity must undertake, by reducing, inter alia,poverty and famine in the world. The Minister also cameback to the eight millennium development goals, to beachieved by 2015, particularly the reduction of poverty, theprotection of infants and the environment. For his part, theMinister of Participations and the Promotion ofInvestments, Mr Abdelhamid Temmar, said he was "satisfied"with the results of this survey which he described as a"key element” for reinforcing the strategies adopted to fightagainst poverty."I want us to be able to take the results from this survey tostart very quickly to structure our decisions in social matters”,he said.The resident representative of the UN in Algiers, Mr MarcDestanne de Bernis proposed, for his part, during theworks of this workshop, the organisation of a meeting,bringing together all the players concerned to define a criterionspecific to Algeria to measure the poverty rates withthe support of the United Nations DevelopmentProgramme (UNDP).Energie & Mines30November 2006

performancesFinanceAlgeria's foreign exchange reserves exceeded70 billion dollars at the end of AugustAlgeria's foreign exchange reservesamounted to 70.28 billion dollars on31 August 2006, revealed the presidentof the finance and budget commissionon the radio to the APN, Mr BenaliaBoulahouadjeb, citing "official figuresof the Bank of Algeria”.Boosted by a particularly favourable oilclimate, these reserves have thusincreased by about 4 billion dollarssince the end of May 2006 where theysettled at slightly more than 66 billiondollars. At the end of 2005, theyamounted to 56.18 billion dollars andtoday represent about 3.5 years ofimports, at the current pace. MrBoulahouadjeb also noted that theincrease in reserves has meant anincrease in the amount of the RevenueRegulation Fund (FRR - Fonds derégulation des recettes) to 2,700 billiondinars or about 30 billion dollars, comparedto 1,923 billion dinars at the endof last year.This fund, which holds the surplus oilrevenue, has particularly been used topay foreign debt whose early repayments,initiated in May, brought thevolume to less than 6 billion at the startof the year. Since its creation in 2000and up to the end of August 2006, theFRR has been credited by a totalamount of 4,009 billion dinars, accordingto official data. Over the sameperiod, the withdrawals made on thisfund for the repayments of the principalof the public foreign debt reached1,303 billion dinars, i.e. a payment rateof 32.5%.Gulf Finance House wants to investin the Algerian marketThe Arab investment bank GulfFinance House (GHF) wants “to developits knowledge of the Algerian market”and explore all the possibilitiesoffered by the rapid development of theAlgerian economy, indicated apress release made by this financialinstitution.The company GFH, as an investmentbank, “wants to develop its knowledgeof the Algerian market and explore allthe possibilities offered by the extremelyrapid development of its economy” itwrites.“The financing needs are importantand GFH intends to provide its expertiseand its know-how in establishingstructuring projects”, emphasises thepress release.More generally, the bank expressed aparticular interest in setting up in thesub-regions of Maghreb and theMiddle East. This interest "is shown bythe 1.4 billion dollar transactionconcluded recently with Morocco relatedto two mixed-use property projects”,it states. This "marks the start ofactive prospecting by the financial institution– in Algeria, Morocco andTunisia – and proves its interest indeveloping projects in the region”, furtherstates the press release.Algeria is “a key component of ourregional expansion strategy (…) in aregion which is experiencing sustainedeconomic development”, confirmed theChairman of the bank, Mr Esa Janahi.The GFH, created in October 1999 inBahrain, is a regional leader in thedomain of investment in accordancewith the precepts of Islam.Energie & Mines31November 2006

performancesPERFORMANCESChakib Khelil, Minister of Energy and Mines,a guest of the El Moudjahid Press Centre“The Energy and Mines sectoris booming”Energie & Mines32Algeria has made 40 billiondollars of oil revenuein nine monthsAlgerian hydrocarbon export revenuereached the threshold of 40 billion dollarsat the end of September 2006,indicated Chakib Khelil. The unprecedentedupsurge in the price of crudeoil, which marked the first sevenmonths of 2006, is the source of thisnew record. Over the entire year 2005,also marked by high oil prices, Algeriamade turnover of 45.6 billion dollars.The Energy and Mines sector continuedits progress in the first half of2006, recording significant growth, inthe wake of the series of good resultsinitiated in 2005, thanks to the reformsundertaken, indicated, in Algiers, theMinister responsible for the sector,Chakib Khelil.The “strong and sustained” growthwhich has affected all the energy andmining products is due, explains theMinister, to “the considerable economicexpansion of the country” and“confirms the continuous improvementof the population's standard of living”.However, he stated, this growth “posesserious challenges in terms of investmentthroughout the energy chainwhich the sector is in the process oftaking up".The bets to succeed in include thenecessity, according to the minister, tofind the sources of financing majorinvestments to be granted, includingthrough a “more rational pricing” ofenergy, in other words a recovery of theenergy product consumption prices.Illustrating the importance of theresults recorded by his sector, theMinister cited, supported by figures,the increase in primary production (allproducts included) to 89 million tonnesof oil equivalent (TOE) during the firsthalf of 2006, the making of 15 discoveries(a record) and the investment of anamount of 24 billion dollars, 13 billionNovember 2006of which in partnership, since 2000.This growth has not only affected theenergy sector but also the mining sectorwhich, thanks to the law of 2001 onmines, has experienced a major impetus,particularly with the participationof national and international investorsin the appeals for tender concerningthe exploration and mining of deposits.Since the year 2000, this sector hasrecorded average growth of 10%,mainly drawn from the production ofgold, iron and aggregates.The minister estimates that the “newinvestments in the mining activityshould support this growth over the

duration, and cites several partnershipprojects already concluded such as theone with the Australian company GoldMines of Algeria, which develops withEnor (Entreprise national de l'or), thegold deposits of Tirek and Amesmessa(Tamanrasset). The sector is starting tointerest, through its attractiveness andits potential, partners from severalcountries, particularly China, GreatBritain, India, Lebanon and Morocco.The new dynamic introduced by themining law is evaluated by the “arrivalin the mining domain of over a thousandnew national private operatorsthanks to the 18 small and mediumsized mine allocation operations whichhave enabled 681 mining permits to begranted and revenue of 2.6 billiondinars to be generated, paid to thePublic Treasury”, informed theMinister. These permits mainly concernedthe extraction of mining substancesrequired for the manufacturing ofconstruction materials.Returning to the amendments of thehydrocarbons law, the Minister emphasisedthat they had been decided upon"to enlarge and reinforce the State'scontrol over the hydrocarbons resourcesand to better guarantee their rationalmining".The purpose of these measures can besummarised as “preserving resourcesfor the future generations”, he insisted.Questioned on the gas agreement betweenSonatrach and the Russian companiesGazprom and Loukoil whichseemed to concern the European companies,particularly the Italian companyENI, Mr Khelil repeated that theseagreements were "memorandums ofunderstanding related to energy cooperation"such as those already signedwith the companies Shell (GB -Netherlands) and Statoil (Norway)."The Italian company ENI has alsosigned an agreement with Gazprom”,the Minister was keen to point out.24 billion dollars ofinvestment, 13 million dollarsof which in partnershipThe El Moudjahid Press Centre welcomedthe Minister of Energy and Mines,Chakib Khelil, within the framework ofa debate-conference on matters relatedto his sector, the analysis of the internationalgas and oil market, the amendmentsmade to the hydrocarbons lawand the Algerian-Nigerian gas pipelineand partnership.As usual, the Minister made an analysisof very big relevance on these majorissues and responded with a lot ofhonesty and competence to the questionsasked him during the debate.A progressing sectorTalking about his report, the Ministerreminded people of the physicalaccomplishments of his sector andrevealed that this continues to makeprogress for the development of thecountry's energy and mining resources.He gave a report running from the year2000 to June 2006, stating the signatureof 43 production research contracts,the making of 62 oil and gas depositdiscoveries, 12 of which during the firsthalf of 2006.There has been an investment of over24 billion dollars in partnership. TheMinister noted that, in terms of primaryenergy production, represented by,he emphasised, the quantities of hydrocarbonsextracted, this productionincreased from 152 tonnes of oil equivalent(TOE) in 2000 to 180 millionTOE in 2005, i.e. an average increaseperformancesof 4%. During the first half of 2006,this production reached 89 millionTOE. With regards electricity, the productionhas experienced strong growth,going from 25 tetrawatts/hour (TWH)in 2000 to 34TWH in 2005, reflectingan annual rate of 6%; this trend hasbeen maintained during the first half of2006. The installed capacity of thenational electricity production at theend of June 2006 is almost 7,100MWcompared to 5,900MW in 2000, whichcorresponds to an expansion of over20% over the period.Increased energyconsumptionThe national energy consumption, allforms included (gas, oil products, electricity)has gone from 30 million TOEin 2000 to 35 million TEO in 2005.During the first half of 2006,consumption reached 18 million TOE,i.e. 4% growth compared to the sameperiod of the previous year. These figures,according to the Minister, revealthat the demand for oil products recordeda strong and sustained increase ofalmost 6% a year during the period toreach 11.6 million tonnes in 2005.This trend continued in 2005, particularlydriven by the exceptional increasein the consumption of diesel of over11%.Strong growth for natural gasThe final consumption of natural gasexperienced the largest growth with anaverage rate of more than 7% a yearduring the period 2000-2005 and ☞Energie & Mines33November 2006

performancesPERFORMANCES☞Energie & Mines34continued at a similar pace in 2006.The electricity consumption recordedan average increase of 6% during thisperiod to reach 27.3TWH in 2005.This growth continues in 2006 withconsumption of 13.9TWH during thefirst half. This strong and sustainedgrowth, in the Minister's opinion,results from the significant economicexpansion of the country and confirmsthe continuous improvement of thewelfare of the population during theperiod. It does, however, pose seriouschallenges in terms of investmentthroughout the energy chain, which thesector is in the process of taking up,emphasises Chakib Khelil.The Minister also sees this evolution inthe efficiency potential existing in ourenergy consumption model and theneed for a more rational policy in termsof energy pricing. Among the challengesto be taken up, the Minister pointsout the continuous electrification of thecountry and reveals that the effortmade by the State during this periodhas enabled the realisation of22,500km of electric lines for theconnection of almost 270,000 households.Through these figures, theMinister notes that the electrificationrate reached 96% at the end of June2006 with a total number of 5.7 millionsubscribers. 354 towns were connectedduring this period to natural gas, enabling600,000 households to benefitNovember 2006from this service. The number of subscriberstherefore increased to 2.1million people. This development hasenabled, according to the speaker, anational gas connection rate to be reachedof 36% compared to 29% in2000.145 million TOE in 2005in terms of exportsThe total volume of national exports ofhydrocarbons, for its part, increasedfrom 124 million TOE in 2000 to 145million TOE in 2005, reflecting an evolutionof more than 17%. The value ofexports, during the period 2000 to June2006, reached 186 billion dollars, 27billion of which made during the firsthalf of 2006.9,500 billion dinarspaid out in oil taxationWith regards the State's revenue, anamount of almost 9,500 billion dinarsin oil taxation has been paid to thePublic Treasury during this period(1,435 billion of which in the first halfof 2006). In terms of employment, thesector in its entirety uses the needs ofsome 207,000 employees, 41,000which by the private industry.The Minister then dealt with the issuerelated to the Trans-Saharan gas pipelineproject. This project is part of theframework of the new partnership forthe development of Africa, Nepad. It isof a total length of 4,100km and shouldsupply Europe with natural gas fromthe Nigerian gas deposits via Niger andAlgeria. According to the speaker, thisproject has multiple advantages at thenational and regional level. ChakibKhelil cited, among other advantages,the recovery of flared gases in order topreserve the environment, he said.He also cited the option in favour ofregional development which such aproject enables through supplying gasto the countries through which thepipeline runs. There are also synergieswith the other projects planned on thesame outline, such as the Trans-Saharan road and the fibre optic cable.The feasibility studyis complete - an investmentof 10 billion dollarsAccording to the Minister, the resultsof the feasibility study carried out byPENSPEN/IPA were presented on 19September 2006 to the Ministers ofEnergy of the three countries concerned.The study shows, without anyambiguity, the technical-financial feasibilityof the project whose investment isestimated at 10 billion dollars. It has atransportation capacity of 20 to 30billion cubic metres / year of gas whichis planned for 2015.The Minister mentioned the evolutionof the mining sector for which he noted

that although the potentials and performancesare still relatively little knownby the public, the growth is howeverthere and strong. According to thespeaker, it represents almost 10% onaverage, annually.The increase in the production of gold,iron and aggregates is the main drivingforce of this growth; according to theMinister the new investments in themining activity should support thisgrowth over the duration.The percentage of foreign investment isgrowing, reveals the speaker, withAustralian, Indian and Egyptian companiesand is in perspective with China,Morocco and Great Britain to whichwe have to add the national partnersparticipating in the appeals for tenders.1,000 new national private operatorsarrived on the market for 18 contractallocations between 2000 and 2006and the issuing of 581 mining permits.The Minister then mentioned the puttingin place of the directors and personnelof the new hydrocarbons' agencies,Alnaft and the ARH.Enlarging and reinforcing theState's controlMentioning the amendments made tothe hydrocarbons law, Chakib Khelilreminded people that they had beendecided upon to enlarge and reinforcethe State's control over the hydrocarbonsresources and to better guaranteetheir rational mining. The purpose ofthese measures remains, of course, thepreservation of these resources forfuture generations. These measuresprovide for a majority stake bySonatrach in the research, mining andtransportation by pipeline activities ofhydrocarbons as well as the refiningactivity. The other innovation resultsfrom the establishment of a non-deductibletax on the extraordinary profitsapplicable to the partnership contractsconcluded within the framework of thelaw 84-14.This measure is motivated by thepreoccupation with recovering part ofthe large capital gains made by theforeign companies that are partners ofSonatrach in case of a high price of oil.The impact is quantified in the increasein the State's resources as of the secondhalf of the current year. The Ministerthen mentioned the deregulation of theelectricity sector which is underway.2006, a record yearWith regards the oil market, ChakibKhelil reminded people that 2006 was ayear of record prices, given the persistenceof the factors which triggered theupsurge in prices in 2004, namely arobust economic activity which causeda strong increase in demand faced withlimited production capacities both inthe upstream and in the downstream.The geopolitical tensions and climatefactors also contributed to exaggeratinginsecurity premiums and reinforcedthe speculation activity, thusaccentuating the upwards trend in prices.As an annual average, the prices,according to the speaker, increasedduring the current year by 24% comparedto 2005 with an OPEC basket priceof 62.6 dollars a barrel compared to anaverage in 2005 of 50.6 dollars B/T forthe same OPEC basket. According tothe Minister, the OECD countries'trade stocks are at comfortable levels,but were not able to contain, alone, theupsurge in the price of the barrel observedup to the end of the summer. Theplayers, confirmed Chakib Khelil, wererather preoccupied with the lack of surpluscapacities of the oil chain.Accentuated declineas of SeptemberIn September and the start of October,prices experienced a strong decline ofperformancesalmost 17 dollars b/d compared to therecord level observed on 8 August. Thisdownturn is due to the reduction,indeed the disappearance, which enabledthe upsurge in prices.The Minister announced that theOPEC member countries are in contactand are monitoring the evolution of thesituation on the market in view oftaking the corrective measures requiredin case the prices deteriorate. Theworld's economic activity will experienceweaker growth in 2007 than in thecurrent year, with a rate estimated at4.3%. The world's oil demand shouldcontinue to grow in 2007, with anincrease estimated at 1.5mb/d.Chakib Khelil did however note that thestrong increase in the non-OPEC oilsupply, which would be higher than thegrowth in demand, will entail a reductionin recourse to OPEC oil, based onthe expansion in the production capacitiesof the OPEC member countries.These oil supply-demand outlooks andthe evolution in the production capacitieswill entail a significant increase inthe unused OPEC capacity.The Minister considered this as a majorstabilising element of the oil market, asit enables potential production losses tobe compensated for and hence, wouldreassure consumers.It should be reminded, added the speaker,that it is the weakness in the productioncapacities used which has fedthe fears of a shortage in supply andfed the speculation which stronglyaccentuates the increase in prices in2005-2006.Balanced supply-demandin 2007For Chakib Khelil, the outlooks for2007 reveal a balanced supply-demandfor oil that is a lot tighter than in thecurrent year, with comfortable stocklevels and a larger unused OPEC productioncapacity. This, according to thespeaker, should lead to a moderation ofprices. Chakib Khelil did however recallthe duty of vigilance to which OPEC issummoned, given the change in thesituation. He recalled the principle onwhich the organisation's action is based- that of working hard to ensure pricesstabilise.☞Energie & Mines35November 2006

☞Energie & Mines36performancesPERFORMANCESGas: a non-globalised marketMentioning the natural gas market, theMinister noted that this takes place in anon-globalised market, unlike the oilmarket. The gas market remains markedby three regions: the Asian market,the European market and the NorthAmerican market.The majority of this trade is done onthe basis of long term contracts, whoseprices are indexed on the price of crudeoil and/or oil products; this is particularlythe case for the Asian market,noted the speaker, and for the continentalEuropean market.The natural gas prices in these tworegions are evolving in line with thoseof crude oil with a lag of some months,however. With regards the NorthAmerican market, and the UnitedStates market, the prices are determinedby the spot market on the one handand by the Stock Exchange on theother. There is the same phenomenonin the United Kingdom.These last few years, the prices haveexperienced large volatility reachingexceptionally high prices as at the endof 2005 and the start of 2006, beforereturning to trend levels.Chakib Khelil revealed that the generalevolution in the price of natural gasover the three continents will overallreflect the price of crude oil whichremains the driving force of energy globallywith seasonal shifts and strongdivergences sometimes in the veryshort term. In the debate, the Ministerreturned to a certain number of issues,November 2006hence responding to the questionsmade by the participants.African oil remainsimportant for the marketWith regards African oil, some of thecontinent's countries are not part ofOPEC such as Angola, EquatorialGuinea, Sudan which has the status ofan observer, and Chad. The Africancountries that are not members ofOPEC support the organisation as theyhope to join it also. This being the case,non-OPEC African oil remains important.It will be even more important inthe future, perhaps not as important asGulf countries' oil, but the Africancountries may constitute a threat forthem.Cooperationresulting in projectsWith regards the Algerian-Norwegiancooperation, further to the visit by theNorwegian Minister of Energy toAlgeria, the Minister noted thatNorway greatly collaborates withOPEC. With regards Algeria, ourcountry has two large projects withNorway, in In Amenas and In Salah.Sonatrach and Statoil, the Norwegiancompany, have signed a master agreement,and with the Norwegian Ministrythere is cooperation for the developmentand in the training with aNorwegian stake of 10% in the IAP.On the question of the price of the barreland the fact of knowing whether aprice of 25 dollars is possible, theMinister revealed that this is possible,adding that a price of 10 dollars is alsopossible as happened in 1986.The Minister explained that, when oildemand reduces on the market, supplyis there. If this supply is maintained,then the prices will, of course, tumble.We can also balance supply-demand tostabilise the price.Should demand decline, OPEC mustbe able to react and have a counteringdevice. With regards the substitutionenergies, we speak a lot about bio diesel,etc. noted the Minister. For theseproducts to be able to substitute petroland diesel, they have to be competitive.Brazil is an exporter of bio diesel andethanol. This competitiveness is onlypossible if the prices of the bio fuelsremain high, otherwise it will be a failure.There is also recourse to performingtechnologies to attempt to maintainthis. The Europeans are still in thisrationale. This being the case, bio is nota threat as it is a very specific niche.Carbon continues to support requirements,but no longer has the supremacyit had in the past; in the same way oilmay one day lose its supremacy overgas for example, but oil will continue tobe used.A law of the Algerian State,and not of the sectorReturning to the hydrocarbons law furtherto a question, the Minister revealedthat this is a law of the AlgerianState and not of the sector. It has beenadopted within the framework of preservingthe interests of future generations.With regards the contract signedbetween Sonatrach and Gazprom, theMinister revealed that this contract is ofthe same nature and responds to thesame objectives as the contracts signedwith the other countries.This is a completely normal agreementwhich concerns different domains.With regards the potential criticismsmade by the foreign partners, ChakibKhelil confirmed that he was not awareof such criticisms. These partners cancome to the market where they haveadequate profitability with the risksthey want to take.The importanceof the stabilisation fundWith regards the precautions to betaken to avoid the consequences of

performancesvolatile prices, the Minister recalled theexistence of a stabilisation fund worth40 billion dollars, according to the veryrecent estimate given by the Minister ofFinance. Algeria's problem is that thefunds exist, but the question is posed oftheir digestion or their digestion capacity.Today, the economic machine hasdifficulties in digesting these funds. Wetherefore have to learn to digest themand this can be done through thereforms which are undertaken, bankingreforms in particular, and the existenceof the guarantee fund (SME, etc.).A system is being slowly put in placewith the stability which has returned;consuming credit can only be doneonce stability has been found again.The laws may exist, but they can also beimproved to boost our economy.There will alwaysbe oil and gas in AlgeriaWith regards the reserves, there willalways be oil and gas in Algeria, repliedthe Minister, recalling that depositswhich date back a century are still operational.The new technologies and thenew mining procedures are capable ofguaranteeing the extraction and moreextraction for a long time.Chakib Khelil said that we have thesame level of reserves as in 1971, whereasa lot of studies predicted a reductionin reserves in 20 years' time.For the Minister, technology andresearch are capable of guaranteeingthe future, noting that Sonatrach isputting a lot of effort into research. Wewill extract more oil thanks to all this.With regards the Trans-Saharan gaspipeline, the Minister emphasised theguarantees needed to obtain the projectfinancing from bankers. If there is aconsortium of companies which sellsand another which buys the gas, thesale and purchase contract would be aguarantee to finance the project plannedfor 2015, with a production of 18to 25 billion cubic metres. TheEuropeans would be very happy to seesuch an availability of gas in this study,revealed the speaker. This being thecase, the project's studies are complete.We have to act now, emphasised theMinister who remarked that the Africanmarket will remain too tight to absorbthe quantities produced and make theproject profitable.Corrupt, but corrupters alsoWith regards a report by TransparencyInternational on corruption and theaccusations made on Algeria, there areforeign companies which are not themost perfect either in this domain,remarked Chakib Khelil, adding that ifthere is corruption, there are corruptpeople but also corrupters. There arelaws in the Western countries on corruptionwhich are not necessarilyapplied properly.The Western countries are swept alongwith avoiding corruption but also weedingout markets. With regards thereduction in production faced with thecurrent economic situation, there is,noted the speaker, a downwardsconsensus. This being the case, OPECmust be credible and do what is decidesto do. With regards nationalisation, inLatin America, the Minister, who citedthe case of Bolivia, recalled that thenationalisation decision is not yetimplemented, as the Bolivian oil companycannot assume the problem.Concerning the industrial risk, this isinherent in all activities, recalled theMinister.Concerning the fire in the Gassi Touilwells, this was a human error, as isoften the case. We are putting effortinto the maintenance and renovation ofthe sites to avoid these risks reoccurring.With regards Gassi Touil, itshould be reminded that is it Repsolwhich managed the site. An investigationhas been initiated to isolate theresponsibilities. Still with regards safetyand the existence of service stationsnear buildings, this exists throughoutthe world, said the speaker; there is aspecific regulation on this matter.These stations exist, we can alwaystransfer them, but there is the publicservice, so where should we put them?With regards the reduction in production,in case of gloominess in the market,each member of OPEC mustcontribute to this reduction to ensurethe equilibrium of the market, pointedout the Minister. This is a choice to bemade, he added.Energie & Mines37November 2006

performancesPERFORMANCESFinance law 2007Creation of jobs, reduction in tax pressure,making investments dynamicThe drawing up of the financebill for 2007 has set itself theambition of improving thegrowth rate fixed at 5.2% and6.1%, excluding hydrocarbons,thus maintaining the surgewhich occurred a few years agonow with the launch of the economicrecovery support programmefollowed by the fiveyear programme 2005-2009.For this year 2007, the third year of theimplementation of the five-year plan, a largefinancial package is allocated to the equipmentbudget in view of the start-up of theeast-west motorway works and other largescale infrastructure projects. The operatingbudget also benefits from a consistent packagethat has significantly increased withthe reinforcement of the Public Service'sworkforce and the increase in the salaries ofcivil servants. The State's role appears preponderantin providing impetus to the economicrecovery dynamic inducing a highlevel of public expenditure.We also note a strong increase in imports, ofaround 8%, in the aftermath of the equipmenteffort and to satisfy the needs of thecompanies which have seen the work loadincrease. The social-type expenditure, whichis very large, related to the solidarity policyfor the disadvantaged, the realisation of thehousing programme supported by the State,the implementation of the charter for peaceand national reconciliation providing forcompensation have had the consequence ofsinking the budgetary deficit which willreach 1,821.1 billion dinars and theTreasury deficit of 1,722.4 billion dinars,which will undoubtedly require dipping intothe Revenue Regulation Fund to overcomepart of the deficit, on the understanding thatthe Regulation Fund's reserves must not fallbelow a certain threshold.The current financial affluence with foreignexchange reserves which exceed 60 billiondollars have made it possible to lighten companies'work loads. The government hasdecided to reduce corporation tax for companiesthat create jobs and there are othertax benefits for some activities. Overall, thegovernment has decided to decrease corporationtax for companies that create jobs andthere are other tax benefits for some activities.Overall, the government has deliberatelyopted for an approach which attempts toreduce the tax pressure to encourage investmentin the productive activities and encourageall those working in the grey economyto integrate the legal framework to be ableto benefit from the advantages provided bythe legislation. These measures, along withother support schemes (upgrading, attractivebank loans, etc.) must enable privateinvestment to be boosted which must takeon the relays of public expenditure.The revenue forecasted bythe State budget 2007The finance bill 2007 forecasts revenuesof 1,802.6 billion dinars (compared to667.92 billion dinars in the 2006 financelaw).Tax revenues (direct and indirect contributions,customs revenue, etc.) amount to676.116 billion dinars whereas ordinaryrevenues (revenue from the domains, etc.)amount to 23 billion dinars. As for oil taxation,this is evaluated at 973 billion dinarscompared to 916 billion dinars in the 2006finance law.The revenue from oil taxation that tumbledin the first half of 2006 reached 1,420billion dinars, whereas the forecasts countedon 916 billion dinars in revenue for theentire financial year 2006. The recordincrease in tax capital gains made in 2006is particularly explained by the upsurge inThe main taxand customs provisionsHere are the main tax and customsprovisions proposed by the 2007finance bill :■ Companies which create and maintainjobs benefit from a reduction oncorporation tax and income tax over aperiod of 3 years as of 1 January 2007.This reduction is fixed at 50% of theamount of salaries paid by virtue ofthe jobs created and 5% of the taxableprofits without this reduction exceeding1 million dinars.■ The benefits granted to investmentsmade within the framework of the supportscheme for creating jobs forunemployed people aged between 35and 50 will be extended to the investmentsapproved, by the latest, on 31December 2009. The initial deadlinethat was fixed for this type of investmentwas 31 December 2006.■ The employer organisations, withthe exclusion of public authorities andinstitutions, must devote an amountequal to at least 1% of the annual payrollto continuous vocational trainingactions. Failing this, they are subjectto the payment of a learning taxwhose amount will be paid into a specialallocation account.■ The annual housing tax for premisesof residential or corporate uselocated in the wilayas of Algiers,Annaba, Constantine and Oran is fixedat DZD360 for housing (instead ofDZD300) and DZD1,500 for corporatepremises (instead of DZD1,200).■ A unique fixed tax is established (asa replacement of income tax, VAT andcorporation tax) for businesses whoseannual turnover does not exceed 3million dinars. Ten business activitycategories are excluded from this system(wholesale, dealerships, supermarkets,sale of medications, servicestations, construction sites, etc.).■ Prohibition (ban) on importing intothe state spare parts, parts and accessoriesof vehicles and engines. Theconfiscated spare parts must be destroyedwhereas the vehicle is confiscatedin favour of the State and localauthorities.■ The exporting of ferrous or nonferrousmetal waste, hides and leathersis subject to a specification.Energie & Mines38November 2006

performancesthe world oil prices whereas the benchmarkprice for calculating these revenues hadbeen fixed, out of prudence, at 19dollars/barrel, i.e. well below current prices.In 2005, oil taxation revenue amounted to2,267.83 billion dinars compared to forecastsof 899 billion dinars.Reduction in tax pressure andencouragement to create jobsThe finance bill for 2007 forecasts the mobilisationof a large budgetary package for thecontinuation of the complementary growthsupport programme (PCSC) and introducesnew measures to reduce the tax pressureand reorganise certain foreign trade activities.The macroeconomic framework of thisbill has not fundamentally changed in comparisonwith those of the 2005 and 2006finance laws due to the solid macroeconomicand financial stability of the countryobserved for several years now.The authors of the bill have, furthermore,given in by keeping the oil barrel benchmarkprice unchanged at 19 dollars when drawingup the State's budget, whereas all theoil forecasts count on a much more expensivebarrel.■ The loans granted by the banks tocompanies in the energy sector provideentitlement to an interest rate discountfor the projects related to electricityproduction, transportation andpublic distribution of electricity andgas.■ The Public Treasury is authorised toassume the operating support needs ofthe dismantled public companies andpublic institutions.■ A copyright royalty is established forusing intellectual works to be paid infavour of the Office national des droitsd'auteurs (ONDA). It is fixed at 10%,calculated on the amount of revenuerecovered by the mobile telephone andland line operators (ring tone takenfrom the musical repertoire, advertsusing music, etc.).■ The gold, silver and platinum workssupport a guarantee right fixed perhectogram at DZD8,000 for the goldworks (instead of DZD16,000 currently),at DZD20,000 for platinum works(instead of DZD40,000) and at DZD300for silver works (instead of DZD500).■ VAT is reduced from 17% to 7% forthe sale of accessories required for theconversion of vehicles from traditionalfuel to LPG or NGV (natural gas forvehicles).For the year 2007, the third year of theimplementation of the PCSC, GDP of 6,233billion dinars is forecasted, an overall economicgrowth of 5.2% and 6.1%, excludinghydrocarbons, inflation of 3.5%, an increasein the value of exports of goods of 2.1%, anexchange rate of DZD74 per dollar and an8% increase in imports of goods.The authors of the finance bill do howeverwarn that inflationist risk factors may, in2007, influence the general level of consumerprices. They summarise these factorsas the high level of public expenditure, thereadjustment of the level of salaries and theover-liquidity generated mainly by a favourablesituation of the oil market. Withregards the budget, it forecasts revenues of1,802.6 billion dinars (+7.1% compared tothe 2006 complementary finance law) andexpenditure of 3,623.8 billion dinars(+1.9%) broken down into 1,574.9 billiondinars for operating and 2,048.8 billiondinars for equipment. For the secondconsecutive financial year, the equipmentbudget will thus significantly exceed theoperating budget - a previously unheard ofeconomic fact in the history of independentAlgeria.■ The tax on leaded petrol (normal andsuperior grade) is reduced from DZD1to DZD0.10 / litre whereas a tax is establishedfor diesel at DZD0.30/litre,without an impact on the prices at thepump.■ VAT is reduced from 17% to 7% forolive oil.■ Within the framework of fightingagainst grey trade, dealers in customswho fulfil customs formalities onbehalf of the importer or exporter musthave mandates that are drawn up andduly signed by the latter.The customs authority is granted moreroom for manoeuvre in dealing withcases where it has reasons to doubtthe veracity or the accuracy of theinformation or documents provided bythe importer to support the value it hasdeclared.The budgetary deficit will reach 1,821.1billion dinars and the Treasury deficit1,722.4 billion dinars, i.e. respectively -29.2% and -27.6% compared to GDP. Butthese deficit ratios must be qualified,emphasise the authors of this bill, thanks tothe possibility of using the available funds inthe Revenue Regulation Fund (FRR) tofinance the Treasury deficit with the obligation,however, of keeping this fund solid at alevel that cannot be less than 740 billiondinars. Since its creation in 2000 and up tothe end of August 2006, the FRR has beencredited by a total amount of 4,009 billiondinars, according to official data.Over the same period, the withdrawalsmade from this fund for the repayments ofthe principal of the public foreign debt reached1,303.62 billion dinars, i.e. a paymentrate of 32.5%. Thus, we are further explained,as the GDP that is used as a basis forcalculating these deficit ratios is reduceddue to the fact the added value of the hydrocarbons'sector is evaluated on a price perbarrel of 19 dollars, i.e. greatly belowcurrent actual prices and probably futureones (of around 60 dollars). In legislativeterms, the finance bill provides measurescontributing to reducing the tax pressureand reorganising certain foreign trade activities.Provisions have therefore been proposedto encourage the creation of jobs, tosupport the realisation of projects, to producecertain goods and services, and toprotect the environment.These provisions provide tax benefits interms of corporation tax and income tax infavour of companies that create jobs, interestrate discounts in favour of projects tocreate public infrastructures (Algiers'smetro system, East-West motorway, etc.)and to produce a distribution of electricityand gas as well as to reduce the VAT onequipment to convert traditional fuels toLPG and NGV. For the reduction of the taxpressure, the bill proposes the reduction oftaxes on gold, silver and platinum works, aswell as the VAT rate on olive oil.Other than the establishment of a uniquefixed tax for small taxpayers, it also providescustoms measures related to fightingagainst contraband, importing spare partsand drawing up specifications for exportingcertain products.Energie & Mines39November 2006

Reforms REFORMSIn the Council of MinisterAmendmentsto the hydrocarbons lawEnergie & Mines40The Council ofMinisters, in a meetingon 9 July, examinedand approved abill amending andcompleting the lawno. 05-07 of 28 April2005 on hydrocarbons.The amendments proposedto the law 05-07 aim to adapt it tothe evolutions recordedat the internationalenergy marketlevel and to reinforcethe management ofour resources so as topreserve them for thebenefit of future generations.In this framework, the national companySonatrach will have larger participationin access to the hydrocarbonsexploration, exploitation and transportationcontracts.It also introduced tax provisions by virtueof the contracts concluded underthe tax regime of the law no. 86-14, totake account of the evolution in priceson the international hydrocarbons market.Speaking at the end of the examinationof the bill, the President of the Republicwas keen to point out the pressing needfor the current generation to rationallymine the resources of our sub-soil bytaking account both of the needs inducedby the efforts of increasing andsustainable growth and the necessarilygreater needs of future generations.November 2006Facilitation and developmentof investmentsThe Council of Ministers examined andapproved the bill amending and completingthe order no. 01-03 of 20August 2001 on developing investments.This bill aims to introduce measures tofacilitate investment which particularlyconsist of :■ simplifying the benefit granting process,currently based on the establishmentof a decision to bring it closer toa declaration system that guaranteesbetter transparency.■ setting up a simplified system for eligibilityto the benefits by removing theprerequisites resulting from the requirementof conditions for the benefit ofadvantages. The new system accompaniesthe putting in place of lists of activitiesor needs not eligible for benefits(negative list systems fixed by theNational Investments Council), exceptfor the projects with an interest for thenational economy. These benefits onlyconcern the new production goods,except in the event there is a change inresistance, relocation and privatisation.■ Modifying the contracting exemptionsystem so as to introduce clear criteriafor identifying projects by determiningthe benefits they give right to.■ Redefining the missions of theNational Investment DevelopmentAgency to re-focus them on information,facilitation, support and promotionof investments as well as tocontrol, in relation to the tax and customsauthorities, respect by the investorsof the commitments made inexchange for the benefits accorded. Inthe same perspective, the NationalInvestment Council responsible formonitoring the implementation of thelaw is faced in its role with a strategy interms of developing investments.Speaking at the end of the debates, thePresident of the Republic was keen toemphasise the need to simplify the rulesand procedures and of making themclearer and more transparent so as tofree up the initiatives to establish,through the facilitation of the deed ofundertaking, a new dynamic for productiveinvestment and development.The President of the Republic thenadded :“As the obstacles resulting from thecomplexity of the legal framework, difficultiesof access to property and therigidity of the banking system havebeen identified as the main constraintsfaced by the potential investors andnational and foreign entrepreneurs, it isin the sense of lifting these constraintsand all other obstacles which thegovernment’s efforts must converge,which must take the necessary measuresto ensure better attractiveness interms of investments”.

The main amendmentsof the hydrocarbons lawThe National PopularAssembly unanimously(minus 1 vote)adopts the law approvingthe order amendingthe law 05-07 onhydrocarbons.The deputies of the National PopularAssembly (APN) have adopted the billapproving the order amending the law05-07 on hydrocarbons. Here are themain amended articles:ReformsArt. 12: (…) Each hydrocarbons agencyhas a secretary general appointed bypresidential decree, upon the proposalof the Minister of Hydrocarbons. (…)At the end of their mission, the president,the members of the executivecommittee and the secretary generalcannot exercise a professional activityin companies of the hydrocarbons' sector.Likewise they cannot exercise professionalconsultancy activities concerningthe hydrocarbons' activities,within the framework of a liberal professionor for whatever reason, for aperiod of 2 years.Art. 32: The research and exploitationcontracts are concluded further to anappeal for tenders. The research andexploitation contracts provided foreach appeal for tenders are approved bya decision made by the Minister ofHydrocarbons.The Minister may, if reasons and justificationsare given – and after theapproval of the Council of Ministers -be exempt of the provisions hereinabovefor reasons of general interest withinthe framework of the hydrocarbonspolicy. The research and exploitationcontracts contain, as a requirement, astake-holding clause for the nationalcompany Sonatrach SPA.In both cases, the Sonatrach SPAstake-holding rates are fixed at a minimumof 51%. The company Sonatrachbenefits from the granting of a concessiongranted by order of the Minister ofHydrocarbons when said company ofAlgerian law exercises the transportationby pipelines activities.Art. 68: The transportation by pipelineactivities may be exercised bySonatrach or any company of Algerianlaw comprised of any entity andSonatrach which must have a stake insaid company of a minimum rate of51%. The company Sonatrach benefitsfrom the granting of a concession grantedby order of the Minister ofHydrocarbons when said company ofAlgerian law exercises transportationby pipelines activities.Art. 77: The refining activities may beexercised by Sonatrach alone or inpartnership with any other entity.When said activities are exercised bySonatrach in partnership with any entity,the Sonatrach stake holding rate isfixed at a minimum rate of 51%.Art. 101a: For the partnershipcontracts concluded betweenSonatrach and one or several partnerswithin the framework of the law 86.14of 19 August 1986, “a non-deductibletax on the extraordinary profits madeby these foreign partners is applicableto the percentage of production returningto them when the monthly mathematicaverage of the prices of Brent oilis above 30 dollars a barrel”. Said rateis applicable as of 1 August 2006.The rate of this tax, applicable to theproduction returning to foreign partners,is 5% as a minimum and 50% asa maximum. To pay this tax to thePublic Treasury, Sonatrach shalldeduct from the production returningto said partners the percentage correspondingto the amount of this tax.Art. 58: Disputes arising out of thecontract interpretation or execution orthe application of the present law or tothe documents issued in this regardbetween both the national Agency forHydrocarbons resources valorisation(ALNAFT) and the contracting body,shall be subject to a prior conciliationaccording to the terms and conditionsagreed in the contract. If the matterfails to be settled amicably, the disputemay then be referred to an internationalarbitration in the conditions agreed inthe contract.In all cases of a Sonatrach shareholding,the international arbitration procedure"solely concerns entities otherthan Sonatrach being the contractingparty". However, when SonatrachS.P.A. is the sole contracting party, thedispute shall be settled by arbitration ofthe Minister of Hydrocarbons.Energie & Mines41November 2006

Reforms REFORMSAdoption of a bill approving the orderon investment developmentSimplification and clarificationof the proceduresThe National PopularAssembly (APN)has adopted the billapproving the order08-06 amending andcompleting the order01-03 on investmentdevelopment.Energie & Mines42The bill adopted - with an overwhelmingmajority - introduces amendmentsto the system for promoting investmentsin force in view of simplifying it andproviding it with more efficiency. Thisalso means simplifying the benefit grantingprocess related to investment, particularlythe establishment of the declarationsystem instead of the decisionsystem.It finally provides for compensating forthe reduction in customs duties throughexemptions with the purpose of relievingthe measures and respecting theprice dismantling process imposed onthe largest equipment imported. Itsmain provisions hence target :• simplifying the benefit granting process,currently based on the establishmentof a decision to bring it closer to adeclaration system that guarantees bettertransparency.• Setting up a simplified system for eligibilityto the benefits by removing theprerequisites resulting from the requirementof conditions for the benefit ofadvantages.• The new system accompanies the puttingin place of lists of activities or ofgoods that are not eligible for the benefits,except for the projects with an interestfor the national economy.These benefits only concern the newproduction goods, except in the eventthere is a change of residence, relocationand privatisation.November 2006• modifying the contractual exemptionsystem so as to introduce clear criteriafor identifying projects by determiningthe benefits to which they give right.• Redefining the missions of theNational Investment DevelopmentAgency to re-focus them on information,facilitation, support and promotionof investments as well as to control, inrelation to the tax and customs authorities,respect by the investors of the commitmentsmade in exchange for thebenefits accorded. In the same perspective,the National Investment Councilresponsible for monitoring the implementationof the law is faced in its rolewith a strategy in terms of developinginvestments. The Minister ofParticipation and Promotion ofInvestments, Mr Abdelhamid Temmar,reported to journalists, at the end of thevoting session, that the new law mustsimplify the attraction of investments byremoving “any slowness of the administrativeprocedures”.As for the industrial property application,the Minister indicated that thiswould be finally settled before the end ofthis year.The APN adopts the lawon land to be used forinvestment purposesThe National Popular Assembly (APN)has adopted the bill approving the orderon conditions related to transferring andselling land falling under the privatedomain of the State to be used for settingup investment projects, presented by theMinister of Finance, Mr Mourad Medelci.The bill, adopted by an overwhelmingmajority, aims to define the conditions forselling or transferring land falling underthe private domain of the State to beused for setting up investment projectswith a concession of a duration of 20years, renewable and convertible, accordingto clearly defined criteria, withregards industrial, tourist or service-typeprojects as well as the sale of land onwhich property promotion operationshave been carried out in favour of integratedprojects. Excluded from the scopeof this text are: farming land, plots of landlocated inside the expansion zones andtourist sites, required for the setting up ofinvestment projects that fall within the frameworkof a tourist development plan,the plots of land located inside miningacreages, the plots of land located insidehydrocarbons' research and exploitationacreages and the plots of land intendedfor property and land promotion.

ReformsMr Temmar explains the amendment of the law on investmentModificationof the benefits systemThe Minister of Participation and Promotion of Investments,Mr Abdhelhamid Temmar, presented before the Commission of economicand financial affairs of the Council of the Nation the reasons for theamendment of the order 01-03 on investment development.During the meeting, Mr Temmar returnedto the reasons for the amendmentas well as "the hopes aroused by suchan approach in the promotion ofinvestment" indicated a press releasefrom the Council of the Nation.The Minister furthermore answeredquestions from the commission, addedthe press release, before specifying thatthe meeting is part of the framework ofexamining the bill by the commission inorder to draw up its report.The bill in question has been adoptedby the National Popular Assembly(APN).The new bill introduces “amendmentsto the system for promoting investmentsin force in view of simplifying itand providing it with more efficiency”.It further targets “simplifying the benefitgranting process related to investment,particularly the establishment ofthe declaration system instead of thedecision system”.It also proposes the "modification ofthe benefits system by introducing newcriteria for defining these benefits tothose entitled to them” as well as “thereintegration of the exploitation benefitswhose abrogation has had a harmfulaffect on Algeria's positioning in therace to attract capital" and "the compensationfor the reduction in customsduties by exemptions with the purposeof relieving the measures and respectingthe price dismantling processimposed on the largest equipmentimported”.The main provisions of the new lawthus target :• simplifying the benefit granting process,currently based on the establishmentof a decision to bring it closer toa declaration system that guaranteesbetter transparency.• setting up a simplified system for eligibilityto the benefits by removing theprerequisites resulting from the requirementof conditions for the benefit ofadvantages.• The new system accompanies theputting in place of lists of activities orof goods that are not eligible for thebenefits, except for the projects with aninterest for the national economy.These advantages only concern the newproduction goods, except in the eventthere is a change of residence, relocationand privatisation.• Modifying the contractual exemptionsystem so as to introduce clear criteriafor identifying projects by determiningthe benefits to which they give right.• Redefining the missions of theNational Investment DevelopmentAgency (Andi) to re-focus them oninformation, facilitation, support andpromotion of investments as well as tocontrol, in relation to the tax and customsauthorities, respect by the investorsof the commitments made inexchange for the benefits accorded.In the same perspective, the NationalInvestment Council responsible formonitoring the implementation of thelaw is faced in its role with a strategy interms of developing investments.Energie & Mines43November 2006

Reforms REFORMSAdoption of the bill on promoting employmentAttracting investments to the HautsPlateaux and the SouthThe deputies of the National Popular Assembly (APN) have adopted, with amajority, a bill on promoting employment during a plenary session presidedover by Mr Mohamed Kenaïm, vice-president of the APN. The Minister ofEmployment and Social Security, Mr Tayeb Louh, presented this bill to theNational Popular Assembly on 21 June this year, it recalls.Energie & Mines44The Minister of Employment andSocial Security, Mr Tayeb Louh,confirmed that the law creatingencouragement measures for supportingand promoting employmenttargets the adoption of financialapproaches in terms of fightingagainst unemployment. Reviewing theobjectives of this law, the Ministerexplained that it particularly aims to“fight against the phenomenon ofnon-declaration of workers to theSocial Security authorities”.The bill adopted by the deputies of theAPN, he emphasised “also aims toencourage the national investments,to attract foreign investments, particularlyto the regions of the HautsPlateaux and the South and encourageemployers to upgrade their humanresources through training and,hence, preserving their jobs".The new law sets out other objectives:“better control of the job market,through recording job applications atthe employment agencies, in view ofbenefiting from the advantagescontained in this text”, statedMr Louh.The bill in question also attempts to"deal with the concerns of employersmainly consisting of relieving thesocial costs to reduce the cost of creatingnew jobs”.In this context, Mr Louh recalled thatthe fight against unemployment is oneof the main concerns, both for thegovernments and the social partnersand "for certain international organisationssuch as the InternationalLabour Organisation (ILO), theUnited Nations DevelopmentProgramme (UNDP), but also for theNovember 2006African Union (AU), within the frameworkof the New partnership forAfrica's development (Nepad)"."Analysts agree on saying that unemploymentis one of the main challengesfacing companies, particularlyArab ones, given that 60% of the Arabpopulation is under the age of 25”,confirmed the Minister."Among the essential stages plannedin the world employment campaign,we should note the UN's recommendationon putting in place nationalprogrammes to take up the challengeof employing youths" recalled MrLouh. With regards employingyouths, the UN has set down fourpriorities to be included in the nationalprogrammes for promoting theemployment of youths including "thequalification for employment thanksto investment in education and vocationallearning” and “equal opportunitiesfor all youths in terms of integrationin the working world”, explainedthe head of the employment sector.The priorities include "the creation ofnew projects in favour of youths inview of facilitating and encouragingthe creation of jobs, so as to offeremployment opportunities”, specifiedthe Minister, adding that, startingwith these strategies, “several countries,including Africa, have put inplace a policy to promote employmentbased on several mechanisms, includingdirect support for employment”.Mr Louh : “The investmentsmade by the State have enabled2,400,000 jobs to be createdfrom 2001 and 2005”The Minister of Employment and Social Security, MrTayeb Louh, confirmed that the efforts made by the Statesince 2001 in terms of investments, through theEconomic Recovery Support Programme (PSRE) 2001-2004, have enabled 2,400,000 jobs to be created up tothe end of 2005. During a plenary session at theNational Popular Assembly (APN) dedicated to votingon the bill on encouragement measures aiming to supportand promote employment, the Minister explainedthat the efforts made by the State, within the frameworkof the Economic Recovery Support Programme 2001-2004, have concerned, as a priority, the constructionand public works, hydraulics and agricultural sectorswhich are large purveyors of jobs.Dealing with the Algerian experience, a "pioneer inAfrica", in terms of promoting and supporting employment,Mr Louh indicated that, in parallel to certainemployment schemes, “three new schemes have been putin place and provide assistance to the creation of jobsthrough the small companies and self-employment,almost 206,000 jobs up to the end of 2005”."These achievements, he said, have enabled the increasingannual demand to be absorbed in terms of employmentand the number of unemployed people to be reduced(thus falling from 2,611,000 in 2000, i.e. an unemploymentrate of 29.5%, to 1,475,000 unemployed in2005, which represents 15.3% of the working population".Mr Louh further emphasised that "the nationaleconomy's growth rate, which has steadily increasedsince 2000 with a peak of 6.9% in 2003, before stabilisingaround 5% in 2004 and 2005, incurs a return tosustainable growth”. The time has come, he pointed out“to make a qualitative revision of the employment strategyby a return to an economic approach for dealing withthe plague of unemployment, particularly throughencouraging investment and reducing the cost ofemployment”."This approach implies, he added, the implementation ofa sustainable employment policy adapted to the economicdemand in the production sector and responding tothe demand for employment".

ReformsThe Minister of Finance to the directors of the press associations“Modernising the State’sbudget is our largest task”The Minister of Finance, Mr Mourad Medelci, at the head office of hisministerial department, met the managing directors of the press associationsin a conference during which the current economic and financialsituation was mentioned as well as the problems encountered bythe press which includes access to financial information.Dealing with the financial reforms,several of whose parts have alreadybeen initiated particularly in thetax, banking and insurancedomains, Mr Medelci indicatedthat the largest task being preparedis that of modernising the State'sbudget system which essentiallyaims to improve the managementof public finances".According to the Minister, theState's annual budget will be presentedin accordance with its newdesign as of the 2009 finance law.Unlike what has been practiced forover forty years, the State's budgetwill no longer be drawn up in thefinance law in the form of operatingand equipment budgets, butwill be designed through the definitionof allocating loans for eachspecific project falling within theremit of each Ministry whilst definingthe objectives.Furthermore, he added, the budgetfor the 2007 finance law will besimultaneously drawn up in theform in force and under the newformula but “blank”.The risk that any totalconvertibility of thenational currencyinto currenciescomprises whose mainconsequence isundoubtedly a “majorleak” of capital whichmight be used asmoney laundering.For the Minister, “the managementof public affairs must not be improvedonly in terms of texts, but alsoby revising the entire system inorder to ensure transparency andefficiency in managing the State'sfinances”.In his speech, Mr Medelci alsomentioned the recent abrogation ofthe decree of November 2005,which should enter into force on 1September 2006 and which stipulatedthat all payments exceedingthe sum of DZD50,000 must bemade by cheque, bank transfer,payment card, withdrawal, bill ofexchange, promissory note and anyother written payment method.Explaining the reasons for theabrogation of this text, the Ministerindicated that the date ofSeptember 2006 had initially beenused as it had been envisaged thatall of the new electronic paymentsystem would be ready before thisdeadline. “This is not the case” henoted. However, he added “we arenot losing sight of” the implementationof the system stipulating theuse of cheques for all paymentsexceeding the sum of DZD50,000.Furthermore, he specified, the decreeof November 2005 which establishesthis measure comes inapplication of a law dating back to2004 and related to fightingagainst money laundering and thefinancing of terrorism.☞Algeria has made earlyrepayments of foreigndebt of over 12 billiondollarsAlgeria has made early repayments of foreigndebt of over 12 billion dollars and hence savedan amount of around 2 billion dollars by virtueof interest, indicated Mr Mourad Medelci. Thefigures put forward by Mr Medelci indicate thatthe 12 billion dollars paid early are comprised ofthe re-staggered debt contracted with the ParisClub (7.9 billion dollars), the London Club(almost 800 million dollars) as well as multilateralloans for an amount of almost 4 billion dollarscontracted with international financial institutions(World Bank, African DevelopmentBank, etc.).Mr Medelci also confirmed that the early repaymentof the debt has enabled Algeria to savean amount of almost 2 billion dollars in interest,debt servicing commissions and other financialcosts related to the contracted loans and whichshould be repaid, according to the initial paymentschedule, between 2006 and 2011.By adding to these agreements the one of thecancellation of Algerian debt with Russia, estimatedat 4.737 billion dollars, Algeria has thereforepaid, between 2004 and 2006, total foreigndebt of an amount of 16 billion dollars, he furtherspecified.With regards the debt taken out with theLondon Club evaluated at almost 800 milliondollars, the Minister announced that not onlyhad the early repayment agreement beensigned at the end of last week in London, butthat the creditors have already been paid byAlgeria.Energie & Mines45November 2006

Reforms REFORMS☞In front of the bosses of the nationalpress, the Minister also dealt with theissue of the convertibility of the dinar.On this matter, he recalled the risk thatany total convertibility of the nationalcurrency into currencies compriseswhose main consequence is undoubtedlya "major leak" of capital whichmight be used as money laundering.During the debate which ensued by MrMedelci, the MDs of the press associationsraised several questions mostlydealing with access to financial information,the sale of national newspapersabroad and the State's aid to thepress sector.For Mr Medelci, the improvement ofrelations between the sources of financialinformation and the press from thepoint of view of accessibility to a maximumamount of information withmore precisions is a “real challenge”.In this sense, he admitted that theMinistry he is in charge of must encourageits executives to communicatemore with the press. He did howeverremark that the specific nature offinancial information requires specialisedtraining of journalists to ensurebetter quality of information.On this point, he suggested that theInstitut supérieur de gestion et de planification(ISGP), which was recentlytransferred under the supervision ofthe Ministry of Finance, put in place atraining programme especially designedfor journalists involved in financialissues. Questioned on the holdingEnergie & Mines46November 2006of information by the banks involved infinancial scandals, the Minister repliedthat the head of a banking institution“is surely not burning with desire” totalk to the press.Furthermore, he added, once the matterhas been introduced in the legalsystem, "it is not the banker's responsibilityto disclose the content of thematter being investigated". As to theproblems of exports and repatriation ofcurrencies coming from sales ofAlgerian newspapers abroad, theMinister remarked to the MDs of thepress associations concerned by thisissue that they are subject to the sameconditions as those of other exportingcompanies from other sectors.In his speech, the Minister also mentionedforeign debt. He thus indicatedthat Algeria has made early repaymentsof foreign debt of over 12 billion dollarsby virtue of interest. With regardsthe debt taken out with the LondonClub evaluated at almost 800 milliondollars, the Minister announced thatnot only had the early repaymentagreement been signed at the end oflast week in London, but that the creditorshave already been paid byAlgeria.The large publicinvestmentprogrammesare sustainableThe Minister of Finance, Mr MouradMedelci, reconfirmed that the differentpublic investment programmes for theperiod 2005-2009 (Complementary growthsupport programme and complementaryregional programmes) are financiallysustainable thanks to the good performanceof Algeria's financial situation.To lay out his proposals, the Ministerunveiled for the first time the financial conditionsfor the realisation of these ambitiousprogrammes whose cost, according to him,is around 120 billion dollars.According to the calculations made, he stated,the implementation of these largepublic investment programmes requiresa minimum amount, respectively, of30 billion dollars for the foreign exchangereserves, 10 billion dollars for the RevenueRegulation Fund (FRR) and a price perbarrel of oil within a range of 50 and55 dollars. In this sense, he stated that therespective amounts of these three elementsgreatly exceed these minimum criteria,citing as an example the FRR whose currentresidual is 30 billion dollars and a priceper barrel of oil of over 67 dollars.The 2006 complementary finance lawstipulates that, under no circumstances,must the level of financial resources of theFRR fall below 747 billion dinars, i.e. theequivalent of 10 billion dollars. Currently,the level reached by this fund is2,200.44 billion dinars (around 30 billiondollars) compared to 1,923 billion dinarsat the end of 2005.

ReformsThe reform of the State's budgetary system presented in detailTraining for almost 10,000 employeeswill be launched in 2007The project to modernisethe Algerian State's budgetarysystem, which mustbe implemented as of2009, has been presentedin detail by a representativeof the Ministry ofFinance during a MaghrebCourt of Accounts Forumheld in Algiers.Designed with the technical support ofthe World Bank, this project aims, essentially,to establish a “results culture” byfocussing the budget on “performance”(precision of the commitments andresults) and to increase the “transparencyof budgetary information”, explained thedirector of research at the Ministry ofFinance, Mr Ferhat Iken.For the implementation of this new budgetarysystem, a vast training programmewill be launched in 2007 aimed at almost10,000 employees from all ministerialdepartments.The main new elements which will beintroduced in drawing up the State's budgetare summarised in the putting in placeof a medium term expenditure framework(CDMT), the implementation of a budgetisationthrough programmes focussed onresults, a multi-annual budgetary framework,a new budgetary presentation andthe accountability of managers.Further explaining these new elements,Mr Iken indicated that the CDMT will bea budgetary policy forecast documentover a three to four year horizon whichmust enable the consistency between theState's expenditure and income to beensured. As for the budgetisation focussedon results, it must put an end to thecurrent practice consisting of a simpleallocation of operating and equipmentbudgets for each ministerial department.According to Mr Iken, the loans will begranted to each ministry by the definitionof a specific programme of activities andwill be “supervised by objectives, measuredby results and evaluated by performanceindicators”.Citing the case of the programme budgetisationstructure for the Ministry ofEducation, according to the next budgetarysystem, Mr Iken explained that theperformance approach will, as an example,consist of defining an objective -aiming to increase the quality of secondaryeducation. The budgetisation outlinemust therefore define the success rate inexaminations as a performance indicatorwhilst specifying the actions which mustbe undertaken to arrive at these objectivessuch as the design of a new secondaryeducation programme. For the sameministerial head, the performance measureswill enable “the difference between theactual results and the expected results tobe measured, the result obtained to beassessed compared to the expected resultand resources used and corrections to bemade to the action undertaken".With regards the 2009 State budget draft,this will be presented in three new separatedocuments called “volumes”.This relates to the "State's main expenditurebudget” (by ministry, by programmeand by large category of expenditure”), a“report on the priorities and planning”over a three-year period (detailed informationon the programmes, the objectives,the resource requirements, etc.) andthe "decentralised wilaya service expenditurebudget", which will indicate thegeographic redistribution of the State'sbudgetary expenditure.The other new fundamental elementprovided by this budgetary system reformproject is identifying a “responsiblemanager” in each ministry and in eachwilaya. The role of this manager, confirmedMr Iken, will consist not only ofdefining the actions to achieve the objectivesfixed and drawing up the necessaryexpenditure budget, but also “reportingthe differences between the actual resultsand expected results”. Presented underthe theme "Budget by objectives for goodgovernance", this forum is organised bythe Algerian Court of Accounts, in partnershipwith the German DevelopmentCooperation (GTZ), within the frameworkof the “good financial governanceprogramme” initiated in 2002 by thisGermany organisation designed for fiveMaghreb countries.It particularly took place in the presenceof managers of the Maghreb Courts ofAccounts, representatives of the NationalPopular Assembly (APN) and foreignexperts.Explaining the choice of the theme underwhich this 2nd forum is organised, thepresident of the Algerian Court ofAccounts, Mr Abdelkader Benmarouf,estimated that even if the Maghreb countrieshave initiated budgetary reformswhose extent differs depending on thenational context, “the stage which hopesto move from a traditional budget to aprogramme-budget is deemed laborious”.Positioning the challenges of renovatingthe budgetary practices at the Maghreblevel, the president of the finance andbudget commission of the APN,Mr Benalia Belhouadjeb, emphasised, forhis part, that with regards Algeria,“Parliament wants a deep reform of thebudgetary system in order to confirm thesense of the finance law” and consideredthat “the use of much more budgetarystrictness is deemed essential”.In this sense, he indicated that the nextbudgetary system which Algeria hopes toput in place by 2009 mainly relies on thebudgetisation by objectives which mustenable “the performances of publicactions to be evaluated throughtheir results, their legibility and theirtransparency”.Energie & Mines47November 2006

Reforms REFORMSCurrency and credit councilAdoption of a regulationon bank creation conditionsEnergie & Mines48The Currency andCredit Council (CMC)has just opted for aregulation on theconditions for creatinga bank or afinancial institutionas well as criteriafor setting up bankbranches in Algeria,indicated the CMC ina press release sentto the APS.This new text completes the implementationof the regulatory frameworkin force with the order of26 August 2003 on currency andcredit, explained the CMC whichadds that this contributes to “theemergence of a modern banking systemwhich responds to the needs ofthe national economy”.The regulation, notes the CMC, forits part, uses the universal fundamentalprinciples applicable in termsof authorisation and approval ofbanks and financial institutions andof setting up bank branches. Thetext, in the spirit of the 25 BaselCommittee principles, "enlarges thecontrol of banks in approval phaseby focussing on the quality of theshareholders, its financial capacities,its professionalism as well as thequality of the management", indicatesthe council.The new system which the CMC isputting in place aims to create theconditions to “consolidate the financialhealth of the banking system andensure its security by reinforcing theconditions for access to the bankingNovember 2006profession", emphasises the samesource. The objective sought afterfor putting this reinforced system inplace, further indicates the CMC, isto ensure that "all new approvalapplications must be examined inaccordance with a transparent andstrict regulatory and legal framework,in order to guarantee the establishmentof quality banks and preservethe banking system”.The Basel Committee is, in reality,that of the Bank for InternationalSettlements (BIS) which has takenthe habit of naming the systems itdraws up in reference to the Swisscity of Basel where it is based.Published in 1988 and adopted byover 100 countries, Basel I introduceda prudential rule through theminimum capital requirement of 8%to cover credit risk. But the shakeupsthat occurred afterwards on theinternational financial markets ledthe BIS to revise the Basel I system,thus giving birth to Basel II. Amongthe reasons which made such a revisionnecessary are the liberalisationand the deregulation of the financialmarkets, the financial innovationsnot taken into account by Basel I,the growing importance of riskmanagement techniques and theincreased volatility on the financialmarkets such as the Asian crisis in1997.The implementation of the Baselsystems (Basel I and Basel II) arenot of a mandatory nature for themember States of the BIS, butrepresent, in their eyes, an importanttool enabling the bank risk managementcapacities to be improved.CPA and BNP ParibasAl Djazaïr authorised toincrease their capitalThe Currency and Credit Council (CMC) hasjust authorised Crédit populaire d'Algérie(CPA) and BNP Paribas Al Djazaïr to increasetheir respective capital, announced the CMC ina press release. United under the presidencyof the Governor of the Bank of Algeria, MrMohamed Laksaci, the council thus respondedfavourably to the requests made by these twobanks in view of obtaining the authorisationto increase their capital :• CPA increased its capital by 4 billion dinarsto increase it to 29.3 billion dinars.• BNP Paribas Al Djazaïr increased its capitalby 1 billion dinars to increase it to 3.5 billiondinars.These capital increases "prove the continuedimprovement of the banks' asset situation”,comments the CMC. A regulation from theBank of Algeria dating back to March 2004and amending the regulation of 1993 imposesupon banks minimum capital of 2.5 billiondinars, compared to 500 million dinars for thefinancial institutions. The banking regulationfurther requires banks to totally pay up theircapital from the date they are established.

Mourad Medelci, Minister of Finance“Insurance cover for exports,excluding hydrocarbons,does not exceed 10%”ReformsIt is with the finding that the insurance cover for exports, including hydrocarbons,does not exceed 10% that the Minister of Finance, Mr Mourad Medelci, estimatedthat this rate is “insufficient given the large amount of our country's trade”.Mr Medelci, who presided over the openingof the works of the conference oninvestment guarantee and insurancemechanisms for exports in Arab countries,attended by numerous financialoperators, explained that these “verymodest” results, i.e. between 8 and 10%,do not in any way reflect the reality of thevolume of trade, excluding hydrocarbons,estimated at some 20 billion dollarsof imports and hundreds of millions ofdollars of exports.Given this, according to him, the exportcredit insurance companies “are calledupon to develop in view of adapting tothe dynamic of the current economicdevelopment”. This is an ambitious programmewhere the role of the Algerianinvestment guarantee and insurancecompany (Cagex) is called upon by theMinister who emphasised that this bodyshould bring itself in line more with theworld of financial operators and financialinstitutions to offer its services.Mentioning the aspect of inter-Arab andinternational cooperation, the Ministeralso recalled that two agreements havealready been signed since the start of theyear between the Cagex and the Arabinvestment guarantee company - agreementswhich related to the aspects ofreinsurance and insurance guarantee forexports ensured by the Cagex; “a cooperationwhich will tend to get bigger”, inhis opinion.The low penetration rate of export creditinsurance in Algeria, for its part, must beseriously looked into, hence the decisionmade by this institution, recently, toreduce its insurance rates, as announced,for his part, by the MD of the Cagex, MrDjillali Trikat. These rates have been deemedredhibitory (between 3 and 5% upuntil now) and which have just been reviseddownwards, since they now vary,according to Mr Trikat, between 0.20%and 1.5%.Hence this insurance recorded turnoverof 5 billion dinars in 2005, and almost 1billion dinars in the first quarter of 2006,still, according to Mr Trikat, who specifiedthat these insurances particularlyconcerned manufactured products andhydrocarbon by-products.To come back to the meeting, this, whoseobjective is to make the large activitiesinherent to the Arab investment guaranteecompany known, has enabled,through its managing director, Mr FahdRached El Ibrahim, this institution,whose vocation extends at a regionallevel, to be created in 1974 in view offavouring transfers of capital and inter-Arab trade flows - trade favoured, ofcourse, through the Arab export andinvestment insurance guarantee.The current capital of the Arab company,whose head office is in Kuwait, is around190 million American dollars. Up to2005, this institution guaranteed a totalof 6.2 billion dollars. 75% of this amountwas designed to finance the guarantee ofinvestments. For the rest, the IAIGG hasbeen devoted to insuring the credit lines(9%) and the goods and equipment ofthe companies (1%).However, the main vocation of this insurancecompany remains the ambition to“be able to set up a real guarantee industryin the Arab world”, as announced byMr El Ibrahim who specified, in thiscontext, that the IAIGG is currently inthe process of updating new formulas torespond to more diverse requests issuedby Arab businessmen and investors. ForMr El Ibrahim, Algeria is, by far, one ofthe most promising markets of theregion, currently. This is based on thevast programme of economic reformsinitiated these last few years and whichhas enabled the equivalent on 1 billiondollars' investment to be attractedannually; a figure which will tend to getbigger in the next few years, according tohim, since Algeria has updated a policy ofpromotion and assistance to the farmingsector and to SME, “which will enable itto diversify its income and set up a solideconomy, in view of no longer sufferingfrom the fluctuations of the internationaloil markets”. However, as the speakeremphasised, the Algerian economy hasnot greatly benefited from the services ofthe IAIGG although it is a 4% shareholderin it. Indeed, the value of servicesfrom which Algeria has benefited since1974 is around 147.6 million dollars, i.e.5.7% of all services insured to Arabmember countries. The total value of theexport investments amounted to 5.5%,i.e. 0.2% of all services insured by theArab company.Given this, the stakes are far from negligibleand particularly in the context ofglobalisation in which the world economywill be positioned, according to themanaging director of the IAIGG, who, inthis context, focussed on the importanceof investments to guarantee the developmentsin the countries which are in theprocess of this. "The Arab countries have,in this respect, promulgated legislationsand very favourable incentive measuresto attract investors, some have succeededin this policy - even brilliantly”, addedMr El Ibrahim, and it is rightly in thisperspective that the institution he manageshas been set up, according toMr El Ibrahim, who specified that theregional vocation of this companyreinforces the desire of Arab countries todevelop economic exchanges and tradewith each other, particularly through theguarantee of these exchanges againstnon-trade risks.Energie & Mines49November 2006

Energie & Mines50Reforms REFORMSNovember 2006The Caisse de garantie des créditsd’investissement is operationalThe head office of theAssociation des banqueset des établissementsfinanciers (Abef) hosted asigning ceremony for thepartnership agreement byMr Ammar Doaudi,Managing Director of theCaisse de garantie decrédits d'investissements,CGCI-PME and theChairmen of the shareholderbanks (CPA, BNA, BDL,BEA, Badr, Cnep Banque).This new institution is now operational.It has been created by the public authoritiesto guarantee the risks incurred bythe banks and financial institutionswhen financing the investment projectsof small and medium sized companies.The putting in place of its managementbodies and the appointment of itsmanaging director, Mr Ammar Daoudi,took place at the start of the currentyear.The instrumentation of the guaranteesystem, the definition of the resourcesand the organisation required for itsoperating were designed and put inplace in the first quarter of 2006 withthe support of international expertsselected during the Meda programmeappeal for tenders.The “caisse” is a joint stock companywith capital of 20 billion dinars, owned60% by the Public Treasury with theremaining 40% shared initially betweenpublic banks (CPA, BDL, BNA, BEA,Badr, Cnep Banque). The large amountof its capital makes it a first class institutionin terms of commitment capacities.Its resources do, in fact, enable itto guarantee, as of the first year, about6,000 SME financing projects.Its creation responds to a strategy ofthe public authorities, whose priorityobjective is to significantly improve theSME investment environment particularlyby facilitating their financing bycredit establishments. Up to present,the access constraints to sources ofbank financing have been one of themajor obstacles delaying the emergenceof a performing SME environment inAlgeria. The role specifically played bySME in the economic growth of acountry and which entails the creationof wealth and, particularly, of jobs, isindeed a driving force for economicdevelopment that, today, is fully accepted.It should be pointed out that, ingeneral, and just like in other countries,the banker rightly considers that thefinancing of SME is very risky. Indeed,the failure rate in the financing of thecreation of a company is around 30%to 40%.Furthermore, when the failure occursand the bank commits to the guaranteeinvoking process, other than the slownessof the legal procedures which mayentail disputes lasting up to 10 years, itonly generally recovers less than 20%of the imported debt. Hence, the banks'reticence to grant investment loans tothe SME and more specifically tofinance their creation are due to objectiveconsiderations.Overall, we can commonly cite: the lowamount of capital, the lack of costcontrol, the insufficient guarantees ofthe backer and often the lack of reliabledata enabling the banker to assess andcorrectly anticipate the risk, given thelack of technical-financial studies of theprojects submitted by the investor. Theguarantee system of the CGCI-PMEhas been validated by internationalexperts and declared conformant tointernational standards. The "caisse"offers its guarantee to shareholderbanks but also to all the credit establishmentsof the place they wish tosubscribe to.Furthermore, in the coming days, the"caisse" plans to approach all the establishmentsto offer them its system.The CGCI-PME guarantee is a particularlyattractive product for the creditestablishments. They benefit from riskhedging that is much greater than whatthey would obtain from the best guaranteesin value, in speed of mobilisationand in cost.The bank’s quick compensation, 30days after the declaration of the incident,constitutes an undeniable advantageinsofar as it will quickly recover itsresources up to the amount guaranteed.The CGCI system thus covers80% of the loans dedicated to financingthe creation of companies and 60% ofthe loans designed for developing productionof goods and services' activities.The level of the CGCI guarantee premiumis less than the rate applied bysimilar foreign organisations. It is fixedat a maximum of 0.5% of the outstandingamount of the loan granted by thebank. The amount of the loan eligiblefor the guarantee is set at a maximumof 50 million dinars to take account ofthe limit of the usual financing demandspecific to small and medium sizedcompanies. The SME investmentfinancing is eligible for the CGCI-PMEguarantee, with the exception of farmingand trade activities.By outsourcing a large part of the risktaken by the bank to the "caisse”, thiswill certainly contribute to modifyingbankers' attitude to the SME risk. Thepositive feedback from the guarantee, aproduct that is still new within theAlgerian banking community, will, inthe field, mean the progressive lifting ofreticence to the financing of SME. TheCGCI-PME will from now on guaranteeabout sixty applications this monthand records a potential guaranteedemand for about 400 applications bythe end of the current year.

ReformsIn the Council of MinistersApproval of the bill on savingsand loan cooperativesThe Council of Ministers has examinedand approved the bill on savings andloan cooperatives. This bill is part of theframework of the modernisation of thefinancial system and of the diversificationof its players.The savings and loan cooperatives aregroups of individuals who pool theirsavings to distribute it in the form ofloans to their members with advantageousconditions. They are non-profitmaking organisations. The membersparticipate in the management of thecooperative through their social bodies,namely the general meeting, the boardof directors, the supervisory committeeand the credit committee.The members of these different bodiesare elected by the general meeting aswell as the managing director of thecooperative.The aim sought after through the puttingin place of these cooperatives is tooffer their members the financial serviceswhich are not accessible to themthrough commercial lenders, either dueto a low level of income, their financialculture or their geographic remotenessand to favour bankarisation of the largestnumber of populations.Establishment of aCommission for the NationalPlanOn Tuesday 11 September, the Councilof Ministers examined and approveda draft presidential decree to create missionsand organise the Commission forthe National Plan.The Commission for the National Plan isset up as a specialised authority enjoyingfinancial autonomy. It is responsible forassisting the government and selectingand drawing up its strategy in thedomains of economic, social and spatialdevelopment. More precisely, the commission'stasks will be :• to analyse the consistency of all developmentpolicies in terms of economic,social and spatial actions and to assesstheir effectiveness,• to organise, in a multidisciplineapproach, a prospective consideration ofthe factors likely to affect the nation'ssocial, economic and spatial revolution inthe long term,• to organise the putting in place anddevelopment of strategic watch activities,• to organise and monitor, in associationwith the institutions and organisationsconcerned, the implementation of thenational statistical information systemand to develop the macroeconomic forecastingand simulation instruments,• to draw up joint documents for themonitoring of the economic and socialevolution,• to draw up and submit to the governmentthe annual report on the economicand social situation,• to drawn up the nation's medium andlong term development outlooks.To accomplish the tasks entrusted to it,the commission acts upon its own initiativeor upon the request of the government.Speaking further to the adoption of thisbill, the President of the Republicinstructed the government to ensure thatthe planning role is made more dynamicas a means of support for decisionmakingand as an objective evaluationinstrument for the progress of the country'sdevelopment.This instrument must contribute to theidentification of the strategic stakes andchallenges posed by the economic andsocial development and propose aconcerted and graduated approachaccording to the short, medium and longterm.Energie & Mines51November 2006

Reforms REFORMSGovernment-UGTA-employersTripartite commission : total successThe minimum salary increases fromDZD10,000 to DZD12,000The tripartite commission has adopted,in Algeria, the National Economic Pactand signed the economic sector's branchagreements (public and private). In a closingspeech for the works of the 12th tripartitecommission meeting, attended bythe government, the Union générale destravailleurs algériens (UGTA - GeneralUnion of Algerian Workers) and theemployers, the head of the government,Mr Abdelaziz Belkhadem, announcedthat the pact adopted by the tripartitecommission is valid for four years.Mr Belkhadem indicated that the pact is“the cornerstone” for dialogue and collaborationwhich will encourage efficiencyin (company) management giving considerationto the balance between socialdemands and economic requirements.The signature of this pact, added MrBelkhadem, will for the first time inAlgeria's history enable the employer toparticipate in the execution of the nationalprogramme. Furthermore, the tripartitecommission has signed branch agreementconcerning the public sector andthe “master” collective agreement of theprivate sector.In this respect, Mr Belkhadem emphasisedthat the signature of the "master" collectiveagreement between the privatesector and the UGTA with measures thatattempt to improve the purchasing powerof all workers.The tripartite commission also revisedupwards the national minimum guaranteedsalary (SNMG), which, as of 1January, will be around DZD12,000.After congratulating the change of viewof the union members, particularly inrelation to the question of privatisation,the secretary general of the UGTA, MrAbdelhamid Sidi Saïd, declared that“regardless of the content of the pact, ithas the intelligence to exist with the commitmentof all parties”, emphasising that“we have a challenge that it must assume”.In this sense, he added that with theresults obtained by the tripartite commission“we have just overcome a new stageand initiated good economic and socialgovernance".For their part, the representatives of theemployer organisations felt that this pactwill enable the challenge to be taken up,employment to be preserved and progressto be made towards sustainabledevelopment, considering it as “a gaugeof everyone's commitment to push thingsforward”.Energie & Mines52November 2006The UGTA backs the socialand economic pactThe Union générale des travailleurs algériens (UGTA) hasbacked the social and economic pact.The meeting attended by the managers of the UGTA and thedifferent federations "sanctioned the choice for which theunion has fought, since the 1990s, by backing the social andeconomic pact”, indicated to the APS the national secretaryof the UGTA, responsible for general relations, MrAbdelkader Malki."The pact will definitively determine the relations betweenthe UGTA and the government, on the one hand, and betweenthe UGTA and employers, on the other hand", he specified.Furthermore, the debates also dealt with, in the samemeeting, the branch agreements and, according to the samesources, the federations gave a report on the state of progressof the negotiations with the asset management companies(AMC). In this respect, the 18 federations all expressedtheir “satisfaction” as to the results of these negotiationssince, it added, "the majority have succeeded, even if this hasbeen difficult for some, in achieving the hoped for results,particularly with regards increasing salaries”. In this context,Mr Malki said that “the secretary general of the UGTA,Mr Adbelmadjid Sidi Saïd, has committed to take responsibilityfor the case of the Fédération nationale des travailleursde la métallurgie, de la mécanique, de l'électricité et del'électronique (FNTMMEE - National federation of metal,mechanics, electricity and electronic workers) and continuethe negotiations until a solution is found that is satisfactoryto all parties”. "The misunderstanding that persists betweenthe FNTMMEE and the AMC, responsible for these sectors,only concerns the issue of the increase in salaries”, indicatedto the APS, for his part, the national secretary responsiblefor organics, Mr Salah Djenouhat.

ReformsSonatrach finalises the adaptation processof the Internal Audit functionReference documentation to thestandards for the audit functionThe adaptationprocess of theSonatrach InternalAudit function to theinternational standardsand practiceswas finalised with thesignature of its referencedocumentation.Falling within the framework of theSonatrach operating modernisation anddevelopment process, the company projecton the “Organisation and developmentof the Sonatrach Internal Auditfunction” has enabled the Group Auditcentral division to adapt the organisationof the Group's internal audit functionto the international standards andpractices governing the profession, todevelop the different management toolsof the Audit function and the necessaryprocedures, enabling the auditors toaccomplish their missions with themaximum efficiency and diligence andto identify, in terms of human resources,the requirements for recruitment,training and development of skills aswell as the performance appraisal criteria.To this end, on 30 May 2006, in theconference room of the GeneralDivision, a signing ceremony took placefor the Group's internal audit referencedocumentation, comprised of three keyand founding documents for the function,namely :■ The Sonatrach Group audit policy■ The Sonatrach Group Internal Auditcharter■ The Sonatrach Group's internal auditors'code of ethics and professionalbehaviour.Note on the internal audit functiondrawn up with the assistance of Deloitte& Touche, a global point of reference inthis activity.Mr Mohamed Meziane“Reference documentation which brings uscloser to the large international groups”After recalling Sonatrach's determination toachieve the international standards in thisdomain of internal audit, Mr Meziane spokeof his conviction that his Group is movingcloser to the best practices shared by thelarge international groups, particularlythose in the oil and para-petroleum industry."The reference documentation reflects, hesaid, the satisfactory progress made in theAudit Function's development and organisationproject which we launched with theassistance of our partner Deloitte & Touchejust over a year ago, since this is what willgive us the new tools to modernise theInternal Audit function in Sonatrach". MrMeziane then gave more detail on the threedocuments comprising the reference documentation:"The first one deals with the SonatrachGroup's internal audit policy. Its purpose isto guide the Sonatrach Group's directors inputting in place and maintaining appropriateinternal control procedures, based onevaluating risks. It defines the principles ofinternal audit and the terms which mustgovern the audit domain throughout theGroup, with the essential aims being:• the efficiency and effectiveness of the operations;• the correct auditing of persons and assets;• reliability and regularity of the financialand operational information reported;• respect of the laws, regulations, contractsand the application of guidelines.”The second document, "The SonatrachGroup Internal Audit Charter” fills in a voidfound when bringing the audit function inline with the profession's standards. "Thischarter, continued the Chairman ofSonatrach, establishes the role, the organisation,the scope and involvement ofInternal Audit; it is a reference for the rightsand duties of the internal auditors, all entitiesof our Group to be respected by everyonewithin the framework of their activitiesand it clearly and carefully displays themethodological guidelines implemented forthe accomplishment of an Internal Auditmission”.The third and final document of this auditreference documentation, “the internalauditors' code of ethics and professionalbehaviour”, defines the profession's rules ofethics and behaviour. "Auditors, he emphasised,finally have a precise, clear and directingreference framework, which they mustconform to."The document is comprised both of thecode of ethics and professional behaviour ofthe Sonatrach Group's internal auditors andof the applicable practical terms and conditionsand standards decreed by the Instituteof Internal Auditors (IIA).After emphasising the increase in the auditmissions and their extension to almost alldomains, whether compliance missions orinsurance and consultancy missions,Mr Meziane declared that "undoubtedlyconsiderable effort has been put into this”.It will undoubtedly encourage the improvementof skills, knowledge and know-how ofthe Group's auditors to finally make theinternal audit function an exemplary placeand a driving force for passing on goodpractices within Sonatrach”.To conclude, the Chairman of theSonatrach Group recalled that the overallprocess initiated is being continued toimprove the company's performances andadapt its organisation to provide it witheffective audit tools and systems to enable toit achieve, with the professionalism requiredand through the good governance rules, theobjectives it has set itself for the short andmedium term."We will achieve all this, he stated, thanks tothe skills and commitment of the Sonatrachmen and women and the qualitative reinforcementof our human resources.”In conclusion, Mr Mohamed Mezianeannounced the initiation of the AnnualExecutives' Conference of the Group Auditcentral division, this year devoted to thedevelopment of human resources specific tothe Internal Audit function by the signatureof this reference documentation.Energie & Mines53November 2006

ChronicleCHRONICLEEconomic debateand political aimsThese are commendable and healthyinitiatives, a priori, insofar asthey enable the opinion to be clarifiedand thus the democraticfield to be enlarged. These meetingsand these conclaves do not howeverenable questioning - at least for some ofthem - as long as they highlight practices andbehaviour revealing a state of mind particularlyenlightening as to the actual aimsunderlying them. Bringing together politicalmen and former executives, the discussionswhich these meetings placed under the bannerof “scientific rigour” give rise thereforefor questioning and particularly: whether thiscurrent frenzy only finally proceeds from oneand only concern: eroding and sharpeningarguments, refining strategies in view ofthese decidedly important political timeframesrepresented by the referendum on thenew Constitution and the legislative electionsof next spring?Under this report, there would still not beanything to say as in this case there would benothing very normal in wanting to take thelead and precipitate the adjustment of startingblocks. What is a problem in reality isindeed the scientific relevance of theseexchanges and the table tennis game drawnfrom connivance to which they give rise.Those who hoped to see authentic attemptsat economic analysis develop in favour ofthese debates, will therefore be disappointed:the scientifically staggered argument isunfortunately often absent from it whereasthe amalgams and the approximations prosperinghere are mutually stimulating.Energie & Mines54By Mohamed Sofiane Kasbadji *For a few months now,various forums, societiesand other more confidentialmeetings have acted,or reacted, in view ofdebating on the country'seconomic situation andcorrelatively the policyfollowed in this domainby the government.November 2006The tropisms of economismIf we systematically denounce, and oftenrightly so, the shortcomings of the bankingsystem, the deficiencies of the humanresources training system, the worryingweakness of the human development indicatorsand the vulnerability of our economybuilt over 25 years ago on mono-exporting,we never, however, give justice to the overallpositive macroeconomic report of the periodfrom 2000 to present.The imperfections of this report are onlyrarely attributed to the difficulties (or to therequirements) of the political-economictransition of the country. If we speak of economics,we arbitrarily disassociate bothterms from the word by reasoning mechanically,purely accounting. The spectacularimprovement in the fundamentals of thenational economy has only, for its part bet onthe increase in oil prices. We finally have theaberrant protest of requiring everything, hereand now. This aspect must lend to considerationin terms of governmental communication.From the point of view of goodgovernance, moralisation of public life,diversification of the national productivepotential, etc., the central question in alldebates is the following: "Should we keep thehydrocarbons in the group to leave them asthey are for future generations, or should weuse them in good conscience to prepare forthe post-oil period?, given that the currentstatus of our foreign exchange reserves isarousing lively (local and foreign) greedwhich we cannot always say are animated bythe public interest. Beyond any criticism,whether legitimate or not, we often forget inthese “economic debates” that we cannotvalidly answer this question through economism.Now, with regards the Economic Policycommitting the future of our country, wecannot content ourselves with the financialvariable alone without proposing new recoverysolutions supported on structural analyses,required for building a self-maintainedeconomy, i.e. sustaining and creating progressfor future generations. Hence sayingthat the entire importance of a clear and precisedefinition of a promulgated economicpolicy, which clarifies the long terms, givesthe consistency required for the options ofthe present whilst reinforcing our country'scredibility.A source of consolidation of the nationalsovereignty, this approach which will rely onthe programme of the President of theRepublic, on which he has been elected, willfavour the visibility required from investors,will ensure better legal stability and will enablebetter harmonisation of the economicrelations between the different business sectorsof the national economy. Apart from thisnecessity, the leitmotiv which comes to anyeconomist or supposed political scientist isthe following: how can we usefully and efficientlyspend our currency assets whilst avoidingunderhand dealings and dilapidation?This is of course the responsibility of all businesssectors and of the State first of all. Butthis is also part of our economy's absorptioncapacity. This capacity which has tragicallyfailed us, by slowing down investment,remains determined, to a large extent, by thequalification of our human resources and theadaptation of our institutional organisation.But the more sensitive problem, and which isinevitably part of complex tendencies, is thatof the education-training to be considered inits entirety. As it is obvious that it is thepupils educated in primary education, oreven in nurseries, who will later add to thespecialised institutes, the faculties and thedifferent business corps. The training givenmust still be adapted to the needs of the jobmarket. Hence, we must consider that theeconomic measures will still be insufficientfor as long as they are not supported by anappropriate institutional organisation that iscompleted, in a restrictive way, by budgetaryselection rationalisation instruments, rigorousmonitoring of the execution of publicpolicies and of an (internal or external) auditsystem worthy of its name so that it is preservative,educational and dissuasive.Recent one-off decisions which are part ofthe framework of the so-called second generationreforms are moving in this direction :new provisions for the preparation of theState's finance and budget's laws; creation ofthe Commission for the National Plan. Theseare very encouraging measures whichdeserve being followed and particularlycompleted.M. S. K.(*) Economics expert

ReformsThe IMF comes back on the Algeria-EU agreement and investments“The potential tributary advantagesof continuing the reforms”The IMF comes back in a report on Algeria's economic situation. First point covered,the partnership agreement with the European Union that entered into forcein September 2005.For the authors of said report, the recentagreement has “costs and benefits”. Butwhilst the costs are only in the shortterm, the "benefits gained will be over thelonger term" to reassure on the passingaspect of the first malfunctions born ofits implementation.Among the difficulties felt by the fund'sexperts, we quote the “reduction in revenue,turn around of trade diversion,transitional unemployment and enterpriseclosures”. But this cannot in any eventhinder the optimism of the authors of thereport for whom “Algeria's strong financialposition together with the deep economicreforms would help mitigate theshort-term costs of the agreement”.That said, the expected benefits “wouldcome mostly over the longer term andconsist of welfare gains, increasedforeign direct investment, transfers oftechnology and knowledge, and higherproductivity and potential growth”.As an indication, the loss of customsresources will increase continuously,going from 0.1% of GDP in 2005 (theagreement only entered into force inSeptember 2005) to about 0.4% of GDPin 2006 and to 2% of GDP in 2017,when the agreement will be fully applied.The revenue loss would be higher ifaccount is taken of "the impact of tradediversion and of the adverse effect of theagreement on the import substitutionsector", notes the report. Working in theother direction, however, potentialhigher economic growth resulting fromthe agreement will generate additionalfiscal revenues, which would partly offsetthese losses.To conclude, the fund feels that “realisingthe potential benefits of this agreementdepends, to a large extent, on Algeria’scommitment to reforms”, as, it adds,“the Barcelona Process positively affectedmainly the countries that showedserious commitment to reform”.It cites the cases of Jordan, Morocco,Tunisia, Lebanon and Egypt.Furthermore, Algeria has an “advantage”,according to the fund's managers,in the sense that its position - it is the 8thcountry to sign this type of agreement -enables it to benefit from the experienceof others. Furthermore, the new EU partneris the only “major exporter of oil”,which means a strategic position for theentire country.Another chapter reviewed in the reportdeals with Algeria's ranking in terms ofattracting foreign investment comparedwith several countries. The business climateand the incentive conditions forforeign investors is the subject of anadditional study which is based on a surveybased on various parameters. Therecommended measures include undertaking“structural reforms aimed atdiversifying the economy and achieving atransition to a market economy” andabove all ensuring macroeconomic stability.With regards the industrial policy, theIMF recommends “accelerating therestructuring / privatisation of the stateownedenterprises” as well as “increasinglabour market flexibility”. These elementscan be used as assets for a modernisationof the national industry andprovide it with the elements of its competitiveness.Finally, with regards the financial aspect,the report notes that "banking reformwould improve the mobilisation ofdomestic saving and the efficient allocationof the financial resources availablefor intermediation”.“Modernising the banking system requires,in particular, privatising severalbanks to reputable investors; improvingthe governance of the remaining publicbanks; strengthening banking supervision,and developing the regulatorystructure”, recommends the report.Energie & Mines55November 2006

Case studyEngineering“... In terms of knowledge, no country, industry or company has a natural advantageor disadvantage. The only advantage it can process is the ability to exploit universally availableknowledge.” Peter DruckerThe key to development

ENGINEERING CASE STUDYEngineeringThe driving force of economic developmentTECHNOLOGYA driving force for economicgrowthAbdelmoumen Ould KaddourChairman & CEOBrown & Root - CondorWe only need to look at the resultsobtained within the framework ofthe Marshall Plan, designed by theUnited States after the SecondWorld War, for the reconstructionof the allied countries of WesternEurope. This plan, drawn up underthe American President, Harry S.Truman, for a period of four yearsfrom 1947, concerned technicaland financial assistance estimatedat 13 billion American dollars -Energie & Mines58“To achieve great things, we needengineers who dream as well as act;not only plan but also believe.”Anatole FranceEngineering is surely at thebasis of all new development:it is a fundamentaldomain thanks to whichwe can achieve our dreams and ourambitions. It enables strong andvigorous companies to be createdas well as a robust and healthy economy.It also provides opportunitiesto develop our capacities to becompetitive at the internationallevel.November 2006equivalent to $130 billion dollars in2006 - to help the European countriesrecover. Never before had asingle cause known such a concentrationof technology and engineeringwhich enabled WesternEurope to experience unprecedentedgrowth and prosperity in thefollowing two decades.There is a lot of proof supportingthe idea that technological innovationis at the heart of the creation ofwealth. Indeed, technological progress,raised to front line status,has been, without any doubt whatsoever,the driving force of the economicand cultural boom of the20th century. A lot of studies indicatethat during the last 50 years,technological innovation has representedover a third of the growth ofthe western economy.In this context of innovation andproductivity, engineers have playedand will continue to play an evermore important role. Engineerswill still have to develop new processesand products and managenew systems in the domains ofinfrastructures, industrial production,health, information management,data transmission, etc. Ingeneral, they will have to put theirknow-how to the use of societyand, so doing, procure enormousopportunities to the public and privatesectors for the creation ofwealth and of jobs.In the same way that Japan surprisedthe West between the 1970sand 1980s with the increasingsophistication of its technologies,the attention has since been turnedto the technological achievementsof the economies of South Koreaand Taiwan and, more recently,towards the technological potentialand competitive strength of Indiaand China.These emerging economies all havethe same vision. The elites, adeptsof modernisation, place the developmentof sciences and technologyat the top of their concerns. Theyhave quickly put in place or set uppolicies and incentives aiming to

Engineering Case studyimprove the quality of and access toeducation, encourage investments,favour deregulation, keep highlyqualified personnel and attractforeign investment as well as theskills of expatriates.According to Forrester Research, inthe next 15 years, over three (03)million intellectual workers representinga payroll of 136 millionAmerican dollars, will go to countrieslike India which, given thetechnological profile jobs offered,are attracting this migratory flow.India, which has seized this opportunity,is responding to the futuredemand of qualified jobs, by training3.1 million university graduatesa year (it is planned to doublethis number in 2010).To support this growth, the numberof engineering educational establishmentsis likely to increase by50% to reach almost 1,600 establishmentsin the next four years.In 2005, 450,000 studies enrolledin four-year engineering courses inIndia, which means that the outgoingnumber of engineers willmore than double in 2009.Europe in its entirety trains, for itspart, 100,000 engineers a yearwhereas America only trains70,000.Likewise, countries such as SouthKorea have seized the nationalimportance of becoming a mainplayer in the domains of research,innovation and engineering. Theresult of this is that high technologyproducts today represent over30% of all products manufactured;an average well above that of mostOECD countries and the UnitedStates where this ratio is 25%.The majority of Asian countriesaccord a lot of importance to theircapacities in terms of sciences andtechnologies and consider them asbeing at the very heart of the challengesfacing them in variousdomains such as the military, economic,environmental and securitydomains. Better still, they areconvinced that sciences and technologiesare, currently, among themost globalised activities in theworld. Consequently, those whocommit to exploit the opportunitiesare ensured that they will havenational innovation systems capableof enabling them, on the onehand, to reinforce the nationaltechnological capacities and, on theother hand, better exploit theopportunities given to them by globalisation.The political desire of governmentsto support and also, above all, topromote the necessary environmentin which innovation and technologycan flourish has been thecentre of their success. Whengovernments adopt a proactive collaborationapproach and look tofavour partnership in the domainsof education and industry, theircountries become capable of quicklyresponding to the ever changingand ever increasing national needs.The real wealth of a nation residesin its human capital, and a lotconsider that this particularlyapplies to its engineers. In thisrespect, I would like to specify that,for me, an engineer is someonewho not only knows how to dothings well, but also knows how toappreciate the right thing to do.Engineers must, in fact, be capableof seizing the opportunities forinnovation rather than simplycontributing to increasing productivity.Innovation is the result of theapplication of new knowledge tonew and different tasks, and thisprocess in its entirety is maintainedby a continuous cycle of education,training and the sharing of knowledge.As the company's "mainintegrators", engineers must havethe functional competence requiredto provide the leadership capable ofadding to the continuous and interactiveinnovation process and thatof creating wealth.75 years ago now, the philosopherJosé Ortega Y Gasset predictedtoday's challenge in terms of engineeringeducation, writing in theUniversity's Mission (1930) that“the need to create good synthesesand the systematisation of knowledge…will call upon a sort ofscientific engineering which, today,has only existed as an aberration:engineering for integration.Through necessity, this means specialisation,as any creative effortrequires, but this time the personwill specialise in overall construction”.Technological innovation has beenthe emblem of the oil industry sinceits beginnings. Engineers and geologistsare constantly challenged inlooking for oil and gas deposits,how to extract the hydrocarbonsfrom rocks or from the soil efficiently,whilst reducing to a minimumthe impacts on the environment.Learning from the successesand even failures of others, engineersfeel armed for the next technologicalbreakthrough, which willcontribute to improve the industry'scapacity to produce the oil and gasthe world needs.The economies are also currentlymoving towards an era of knowledgeand shared intelligence, whereknowledge is accessible to everyone,no matter where or when, andwhere the power, information andcontrol go from centralised systemsto the individual.To only take one example, computershave, after a period of a fewyears, gone from air conditionedrooms to cabinets, then into offices,to then become portable andfinally end up in our pockets.Likewise, the extent of the reach oftelecommunications has largelyincreased the intellectual and politicalconnectivity and that ofbusiness. The number of internethosting sites went from just 200 in1983 to 10 million in 1996 and isin the process of doubling annually,according to the evaluations of theComputer Research Association. ☞Energie & Mines59November 2006

ENGINEERING CASE STUDY☞Energie & Mines60In the current business world,companies must be able to quickly,efficiently, dynamically and responsiblyreact to the changing needs ofthe market. They must reduce theiraccess timeframes to the marketand adapt to changes of circumstances.Furthermore, with governmentalregulations becoming stricterand the consumer being moreand more aware, companies haverealised the importance of protectingtheir environment.In their effort to become even moreagile, companies have adoptedstrategies such as the EngineeringConcomitant. This business strategyreplaces the traditional designand engineering sequentialapproach, enabling the parallel executionof tasks. The strategy isfocused on optimising and distributingthe company's resources inthe design and development stagesso as to ensure an efficient andeffective development process. TheEngineering Concomitant isunquestionably the wave of thefuture in that it reduces the time,costs and execution risk andimproves efficiency and effectiveness.However, to achieve theseadvantages, the collaborationbetween individuals, groups, structuresas well as with the clients,suppliers and partners is essential.Throughout the world, people arefocussing their attention on theimportance represented by protectingthe environment. Pollution isincreasingly contaminating the air,water and neighbouring land. Thishas led to the introduction of theindustry's environmental practicesin the districts, communities andeven in individual homes. For thispurpose, companies are concentratingmore energy on environmentalissues from the design and developmentstage of new projects. This“green design” process consists ofsystematically taking into considerationthe environmental management,safety, waste management,ecology, conservation and restorationproblems.November 2006Looking to be constantly moredynamic and more receptive to themarket's needs, companies are stillcontinually ready to adapt the complexbusiness models to unforeseenchallenges. This is not a banal task,but rather a complex strategic planwhich requires the company's fullcommitment, powerful leadershipand continuous dialogue with everyoneinside the business valuechain. Doing this, there is nodoubt that the advantages are substantialand those who have succeededhave transformed these bestpractices into competitive advantages.Successful engineering relies onthe following prerequisites :• A clear strategyfor the execution of the work• An evident commitment toimproving health, safety and theenvironment• Efficient and effective projectmanagement• Well trained personnel• An interface control• Standardised tools• Computer simulation tools• Global supply sources• Knowledge management• Risk managementIf these prerequisites are fulfilled,the future can only then be the factof organisations and individualsthat have the ability to :• design whilst responding to theobjectives of safety, reliability, theenvironment, operating costs andmaintenance:• continually design projects whichrespond, to, or exceed, the clients'expectations;• acquire the intellectual qualificationsrequired for on-going training:– create, at the world level, effectivepartnerships which will enablethem to increase their areas ofexpertises and access the latesttechnologies;– understand the physical constructionsand the economic, industrial,social, environmental, politicaland international context inwhich engineering is applied.In Algeria, we are living in a periodof shake-ups of the structures andmentalities. At this particular timein its history, our country is goingthrough a difficult transition toa market economy where technologyplays a vital role for economicgrowth and sustainable development.In this reform, restructuring andeconomic recovery effort, weconsider that it is of the utmostimportance that a significant percentageof investments are reservedfor technology as a privileged basictool for resolving a lot of difficultsocial and economic problems,such as the creation of jobs, housing,the improvement of infrastructuresand communications,managing the environment andliving areas, designing more efficientand more profitable publichealth systems, etc.In spite of the remarkable efforts interms of training and numerousinitiatives in the domain of scientificand technological research,Algeria has not been able to, forvarious reasons, accomplish thenecessary integration of projects todraw from its potentials and developskills in terms of engineeringwhich would have enabled it tosupport a strong industrial andeconomic base in general.Today, a second opportunity isoffered to it with the emergence ofits services' sector. To ensure itssuccess, it must, however, establishstrong collaboration between thepublic authorities and the companiesthat can guarantee legislativeand regulatory support, a reductionin bureaucracy and a commitmentto develop the skills within theAlgerian workforce. The reward, incase of success, will be the opportunityto become, in the comingyears, an important player in theworld's services' economy, by creatingjobs and important addedvalue both inside and outside thecountry.

Engineering Case studyIn this perspective, and by continuingto favour the latest researchwhich is the basis of competitiveness,our country must ensure thatits engineers and managers assumeincreasingly complex roles in thefuture.To do this, we need to reinforce thenational fundamental researchcapacities, establish new incentivesand institutional arrangements tolink the research to the economy,find new mechanisms to bring anational innovation system in linewith the trends towards a globalisationof research and innovation andreinforce the capacities for theinternational cooperation in sciencesand technologies.To support this global effort, weneed to develop a scientificapproach in terms of education,training and managing skills that iscapable of ensuring the attraction,the motivation and the loyalty ofpeople in the different engineeringdisciplines. This can only be done ifthere is real active cooperation betweenthe training institutions,industry and the public authoritiesthrough the putting in place ofsignificant and measurable actionplans. To make this expensiveinvestment effort profitable interms of training the engineers ofthe future, we must improve theway in which skills are managed.Achieving competitive advantagesin engineering companies is notonly a technological matter, it isalso a human resources managementmatter in terms of using themand ensuring that they generateadded value for the economy. Wetherefore need to create an environmentwhere the skills we haveare committed, well trained andmotivated. If we succeed in thiscrucial development stage, we willhave established a solid and productivetechnological base whichthe country can make use of tobuild up a self-maintained and thereforeinexhaustible potential forthe future.This means that it is essential forthe public authorities to makeimproving endogenous technologicalcapacities an absolute priority,which can only be achieved withdirect financial support from theState as, if this is left up to thevicissitudes of the market or isconsidered the sole responsibilityof industry, we will certainly failto guarantee the future of ourcountry.To summarise, we have to note everythingthat other countries haveaccomplished, learn from theirexperience and look to make similarprogrammes succeed that areadapted to Algeria's stage of development.For this purpose, it isessential for the public authoritiesto play a leadership role, channelfinancial aid to specific industries,encourage risk-taking, and stimulateand influence the acquisition offoreign technologies.The highest standards must aboveall be put in place to create andpromote a climate favourable to thedevelopment of science and technologysupported by a powerfuleducation system along with theparticipation of industry.I hope that the articles below willfurther highlight the importance ofengineering as a driving force ofeconomic growth and will giveexamples of best engineering practicesand relevant case studies.Other articles will also give you anoverview of the progress of engineeringand comparisons enablingyou to get an overview of the progressof engineering and the problemshaving an impact on Algeria.To finish, I would like to remindeveryone that our efforts andperseverance are the key to oursuccess. One thing is certain: tosucceed we all have to be a lot moreimaginative and intellectually ambitious.References1) Society of Petroleum Engineers.2) Forrester Research.3) The Future of the Oil & Gas Industry -Harry J. Longwell - Director andExecutive VP. Exxon Mobil Corp.4) Next-Generation Engineering - JosephA. Bordogna - Acting Deputy DirectorScience Foundation.5) Computer Research Association6) José Ortega y Gasset.Energie & Mines61November 2006

ENGINEERING CASE STUDYEngineeringSouth Korea's experienceThe Republic of SouthKorea, with a relativelysmall surface area, representing1/24 of Algeria'sland surface, has weak naturalresources but did however have48.3 million inhabitants in 2005and has one of the highest populationdensities in the world. Thiscountry, located to the north-east ofAsia, is the only country in theworld to remain divided, in spite ofthe ethnic homogeneity of its population.Namhee ParkManaging DirectorKeangnam AlgeriaIn the aftermath of World War II, aRepublic of Korea (ROK) was createdin the southern half of theKorean peninsula, whereas a communisttype regime was set up inthe north (the Democratic People'sRepublic of Korea). In 1950, the"Korean War" began which devastatedthe peninsula causing severalmillions of deaths and casualties.Thereafter, and for the next twentyyears, the Republic of Korea benefitedfrom the support of westerncountries.In the space of thirty years, Korea'stransition from the status of a countrydevastated by the war and lackingnatural resources to a countrywith advanced technology is aunique case in the world.In what follows, we will see how theRepublic of Korea has overcome theweaknesses and constraints specificto its environment to become astrong country in the field of engineering.Elected to power at the start of the1960s, President Park Chung-Heelaunched a National EconomicDevelopment Plan with the objectiveof overcoming the deplorablesituation suffered by the countrydue to the war.Initially, he adopted an economicpolicy focussed on exporting and,through a strategy avoiding theimporting of raw materials; he createda chemical industry necessary toput in place the infrastructure forlight industry. At this time, constructionof factories essential to thedevelopment of the country dependedon foreign engineering companiesand the realisation of publicworks and architectural constructionwas, however, structured on anintensive use of labour.Thanks to the development of heavyand chemical industries, the volumeof exports multiplied by 10 in 1969compared to the first years of thesame decade. This gave the Koreansself-confidence and made themaware of their ability to do more ifthey focused on their objectives.Supported by the initial economicprogress recorded in the industrialinfrastructure development plan,the Korean government drew up theso-called "Engineering ServiceNurturing Law” to enable the transitionfrom industry based on anintensive use of labour to heavyindustry with intensive use of technology.In the terms of the law andthe governmental policy, a lot ofbenefits were granted to newly-Energie & Mines62November 2006

Engineering Case studycreated engineering companies.Hence, large companies becameowners of factories and constructioncompanies, in their turn, createdengineering companies to constructnew factories and developtheir business activities.By virtue of the engineering servicenurturing law and thanks to theannual increase in exports whichexceeded 40%, the country neededto build more factories, industrialzones, industrial facilities, roads,ports, etc.Consequently, training and educationcourses were deemed necessaryto be given, in this period, to thehighly technical engineering workforce.For this purpose, the Koreangovernment drew up a policyencouraging the training of thetechnical workforce requiredthrough the establishment of severaltechnical colleges and setting downquantitative objectives for the workforceto be trained by each college.Practical manuals in all fields ofindustry as well as scholarshipsdesigned for research were madeavailable to the technical workforce.In the middle of the 1970s, Koreawas to suffer two oil crises. As a nonoil producing country, Korea couldnot avoid the shortage of foreigncurrencies essential for importingoil, particularly after the oil pricesurged. Furthermore, it was verydifficult in the economic crisisconditions to ensure the supply ofthe raw materials needed for itsexports whereas the demand on oilfacilities and infrastructures remainedvery high in the countries of thepetrodollar wealthy Middle Easterncountries.To exit the crisis, the Koreangovernment placed its highly qualifiedand well trained workforce,through the cooperation with theprivate engineering and constructioncompanies, in the petrochemicalindustries and in infrastructureconstruction projects in the MiddleEast. Acting in this way, the governmentwas not only able to overcomethe oil crisis in consideration for thepetrodollars earned in the MiddleEastern countries, but at the sametime saw its construction and engineeringindustries make enormousprogress in the quality and quantityaspects.Hence, the training of technicians isa key and essential element of anyindustrial modernisation policy andof an industrialisation which wouldlead the government to contributeto the creation of jobs and increaseKoreans' salaries. Furthermore,when Korea found itself confrontedwith a national crisis, the privateengineering and construction companieswere able to save the countrythanks to their breakthrough intothe overseas markets, using theirknow-how acquired in terms ofengineering.CountryAmericaKoreaFranceGermanyJapanItalyGreat BritainIn the 1980s, the Korean engineeringcompanies were at the top ofthe world's ranking in terms oftechnology and equipment forhaving successfully concludedlarge-scale international contracts.In 1982, these performances rankedKorea in second place after theUnited States of America in termsof order volumes in overseas construction,particularly in the MiddleEastern region where the Koreanmarket share was 20.9% comparedto 36.1% for the USA and 7.2% forFrance. This means that Korea'sconstruction engineering technologyhas not only judiciously andmore than adequately overcome thetwo oil crises of the 1970s, but alsoachieved its strategic objectives bymaking Korea a developed country.In conclusion, in the decades between1960 and 1980, Korea wasable to draw up and succeed in atechnological development strategyadapted to national economic development.This on-going strategyenabled Korea to have strong engineeringtechnology in the industrialand construction sector.Finally, by completing the developmentof engineering, Korea hasmanaged to improve the quality oflife of its citizens, create jobs, set upa high technology industry and acountry that is resolutely focussedon exports; a country which thusended up by joining, between theyears 1990 and 2000, as a highlyindustrialised country, the group ofdeveloped countries.Ranking of overseas construction orders in 1982OrderamountTotalMarket share(%)44.913.811.49.59.37.87.536.511.29.37.77.66.36.1Middle Eastern RegionOrderamount18.510.73.72.42.52.83.0Market share(%)36.120.97.24.74.95.55.8(Unit : USD billions)Energie & Mines63November 2006

ENGINEERING CASE STUDYTRANSFORMING HYDROCARBONS INTO SKILLSImporting and exportingservices in AlgeriaJean-Marie PINELCEO KPMG AlgeriaEnergie & Mines64We often hear debates onthe obstacles of Algeriansociety. Why aren't theseforeigners coming toinvest more heavily in our so beautifulcountry ? Is there in some way a desireto harm or damage the political stakeswhich would make investment inAlgeria be boycotted ?Today, the search for energy suppliesand outlets for the products of industrialisedcountries is such that no countrycan enable itself to boycott Algeriathat is so full of great hopes.If the obstacles are not coming fromoutside, they must be caused inside thecountry. In my opinion, these obstaclestotally come from inside the countryand there is not, without any doubtwhatsoever, an external concerted obstacleor particular coldness. Investingin Algeria from Europe is so mucheasier than going to China or India. Ifthe foreign investments are insufficientit is because of internal reasons that aredifficult to accept in situ.We therefore have to question theseinternal reasons. After so many years ofshortage, Algeria and Algerians aspiredto consume. It is remarkable that youcan find anything and at low prices inAlgeria. Sometimes, I've even lookedfor what present I can give to friends -something that was not found inNovember 2006Algiers. It is very difficult as you canfind almost everything there.However, the country brutally and dramaticallylacks skills. There are, ofcourse, great skills in Algeria, but insuch an insufficient quantity that it is alot easier and more financially viable tomanufacture abroad and import. Whydeprive ourselves when Algeria has themeans to pay for them ? This is fair,but the population to be employed issuch and the future exhaustion of naturalresources is evident that the currentchain of wealth is likely to leave behindit a very bitter taste.A lot of players have considered explainingthis reticence in investing inAlgeria. Each of these factors contributesto it for a good part: land, nit-pickingadministration, lack of legal publications,obsolescence of most of theindustry, etc. But one of the essentialfactors constituting the largest obstacleboth today and tomorrow is know-howand skills. To overcome this, we need totransform part of hydrocarbons intoknowledge and know-how into valuefor Algeria. This means a majorinvestment which will benefit futuregenerations much more than physicalinvestments.If, after World War II, Europe recoveredwith overwhelming speed, it is thatthe money given or lent by theAmericans within the framework of theMarshall Plan has fallen on the competencethat the war did not have the timeto make obsolete faced with greatneeds. Twenty years later, GDP percapita was no longer far behind theGDP of the United States.The financial amounts procured by oilare much bigger each year, per capita,than those given to Europe by theMarshall Plan.Everyone knows that we have to getourselves organised to create this competence;schools and universities areworking on this but I don't knowenough to talk about it. However,schools and universities must beprolonged by experience, continuoustraining, foreign techniques, etc.Today there is no contingent for anymanufactured product whatsoever.Even a useless product can be imported,provided it finds a taker on theAlgerian market. You order it, it goesthrough customs. The Bank of Algeriatakes what is needed from its currencyfund to pay for it and make it availableto you.If you manage a services company andyou do not have the specialist you cruciallyneed to achieve the mission youhave committed to and you need to payfor it, you will enter into a processwhich makes you despair of being able

Engineering Case studyto make progress. All companies are inthis situation. There are contracts to bedrawn up, in forms which suit thosewho release methods of payment; weneed to argue, justify, demonstrate,spend a lot of time to the detriment ofprofitability and productivity to importthe service you need and which, bybuying it, will enable you to train youremployees who will learn even morethan at school, in contact with peoplewho have great experience but who,unfortunately for you, are foreigners.Algeria, a formidable investment country,also has great know-how: at leastthat of advising foreigners on itself. Wethought that to do this, we needed tofix ourselves in Algeria, particularly tobetter advise our potential foreignclients.Today, there is still a debate on findingout whether the advice we sell to adirector from a foreign general quarteris an export. For example, if we carryout a due diligence mission to take apotential stake-holding in a companythat can be privatised, will this servicethat we are selling to a Montreal companyin Canada be an export? This isvery important as if you give this servicefrom Paris, Beirut or Tunis, as ourcompetitors do; you will invoice itexcluding VAT and will be paid in fullyavailable currencies. If you invoice itfrom Algiers, the doctrine is not yetclear to find out whether you need toadd 17% VAT which your client cannotrecover to which is added the 2% corporationtax and which will make yourservice too expensive.The bank is highly likely not to reserveyou a part of the currencies it receivesas currencies available for buying, inexchange, services you need : in short,the authorities today have difficulties inaccepting that a service can constitutean export whereas foreign countriesfavour this type of export which enablesthem to improve their balance of payments,the skills of their workers andthe radiation of their economy.Here you have one of the reasons whywe are, for the time being, the only oneof the four major foreign research firmsto be set up in Algeria rather than workingfrom abroad.So, you are particularly told that thebalance of services between Algeria andabroad is in a deficit situation :• How could it be otherwise if weaccount it as such with the cost ofimporting services, but that do notrecognise exports in the same way?• This is so serious that the servicesbalance is in a deficit situation, as if theservice bought interfered with the workof Algerian specialists. Are we not thereforein the process of creating tomorrow'sservice economy by importingreal know-how ?Perhaps we simply have to ask eachservice importer to have a surplusexport balance of services. A lot have itin the service and it is remarkable comparedto the trade deficit, excludinghydrocarbons where imports of goodsare not covered at 10% by imports if weexclude the coverage procured byhydrocarbons.The most developed countries haveGDP comprised of over 70% services.This is the economy of tomorrow. Thepercentage of manufactured productsis tending to decrease compared to services.But services enable us to improvethe knowledge required to keep thefactories in place. France – a countrywith very high labour costs – is one ofthe most important receptacles offoreign investments. This is why,thanks to services, productivity there is,in spite of everything, stronger.Counting on the barely valuable chimeraof cheap labour is an error when thelack of services eats away at this so-calledcomparative advantage.We have to enter feet first into theeconomy of knowledge, service, invention…which will provide the productivity.Failing this, I fear that we areforced to import, even longer, thegoods we need, as it is far too complicatedto manufacture here and far tooexpensive particularly because the skillshere are more expensive than abroad –no matter what proportion is kept.Often, this doesn’t even relate to veryhigh skills, but those we need everyday.Nothing will be done without beingaware of the contribution of service tothe welfare of humans and the progressfactor it represents. This will then meanfinding the means to enable it to expressitself as if we have managed to findthe means to facilitate the importingand exporting of physical goods.Tomorrow we will manufacture withless and less work, but with more andmore specialists who will sell their serviceto enable this manufacturing. Willwe enable them to exist, be recognised,and develop ? The most numerous andmost highly paid jobs are in services.The development of services is animportant factor of social stabilisationand of the creation of jobs.The service economy enables the longterm maintenance of the balance ofpayments and the North/South tradeterms. Without taking this factor intoaccount, the most developed countrieswill consider us to be their energy suppliercompared to the technology of theNorth, but without the creation ofindependent development due to theconstitution of specific know-how.Factories set up here are often out ofdate and no longer profitable in theNorth; this will teach us much. On theother hand, if we master the latest technologies,we will create these poles ofcompetences here.How can we do this without, beforehand,having created service companieswhose exporting we accept as well astheir importing to develop and winadvanced technology market shares ?Energie & Mines65November 2006

ENGINEERING CASE STUDYShort history of engineeringin industry in AlgeriaHachemi BENYAHIAVice-President AuditBrown & Root - CondorEnergie & Mines66In the aftermath of Algeria'sindependence, a few rareindustrial plants remained inactivity in the country. Theirnumber was insignificant, but they hadresearch capacities for their own sectors.The companies Durafour and Somelproduced the necessary research forthe construction of industrial buildingsand the metallic framework.The company Neypric studied thehydraulic equipment and manufacturedit in its own plant. The public companyEGA, just like EGF France, also had aresearch structure for constructing itsstations' electricity poles…1962-1963Emergency industrial planAlgeria's economic and social situationrequired a quick initiation of an industryas a source of job and income generatingdevelopment. The country hadto be industrialised.The Berim research firm (Bureau d'études,de réalisations et d'interventionsindustrielles et minières) was createdfor this purpose in February 1963. Itsmissions were to research and execute,within the framework of plans and programmes,the industrial and miningexploitation projects. It enabled it tolaunch the first manufacturing plantsthanks to international cooperation.Bulgarian co-operators provided skillsand seriousness and provided the frameworkof this research firm.November 2006This research firm provided completedocumentation to suppliers :• Machine specifications and files• Civil engineering and assemblystudiesIt controlled, managed and supervisedthe assembly of buildings and equipment.In September 1964, the research firmBerim was dissolved and replaced by :• The research firm Beri (Bureau d’étudeset de réalisation industrielles)whose purpose was to research, withinthe framework of industrial equipmentprogrammes and projects, the newinvestment or extension projects for theexisting industrial plants which wouldbe entrusted to it by the Ministry of theEconomy.• The research firm Barem (Bureaualgérien de recherches et d'exploitationsminières), whose mission was topromote the research and exploitationof resources from the sub-soil, with theexclusion of hydrocarbons, to executeor have executed geological or miningresearch works. The research firm wasthen merged into the national companySonarem.In July 1968, the research firm Beri wasdissolved and all its assets, rights andobligations were transferred to thenational company Sneri (Société nationaled'études, de gestion, de réalisationset d'exploitation industrielles)which had just been created.Sneri’s purpose was to research andrealise all investments of an industrialnature and provide the services enteringwithin the framework of thispurpose.In April 1982, the Sneri was dissolvedand all its assets, rights and obligations(assets and liabilities) were distributedbetween several light industrial companies(Edil, Enitec, ENRI-East, ENRI-West, ENRI-Centre).The creation of different national companiessaw the appearance of primecontractors whose mission was toconstruct industrial works.The company Sonelgaz (Société nationaled'électricité et de gaz), heir of theresearch firm EGA (Electricité Gazd'Algérie), had its own research departmentswhich prepared complete documentationfor the construction ofindustrial plants (electric power plants)which it divided up into separate lotsfor the companies.The company SNS (Société nationalede sidérurgie), by perfectly integratingtechnical co-operators, would go furtherinto research works with clearlyseparated lots in terms of local assemblyand construction skills.The SNS then created an engineeringplant and then the subsidiaries Sidem,Cosider and Genisider.

Engineering Case studyThe company SN Metal (Société nationalede constructions métalliques),created by an order in November 1967,was responsible for running and managingthe metallic construction factoriesof the public sector and running allconstructed plants.It did this excellently, accepting theresearch and doing the assembly for:• Electric power plants,• Industrial buildings,• Storage tanks,• Storage spheres.For the construction of the electricpower plants' framework, or the manufacturingof pylons, the company SNMetal received the necessary and detailedstudies from the companySonelgaz. With regards the storagespheres, it bought licences.The company SNS ordered from SNMetal a “turnkey” individualised lot -that of “preparing materials” where theSN Metal played the role of chief engineerfor the procurement and constructionstudies of the plants.This decision by SNS, aware of theproblems of timeframes and prices, wastaken with the desire to set up plantsoutside the company SNS capable ofcontributing to the development of thesteel industry. This attitude was alsothat of the company Sonelgaz.Both these companies wished to developjob and income generating plantsand to see the emergence of constructioncompanies capable of respondingto their needs. The decisions made bythe companies SNS and Sonelgaz wereundertaking decisions led by theconcern for the country's industrialdevelopment.They were part of a general climate inwhich the national awareness and thefact that industrialisation was a sourceof economic and that social developmentprevailed.Engineering was felt to be a necessityas it enabled the plants needed to bedesigned and also enabled them to bedivided up in lots likely to be constructed,manufactured or taken in and bylocal industrial plants.Engineering was thus used for nationalpromotion. But engineering, in themodern sense, had no meaning.In the domain of oil, gas and petrochemistry,the contractor, whilst beingmindful of the need to use the nationalassembly and manufacturing capacitiesas much as possible, did not succeed increating all effective studies capable ofproviding accurate technical data toachieve these objectives.Sonatrach, just like large internationaloil and petrochemical companies, alsoopted to construct its works for the“turnkey” formula.However, what was not apparent at thestart was that these large internationalcompanies had developed their owndepartments capable of providing completedocumentation with specificbriefs and its own standards that theyprovided to engineering (generalcontractor) that took responsibility forthe detailed studies, the procurementand the assembly.In its relations with the internationalcompanies in charge of the constructionof the works, the companySonatrach had focussed more on thecontractual legal, financial and administrativeaspects. No system was put inplace that was capable of transferringknowledge and technology, even ifthese international companies wantedto do this.The Sonatrach END (Engineering andDevelopment Division) realised, ascontractor, all projects for the oil andpetrochemical sectors of the country(pipes, LNG, refineries, fertilisers,plastics) for the two four-year plans.Although it had completed a very largenumber of industrial works, it did nothowever succeed in creating an engineeringunit that was capable of nationalintegration. Neither was it able toinitiate a transfer of skills.In its quest to master its developmentand get the existing (or to be created)local companies involved, Sonatrach,through its END (Engineering andDevelopment Division) attemptedseveral routes. It created, either aloneor in partnership with foreign companiesworking in Algeria, research, constructionand assembly companies.It created a few engineering companies,including:The company Altec, with the assistanceof Topsoe (Danish company), for theconstruction of an ammoniac plant - anenormous ambition that failed. Afterterminating its relations with Topsoe, itconstructed the refineries in HassiMessaoud and In Amenas withHydroprocessing. This company thenalso dissolved.With the rest of the Altec elements andthose of the END division, in August1983 it created the company Enep(Entreprise nationale d'engineeringpétrolier). The latter was responsiblefor carrying out the general, technical,technological, economic, financial andcommercial studies in the domains offeasibility studies, market studies, technical-financialstudies and profitabilitystudies.This company was born with an enormoushandicap that it was never able toovercome, as it had inherited a greatdeal of administrative personnelwithout great qualifications, withoutgreat means, without an importantwork load and with only a few studyactivities, a lot more in the domain ofcontrol and supervision.Abroad, it worked in Libya and particularlyin Mauritania in the revamping ofthe Nouadhibou refinery. It was usedfor one-off actions and became muchattached to design engineering and wasnot able to develop construction engineering.As never being backed by a large internationalengineering company to beable to hope for its development, thecompany Enep did not succeed eitherin achieving its objectives. It was dissolvedin February 2003 and its assetswere transferred to Sonatrach fromwhich it was created.The company Enac (Entreprise nationalede canalisations), designed as aresearch and construction firm, havingto successfully carry out the pipelinestudies, construction, supervision and ☞Energie & Mines67November 2006

ENGINEERING CASE STUDY☞Energie & Mines68general inspection of the works, wasnever able to emerge in the domainof pipelines and finally failed and dissolved.The company Safir (Société algérofrançaised'ingénierie et de réalisation)created in 1991 between Sonatrach,Sonelgaz and the French companiesGDF and Sofregaz, participated in therevamping of the LNG-4 Arzew gasfacilities, but did not succeed either inconvincing.In the end, it was separated from itsforeign partners and no longer has awork load capable of ensuring its survival.Discussions should be currentlyunderway with another foreign partnerto purchase 49% of the capital.Brown & Root - CondorIn January 1992, Sonatrach, Naftecand the CDM (Centre des matériaux)falling under the remit of the Ministryof Research, signed a master agreementfor the creation, in the form of ajoint stock company, of an engineeringcompany named Condor Engineering.This company was able to obtainnumerous small study projects; it didhowever lack the experience so muchsought after in the use of the very latesttechnologies, methodologies andmanagement techniques used by thelarge international engineering companies- experience which is essentialto convince the large national andinternational clients of its ability tocompetently execute large projects of acomplex nature.It became necessary to develop a partnershipwith an international engineeringcompany of great repute havingup-to-date technology in order toacquire know-how in the realisation ofmore complex projects.In April 1994, a master agreement wasconcluded between Sonatrach and theAmerican company Halliburton (parentcompany of Brown & Root) to developa partnership, particularly in the field ofengineering.One of the most important resultsexpected from this partnership wasaccess to the immense resources of theNovember 2006different Brown & Root plants whichhas worked for tens of years in the fieldof engineering throughout the world.In other words, the partnership withBrown & Root had the aim of transferringto an Algerian company the mostmodern techniques in terms of systems,organisation and management. Thispartnership also had the aim of reinforcingthe company's intervention abilitiesand extending the remit of its activitiesto fields as complex as detailedstudies, procurement, managementand monitoring of industrial projects,particularly in the oil and gas, refiningand petrochemistry sector.The targeted objective was to integrateall the functions and activities related toengineering and the construction ofprojects in view of having, at the nationallevel, a tool capable of respondingto the national needs.The company Brown & Root-Condorquickly imposed itself on the engineeringand project management project,initially in the domain of hydrocarbonsand, then, in other sectors such asinfrastructures and new technologies.As it developed its resources and skillsand successfully completed the projectsentrusted to it, the company consolidatedits work load and diversified itsbusiness portfolio.Within the timeframes and to the satisfactionof its clients, it accomplishedmajor and complex projects such as :• the Hassi Berkine oil field productionfacilities;• the Aïn Naâdja, Oran, Constantineand Blida hospitals;• the Bouchaoui criminology and criminalisticscentre;• the Aïn Naâdja expertise centre;• the Tamanrasset air base;and a lot of other projects which wouldbe too long to list.In conclusion, we can confirm that allthe attempts made for the creation ofperforming Algerian engineering companies,capable of accomplishing largeprojects in the different businessdomains, all practically failed.Hence, in 2006, with the exception ofBrown & Root - Condor, which continuesin a difficult environment to win alarge share of the market available inAlgeria, the other investment projectscontinue to be won and carried out byforeign companies in the form of “turnkey”contracts and, most often, withoutany transfer of technology or knowhow.It is becoming necessary and imperativeto develop a national strategy andencourage the creation of Algerianengineering companies able to favourand “pull up” the development of thecountry.

Engineering Case studyBrown & Root - CondorBirth and developmentof an engineering companyAbdelkrim RAMTANIConsultantThe industrialisation policyimplemented by Algeria as ofthe end of the 1960s causedhuge demand in terms of theconstruction of projects. Now, giventhe complexity of the technologiesimplemented in these projects and therequirements for highly skilled personnel,the national capacities did notexperience development capable ofovercoming the constraints and meetingthe requirements of the market.The acquisition of expertise and knowhowin this domain is, as everyoneknows, a cumulative process that isboth long and difficult and, despite theefforts made here and there to build uplocal capacities, Algeria remained – andstill remains – largely dependent onforeign engineering companies.Aware of this great shortfall, the publicauthorities, from the start of the 1980s,decided to set about the creation ofnational research and project realisationcapacities on behalf of the mainobjectives of the scientific and technologicalproject.In fact, basing itself on the recommendationsof the National Seminar onScientific and Technical Research,organised in February 1982, theSupreme Council for Scientific andTechnical Research, which met in themonth of April of the same year underthe presidency of the Head of State,adopted an action plan for research inwhich the reinforcement of the nationalresearch capacities was deemed one ofits main priorities. Within the frameworkof this perspective, the Centre dedéveloppement des matériaux (CDM)introduced, within the framework of itsmission within the New EnergiesCommission, as of 1985, an engineeringbusiness whose initial aim was toenable the development of materials atthe pilot and industrial scale. In fact,the introduction of this business insidethe centre led to the acquisition, duringthe year 1984, of the ASPEN Plus(Advance System for ProcessEngineering) software.The opportunity of building a bridgebetween research and the industrybecame essential given the possibilitiesoffered by the system for the design,renovation and optimisation of chemicaland petrochemical industrial plants.After training the personnel in its use,beforehand, the CDM undertook,within the framework of the improvementpolicy then encouraged by thesupervisory body, deploying this in theindustrial sector and particularly thehydrocarbons sector (Sonatrach,Naftec, foreign partners, etc.).The adoption of the law no. 86-14 onhydrocarbons and the subsequent recoveryof investments in this sector hadthe effect of once again making engineeringdemand highly dynamic, bothfor the new projects and for the renovationof the existing plants. Hencevarious plant simulation studies or gasand oil production fields’ developmentstudies started to be entrusted to theCDM by Sonatrach.The success of the initial projectsencouraged the centre's managers toreinforce its intervention capacitiesthanks to the acquisition of theIntergraph system - a set of computeraided design modules used for basicengineering and industrial and architecturaldesign.Origin of the creationof Condor EngineeringThe evaluation of the engineering marketas of 1990 confirmed the trendtowards a strong increase in potentialdemand, particularly since the recoveryof the hydrocarbons' sector, and showedthat the experience accumulatedwithin the research centre could beusefully and quickly used by the industry.Given its status and its vocation,the centre could not, however, undertakelarge scale engineering projectswithout failing in its fundamentalresearch mission. Starting with thisreality and the pressing need to developan effective engineering tool, the executivesof the Ministry of Research andTechnology, and the Ministry ofEnergy, decided to transform theProcess Engineering Department of theCentre des matériaux into an engineeringcompany capable of working inaccordance with the standards acceptedat the global level, and to giveyoung researchers and engineers theopportunity to develop and perfecttheir skills to bring them in line with thestandards and requirements of a marketeconomy based on the spirit ofcompetition. The first stage in this pro-Energie & Mines69☞November 2006

☞ENGINEERING CASE STUDYEnergie & Mines70cess consisted of putting in place, inpartnership with national industrialists,an independent company capable ofimproving the experience developedwithin the CDM by making this availableto the economy with, as an outlook,its later opening up to foreign partnerspossessing the appropriate resourcesand technology. The main stages of thesubsequent creation process are summarisedbelow :• the authorisation to create the companyon 3 December 1991;• the fixing of the CDM stake-holdingin the company's capital at 40% in theform of contributions in kind;• the contributions' transfer conditionsfrom the Centre de développement desmatériaux to the company.In parallel to the approaches undertakento obtain the administrative authorisationsand evaluate the contributions,negotiations were started withSonatrach, Naftec and the Fonds departicipation hydrocarbures, chimie etpétrochimie (which later withdrew),negotiations which led to the signature,on 15 January 1992, of a master agreementbetween the three shareholdersfor the creation, in the form of a jointstock company, of an engineering companynamed Condor Engineering withcapital of DZD25,000,000.Transformation of Condor SPAinto a joint venture companyAlthough the first stage of this processwas relatively successful, in terms ofthe company being able to obtainnumerous small study projects; it didhowever lack the experience so muchsought after in the use of the very latesttechnologies, methodologies andmanagement techniques used by thelarge international engineering companies- experience which is essential toconvince the large national and internationalclients of its ability to competentlyexecute large projects of a complexnature.It was therefore recognised that thequickest and most efficient way forCondor Engineering to assimilate thistype of know-how and experience wasto forge closer relations with an internationalengineering firm of greatrepute with the latest technology, wishingto transfer its technology andNovember 2006know-how. Now, as of the end of theyear 1992, Sonatrach and Halliburton(parent company of Brown & Root)had negotiations on the way in whichthe two groups could collaborate moreclosely. A series of joint venture companieswere considered and discussed,the most significant of which was thejoint venture between CondorEngineering and Brown & Root. Thenegotiations continued in the year1993 and, in October of the same year,an agreement between shareholderswas signed within the framework of thenew legislation on promoting investment.One of the most importantresults expected from this partnershipwas access to the immense resources ofthe different Brown & Root plants.In other words, the partnership withBrown & Root had the aim of transferringto an Algerian company the mostmodern techniques in terms of systems,organisation and management, reinforcingthe company's intervention abilitiesand extending the remit of its activitiesto fields as complex as detailedstudies, procurement, managementand monitoring of industrial projects,particularly in the oil, gas, refining andpetrochemistry sector.The targeted objective was to integrateall the functions and activities related toengineering and the construction ofprojects in view of having, at the nationallevel, a tool capable of respondingto the national needs.The agreement between shareholdersparticularly provided for :• a 49% stake-holding by Brown &Root;• changing the company name to addthe name and logo of Brown & Root,with the company thus becomingBrown & Root - Condor SPA;• increasing the capital to the equivalentin dinars of 8 million dollars (i.e.288 million dinars at the exchange rateof the time). In April 1994, the creationformalities were finalised and the companyBrown & Root - Condor wasborn. The company's different transformationsand the break down of sharesper shareholder are outlined below.Development and main achievementssince the creationof the companyDespite Algeria's political, economicand social context at the start of the1990s and the particularly difficultconditions of this era, the company,thanks to exceptional determination,quickly imposed itself as a partner to bereckoned with on a market as up-todateand complex as engineering andthe construction of projects, initially inthe domain of hydrocarbons and thenin other sectors such as infrastructuresand new technologies. As it developedits resources and skills and successfullycompleted the projects entrusted to it,the company consolidated its work loadand diversified its business portfolio.The company's initial strategic plan fora five-year period was drawn up andimplemented in 1996 with precisedevelopment objectives in terms ofmarkets to be targeted, resources to bedeveloped, organisation and financialperformances. The strategy implementedthus enabled particularly remarkablegrowth of business, by considerablyenlarging its project portfolio and, particularly,the launch of major and complexprojects such as the crude oil productionplants of the Hassi Berkinefield. Doing so, the company's turnoverwas multiplied by more than 19, goingfrom DZD615,000,000 in 1996 toDZD29,687,000,000 in 2001.This strategy was continued and reinforcedwith the adoption, in 2002, of anew strategic plan for the period 2003-2012 whose more ambitious objectiveswere defined, taking account of theprior evolution of the company as wellas the new challenges to be taken up torespond to the strong demand and toprovide a greater contribution toAlgeria's economic and social development.Within this framework, a studyof great importance for the strategicfocus of Algeria's economic and socialdevelopment, called “Algerian NewDeal Initiative” (Andi) was set up in1999 to be used as a guide for decision-makers.Likewise, two prospective studies arebeing executed related, respectively, toAlgeria to 2015 and the other to anenergy consumption model to 2050.Given its extent and the complexity of

Engineering Case studythe activities and operations required toaccomplish it, the implementation ofthe plan required, as a support, a vastprogramme of developing the resources,technology and know-how ofBRC, but also improving its organisationand its management system. Allthese elements are in the process ofbeing culminated into a GlobalIntegrated Management System(GIMS) similar to those of internationalengineering and construction companies.With regards the actions undertaken inthis sense, we should particularly notethe ISO 9001-2000 and 14001 certifications.Since the ISO 9001 certification,the efforts to fine-tune the qualityassurance systems, project managementand operations are intenselybeing pursued. This has not only enabledthe annual re-certification ofB&R-C, but also improved the processand the quality of the services to offerwhat is best to our clients.In parallel to this, B&R-C is implementing,when conducting its business, thehighest performance standards interms of health, safety and the environment(HSE). A training and awarenesspolicy is carried out permanently for allsites opened by B&R-C.company ESCB from El Achour afterthe agreement of the StateParticipations Committee. This acquisitionaims to reinforce the integrationof activities whilst participating in therecovery of this company in difficultywhose workforce amounts to over 800workers.From 2002 to 2005, the personnelworkforce multiplied by three, goingfrom 400 to 1,150 and continues toincrease.B&R-C has put particular effort intotraining for its employees. The latterare often totally immersed in projects.They work in close collaboration withexperts from the KBR shareholders.They thus acquire know-how andexpertise which are consolidated by thelatest training courses at universities orinternational schools.These are just a few indications whichenable us to measure the stages overcomeby this company, which is particularlydistinguished in the Algerian economiclandscape by its dynamics andits achievements. From the modestengineering company of 1992, it hasbecome, in the space of one decade, arecognised leader in the field of engineeringand construction with, to itscredit, numerous projects of majorinterest for the Algerian economy.Hence, not only has it been able tosignificantly contribute to the developmentof certain key sectors of the economy,but it has also, at the same time,been able to ensure more than enviablegrowth as shown by its operational andfinancial performances.It concerns both its own personnel andthose of all subcontractors working inits projects. This results in a magnificentreduction in the accident frequencyrate.The acquisition of the constructionmeans specific to the company hasalways been an objective for the companyand, for this purpose, B&R-C hasrecently acquired the constructionEnergie & Mines71November 2006

ENGINEERING CASE STUDYRisk ManagementEPC-Lower Risk, ShortenConstruction Cycleand Reduce CostsEPC vs. Traditional ApproachEPC has emerged as the deliverymethod of choice for executing systemprojects in all market sectors. The acronymEPC is short for "Engineer-Procure-Construct," which implies thata single entity has complete responsibilityfor a project from start to finish.Oddly, the key function that assumesthis overall responsibility, namely projectmanagement, is not in the name.Traditional Project ApproachHistorically, utility, industrial and largecommercial entities, including governmentaland institutional facilities,employed sufficient resources to performproject management, engineeringdesign and procurement, and in somecases, construction. However, "rightsizing" to meet competitive and economicconstraints has greatly trimmed thein-house capabilities of many firms,sometimes down to a single individual.To compensate, project work was primarily"outsourced" to consultants andcontractors. Consultants developed thedesign and bid packages, while the successfulcontractor was responsible forequipment and material procurement,installation and start-up. The figurebelow depicts the relationships in thistraditional project approach.The customer has at least two majorcontracts to administer and multiplelines of communication to oversee.Generally, the customer is assumingthe business risk associated with theproject and when problems arise, theyoften result from mis-communicationsbetween the major parties.Consequently, "finger pointing" ensues.When viewed from a time-line perspective,the traditional project approachhas two distinct drawbacks. First, thetwo major functions, engineering andconstruction, are performed at differenttimes. Second, the total projectschedule is longer because of multiplebidding phases. Consider the followingobservations:• Not all major parties are known atthe beginning of the project.• The total cost is not always known atRich Marking-CamutoSystems Integration and Packagingthe start of a project. Many work froma best estimate.• The overall schedule has not beendefined at the start of the project.• The two major third parties, theconsultant and the contractor, are notin "sync," i.e. by the time the contractoris on board, the consultant has alreadycompleted as much as 95% of the engineeringdesign. This means most of theconsultant's resources have been redeployedwith few left to satisfy theremainder of the contract, particularlywhen it comes to resolving problemsencountered by the contractor, unless aseries of change orders are issued alongEnergie & Mines72November 2006

Engineering Case studywith a corresponding schedule commitment.• The return on investment is delayeddue to the prolonged project schedule.Fast-tracking is sometimes used toaccelerate the project schedule, but thisusually increases the overall cost andrisk.Engineer-Procure-Construct(EPC) ApproachIn the EPC approach, the EPC firmassumes overall responsibility for theproject, thereby relieving the customerof this burden and risk. The customerdeals with a single-point contact - theEPC project manager - thus simplifyingthe lines of communication as illustratedin the diagram below.With an EPC approach, the partiesinvolved, the project budget and theproject schedule are known BEFOREthe project begins. Communicationbetween engineering design, procurement,and construction begins immediately,which makes accelerating therevenue generating benefit of the acceleratedproject schedule.The following diagram compares theproject schedule of a traditional projectversus an EPC project. Note the durationsof each major task are the same,yet the project can be delivered moreefficiently. This clearly shows the project'sexpected return on investment(ROI) will be realized sooner, whichmay make the difference between doingthe project or not.project schedule possible withoutimposing greater risk. Customers skepticalof using an EPC approach for projectsare generally concerned with theperception that EPC projects commanda premium price. This is not true. EPCcan be more cost-effective when thevalue of the risk assumed by the EPCfirm is considered, along with the earlyEnergie & Mines73November 2006

ENGINEERING CASE STUDYNew contractualstrategiesTarek MOKRANEVice-President OperationsBrown & Root - CondorEnergie & Mines74The relations between clientand contractor have considerablychanged over the last20 years. In fact, everyonehas responded to the changes of thelocal market, the impact of globalisationand to the tenacious desire toimprove margins and added value. Thishas never been more experienced thanin the realisation of EPC contracts atthe international contractual industrylevel.Historically, clients directly managedthe engineering, procurement andconstruction elements with the differentcontractors assigned to each project.This led to the emergence of complexcommunication interfaces and theneed to have large personnel to managethe main and secondary activities.Furthermore, the people responsiblefor managing the contracts at the client'steam's level possessed limited experiencedin the domain of constructingworks, thus increasing the costs andthe risk exposure given that their mainobjective resided in the productionresults of said works. Furthermore, thestrategy also had a negative impact onthe main financial activities given thatthe attention was focussed on themanagement of secondary elements,with this implying a low overall yieldfor the company.Due to the market pressures at the startof the 1980s, and in order to improvethe operational and financial performanceas well as identifying and introducingthe practice of better workingmethodologies, several clients launchedthemselves into the practice of globalbenchmarking. The result of theseNovember 2006efforts was a decision by the client todevelop the vertical integration strategieswhich would introduce internaltechnological skills inside their workingstructure. The latter strongly investedin making this new strategy a reality.However, a large number of them realisedthat the approach had not workedproperty due to the unmanageableincrease in costs, the time incurred formanagement turned far away from thebasic activities and the investment wasimportant whereas their ROI (returnon investment) was low.In 1986, the impact of the crash in oilprices affected the entire world andclients quickly refocused on reducingthe risk exposure and stabilising costs.This had a dramatic result: clientsabandoned their strategies aiming atvertical integration in favour of subcontractingall secondary activities.Contractors responded to this marketopportunity as well as to the pressurefrom clients to provide engineering,procurement services and the contractualcapacities of a main contractor bystrongly investing. Consequently, thecategory of contractors specialised inthe EPC fixed price projects was created(figure 1).The advantages of an EPC contractwere quickly identified by the clients :• It enables the simultaneity of the activities,whereas, within the frameworkof conventional contracts, the interfacesbetween the disciplines weresequential and contractually managed.• The contractual obstacles were lifted.• The communications are clear andunambiguous as the client controls onecontract interface.• The "fast track" approach is now possible.• The lead-times for the projects andthe costs are reduced and the client'sROI is improved.Towards the end of the 1980s, clientsrealised that the "fixed price" approachwas excessive and inflexible given thatall the risks were incumbent upon the

Engineering Case studyType of contractReimbursable contract“Fixed price”Unit rateMixed contract : fix priceelements - reimbursable party -unit rate (BPU)Open Book + FeeBonus clausecontractor. To resolve this problem, thelatter endeavoured to work in collaborationwith the contractors, with theaim of gaining more flexibility in thecontracts. Consequently, the contractorsdeveloped a menu of types ofcontracts (table 1 & figure 2) enablingclients to minimise their risk exposureas well as optimise their managementand flexibility requirement by adoptingone type of contract only or a combinationof types.DescriptionTable 1All the services provided by the contractor arereimbursable at agreed rates.The contractor undertakes a specific taskat a price fixed in advance.A unit price is applied to certain specific elementsof the project that can be measured (BPU).A unit price is applied to certain specificelements of the project that can be measured(BPU). The elements that can be fixed aresubject to fixed prices. Certain services orequipment that cannot be fixed or measuredare reimbursable.The contractor is reimbursed for all thesubcontracted works. The management, theadministration and the profits are includedin a fixed percentage of the invoicing (Fee).Similar to the Open Book, but with incentivemeasures.Currently, the market conditions arepushing us towards improvement,given that clients and contractors eachrecognise the considerable investment,in the human expertise, technicalresources, business experience and thefinancial capital. By adopting a longterm position leading to the developmentof contracts with incentive measuresand alliances with the contractors(figure 3), the client identified theconsiderable interest of such a position.Contractual development in Algeria hasnumerous parallels with the overall evolutionof contracts. However, specificeconomic conditions have affected itsalignment with the global model.Whereas Algerian clients identified thehigh costs and the low profits due tohaving internal technological competences,the latter put pressure on thecontractors to develop an EPC potential.KBR (a subsidiary of Halliburton)and Sonatrach responded to thisopportunity by putting in place anAlgerian EPC company - Brown &Root - Condor in 1994. Consequently,an immediate transfer of the latesttechnologies enabling a fast track ofAlgerian skills was available for allclients. No other Algerian company hadresponded to this opportunity of entrepreneurshipin EPC and no other internationalcontractor was ready to investin Algeria due to currency problems atthat time. Although the situationimproved, no Algerian or internationalcompany was able to put EPC companiesin place.Whereas the economy quickly developedin the world, clients increased theirdemand to start the projects quickly;more efficient contractual strategiestherefore had to be developed. Clientsand contractors such as BP/KBR andExxon/Bechtel recognised the significantinvestment they made by developingthe common skills necessary, thetechnologies and relations for betterquality and costs and, consequently“preference contracts” were developed.Turning towards the future, a lot ofclients and international contractorsare already in the process of exploringways of improving their alignmentwhich remains still far off.By looking to identify and eliminate allthe activities with no added value, aligningthe common interests and motivatingcontracts, they hope to createlong term partnerships based on trustand performance. This partnershipapproach is already working well inseveral other industries as they arefocussed on the creation of a singleteam with a common objective. It isclear that adopting this win-win mentalitycan only be a positive step foreveryone.Energie & Mines75November 2006

ENGINEERING CASE STUDYWhat is the role of engineeringin the economic developmentin Algeria ?Hachemi BENYAHIAVice-President AuditBrown & Root - CondorEnergie & Mines76November 2006The global economy has enteredinto a phase of profoundchanges of the organisationand operating of industrywhose employment and revenue generatingrole has shrunk little by little. Theservices related to this industry havebeen developed to take first place. Whatare, therefore, these services related tothe industry - a factor of global development?These are outlined in figure 1.From this diagram, we see that a largenumber of activities related to industryare in the initiation, creation and executionof projects.What was part of the organisation of theindustry itself is being outsourced and isbeing autonomous.Hence, engineering, conceived as "newworks" in the industry just before WorldWar II in Europe is increasingly becomingindependent, outsourced by theparent industry which thus finds its justificationhere, through the skills whichare being developed here, the level ofadaptation of these services to the newdiscoveries and new technologies. Ineconomic history, industry as a drivingforce of development has considerablyreduced the importance of agriculture,and has, itself, stagnated and reducedits importance in the development toleave space for services which are nowtaking on a preponderant place.In Algeria, these services have not beengiven the attention they deserve and areoften poorly understood and confinedto a “secondary” role. Engineering hasundoubtedly experienced a specific evolutionin the global economy, but inAlgeria it seems that a lot of people haveunderstood it as a simple research firm,an author of plans, an activity for drawingup designs and diagrams whosemain activity is either works, assemblyor equipment. The engineer that realisesan industrial project is perceived aspossessing the infrastructure to realiseall the civil engineering, assembly andeven equipment manufacturing worksand, why not, machines.Now, engineering is nothing of the sort.The Japanese experience of transferringtechnologies has demonstrated that aconversion "agent", i.e. an intermediarybetween the transferor and the transferee,is one of the most important priorconditions for the success of this transfer.Engineering plays a determiningrole in this role of “mediation”. It caneliminate the part taken against the localcompanies in favour of foreign companies.Engineering is capable of disassemblingtechnologies in block and adaptingthem and modifying them in view ofmaking them usable, accessible andthus respond to local needs. The suppliersof technologies and licences haveoften testified to a negative attitudetowards the transferees, by preventingthem, through restrictive means, frommaking use of local contributions andmaterials. It can thus, little by little,integrate the local capacities in terms ofequipment or spare parts producedlocally for the existing or new companies.At the start, we thought that the purchasingof technologies and the settingup of large industrial plants by purchasingappropriate technologies wasnecessary and sufficient to boost development.Very quickly we realised thatthis was far from being sufficient. Weparticularly focussed a great deal ofattention on the creation of new industrieswhereas the existing industrieswere experiencing an accelerated deterioration.In the developing countries,this phenomenon explains how, with aconstant volume of investments, weresult in a reduction in GDP: a largepart of the contribution from the newinvestments is counterbalanced by theconstant reduction in the yields fromthe former plants.What can engineering do?In an era of never ending transformationand innovation, the most advancedindustries are becoming obsolete overnight.The cost of modernisation isbecoming excessive and the industriesare thus abandoned.Algeria cannot abandon the modernisationof its industry to the skills offoreign experts as the cost of thesemodernisations would weaken its competitiveposition. The role of engineeringin the studies, then the managementand commissioning of industrialprojects is becoming increasinglyobvious.Taking responsibility for the maintenance,the putting in place of a managementsystem is barely starting to awakeninterest. However, this role hasdevolved to it in the modern organisationof the industry. The engineeringcompany can favour the emergence anddevelopment of many research firms,service companies, etc. to which it willeasily subcontract a large number ofactivities. This orientation will, withoutcontext, be a stimulant for the developmentof local expertise. We tend tobelieve that the shortfall of executives isa question of workforce and qualifications,knowledge and practical education;now, the specialists and graduateswho have gained practical experienceabroad find it difficult to get jobs.The lack or weakness of these servicesrelated to the industry only enable a fewcareer outlets in education or publicadministration where these rare resourcesare far from being used as theyshould be.

Engineering Case studyThe emigration of graduates (braindrain) is considered to be caused by thelevel of salaries. This is only partly true.The general climate of developmentthrough practical experiences offered bythe range of jobs is its main reason.The vast domains covered by theseindustrial support services may constitutethe crucible of employment of skillsfrom experts and thus contribute tostopping and reversing the brain drain.There is no doubt whatsoever that theengineering company can participate inthe developments of services and thoseparticularly with high added value and ahigh content of information knowledge(in the information technologies). Innational reality, the problem of waterhas become dramatic. A new industrialstrategic focus can be considered. Theseawater desalination plants, for example,which are small industrial plants,whose planned number is very important,may give the engineering companythis role of “mediator” as it is able to :• select the appropriate technologies;• dismantle these technologies andupgrade them in line with local skillsthrough clearly separated lots that it cancontrol and distribute to the local companies;• create around it a subcontracting networkof research firms, expert firms,industrial or construction units;• with these thus established networks,set up a database capable of focussingon looking for goods and serviceslocally.Energie & Mines77November 2006

Engineering Case studyThe newmanagement toolsThese last few years, the oil and gasindustry has undergone various evolutions.Today, there are numerousdesign tools to carry out engineeringstudies such as the simulation of processes,computer aided design (2D,3D) and database systems.Figure 2 : Computer aided designsIn fact, by mentioning engineering, wemake allusion to “design”. The latter isonly the transcription of an “idea” intoplans, data, etc. Once determined, this“idea” is deemed to be shared. Now,how do we share it? Initially we need tocreate a common operating environment.Then come the definition andputting in place of common favouredmethods and tools.Figure 3 : A network of users using software applications whose versionsare different (see the number of stars) thus making exchanges and transfersof data difficult.This approach which favours the coordinationof the multidiscipline designenables engineering to establish a bettermonitoring of the execution of theproject.Figure 4 : 3D design modelThe drawings below illustrate themanufacturing model of the HassiBerkine project. It is important to pointout that the sharing of information onthis project is done between differentsites, namely Houston, Algiers, HassiMessaoud and Hassi Berkine.Figure 5 : Example of a manufacturing model☞Energie & Mines79November 2006

ENGINEERING CASE STUDY☞The traditional project interfaces arebroken down as follows: the design,the FEED, the estimate, the EPC, thecommissioning and the operations(maintenance).In fact, just a few years ago, the executionof the projects followed a sequentialprocess based on the production ofdocuments (see figure 6).This process successively went fromone phase to the next, according to therule: the end of phase “i” announcesthe start of phase “i+1”, as illustratedin figure 6.Figure 6 : Sequential processHence, in this approach, the project’splanning depended on the completionof the documents to be produced.With the technological progress madein engineering, project managementevolved towards an integrated managementsystem. In fact, nowadays, it ispossible to execute various and evenalmost all project tasks in parallel.After defining the design elements, thestudies, the procurement and constructionare initiated at the same time,thus reducing the execution time frames.This so-called “Fast Track”approach is based on the concept ofsharing information which, obviously,requires perfect knowledge of all informationand human resources used inthe project (ref. : figure 7).Figure 7 : Fast TrackIn the 1970s, the engineering systemswere specific applications installed inlarge systems. Almost 20 years later,these systems evolved and were replacedby mini-systems, then by standalone systems (PC & networks) tofinally lead to integrated systems usingintegrated databases. The introductionof integrated systems, to the greatsatisfaction of clients, led to the optimisationand added value of their project.Indeed, such systems enabled theFigure 8 : Progress of assembling and manufacturing a given project’s zoneon a specific date.Energie & Mines80November 2006

Engineering Case studysingle entry of data and integrated allpersons involved in the project. Theyenable the operating of a conventionalenvironment, the integration of othermodules – depending on the businesssector – required for the execution of aproject and, finally, the operating of aglobal network (the internet).The choice of such management toolshas a positive impact on the mobilisationof a project's workforce. With asmaller number of people in charge ofexecuting the project, the deliverableproducts (documents and others)are drawn up in a shorter timeframe;we therefore talk about optimisedmobilisation.Figure 9 : Impact on the mobilisation of the workforceConsequently, the adoption of integratedprocedures and a commonoperating environment enable a significantreduction in costs, as shown infigure 10.Figure 10 : Cost reductionThe information in a project representsthe essential link, indeed the decisiveone. Its volume increases during theexecution of the project to reach a peakduring the construction phase (see figure11).Figure 11 : Information flows and needs☞Energie & Mines81November 2006

ENGINEERING CASE STUDY☞The management of this information,particularly in this critical phase, iscomplex and requires, therefore, a specificapproach.Hence, to overcome this, we needed toput an Information Manager in theorganisation of the information managementfor each project. This newplayer enables the reduction of theeffort to be provided as well as betterreliability.To facilitate the fluidity of the transferof information, we have adopted a tool:COE (Common OperatingEnvironment). This solution is an operatingenvironment which :• procures a common operating environment;• standardises the operating tools;• enables the quick transfer of data;• manages the software licences;• shares the resources (human, etc.);• enables network-based operating;• enables employees to access the networkthroughout the world, regardlessof their geographic position.Figure 12 : Common operating environmentThe engineering activities have multipliedover time and have become morecomplex. All these integrated systemsand all these shared resources haveimproved project management.The activities are accomplished in lesstime and with more precision andaccuracy. The success is mainly due tothe latest tools, communication systemsand to the technological watch.Engineering is part of this conceptionof globalisation to which the currenttools enable access.Energie & Mines82November 2006

Engineering Case studyTURKEYRole of Education, Science, Engineeringand Technology in Developing CountriesA. Bilsel and Ö. OralEastern Mediterranean UniversityGazimagusa, North Cyprus (via Mersin 10, Turkey)This paper emphasizesthe importance of ascience policy whichassigns the highest priorityto stimulating andsupporting science educationand research. Theimpact of such a policyon economic growth isdiscussed, and in thiscontext, the policies ofdeveloped and developingcountries are compared.Strategies andpolicies for developingcountries are compared.Strategies and policiesfor developing countriesare recommended. Thestate of engineering educationin Turkey is summarizedand comparedwith the American curriculum,as exemplified byelectrical engineering.IntroductionThere are significant social and economicdifferences between developed and developingcountries. Many of the underlyingcauses of these differences are rooted inthe long history of development of suchnations and include social, cultural andeconomic variables, historical and politicalelements, international relations, geographicalfactors. These, however, do nottell the whole story.The differences in the scientific and technologicalinfrastructure and in the popularizationof science and technology inthe two groups of countries are the mostimportant causes of differential social andeconomical levels. An essential prerequisiteto a country's technological progressis early recognition of necessity of a goodeducational system. This was one of thekey factors that contributed to Japan'seconomic success [1]. The role ofTechnion, the Hebrew University ofJerusalem and the Weizmann Institute inIsrael's rapid development cannot beunderestimated [2], [3].In this paper we shall emphasize theimpact of scientific and technologicalinfrastructure on economical growth ofdeveloped and developing countries.Recommendations for developing countrieson necessary policies that theyshould implement will be discussed. Thestate of engineering education in Turkishuniversities will be summarized and comparedwith the American curricula.Science and Technology in Developedand Developing CountriesAs Abdus Salam, the Nobel Laureate inphysics in 1979 observes, in the final analysisit is basically mastery and utilisationof modern science and technology thatdistinguishes the South from the North[4]. Some developing countries havemade important contributions to thedevelopment of science and technology inthe past and some even served as thecradle of human civilization. But the floweringof science and technology thatbegan in Europe in the 17th century wasused to advantage by only a relativelysmall group of nations [5]. This situationcreated not only a difference in materialaspects of cultures, but also a differenceEnergie & Mines83☞November 2006

ENGINEERING CASE STUDY☞Energie & Mines84in the social climate of the two groupsof countries. The practical use of sciencethrough technology created the climatefor ever increasing emphasis onthe pursuit of science and education indeveloped countries, where fundingscientific enterprises is widely acceptedas a vital and long-term investment. Forexample, federal funding alone providedfor non-defense basic and appliedresearch in the States, was $7.9 billionin 1985-and more than half of this kindof support is given to the universities[6]. Contributions of industry to nationalexpenditures on research and developmentare about twice this amount[7].Today, in developed countries basic andapplied scientific research is an essentialinvestment in the long-term welfare [8].In the universities, they assign highestpriority to stimulating and nurturingscientific and technical talent, and tothe concomitant training of students.What is emerging from this priority isthe close association of education andeconomical growth. Accelerating therate of growth and rate of productivitycan basically be accomplished by stimulatingand supporting scientific educationin universities.Salam [9] states that science in developingcountries has been treated as a``marginal activity'' and perceived evenas an ``ornament.'' Indeed, most of thedeveloping countries do not realize thattheir situation can only be rectified withthe infusion of modern science andtechnology into their societies.Although some of the developing countriesare aware of the importance ofscience and technology, this awarenessdoes not necessarily make it easy todevelop, and popularize science.Inadequate scientific infrastructure is acritical factor which creates strong barriersto the path of advancement indeveloping countries.The critical size of human resourcesand infrastructure, and the amount ofinvestments in these areas, illustrateshow science and technology are ofneglected importance in developingcountries. Industry and universities inTurkey face shortages of researchers-10for every 100,000 of population comparedwith 280 in US, 240 in Japan, 150in Germany, 140 in the UK [8]. InNovember 20061984, in Turkey non-defence researchexpenditures were 0.20%of GNP [10],while in the US they were 2.74%,2.65%in Japan, and 2.54 %in Germany[8]. Thus, developing countries haveprincipal shortcomings in their fundingand supporting scientific infrastructure.Another indicator of how science is ofneglected importance in developingcountries is that most of these countriesfail to stress that, for long term effectiveness,technology transfer shouldalways be accompanied by sciencetransfer. From the simplest to the mosthighly complex industrial products arebased upon the rapid advances andaccumulation of scientific knowledge invarious related areas.Compared to technologists, economists,and planners, the extent to which scientistsare allowed to play a role in nationbuilding is another important problem.Few developing countries have formulatedsuch a policy of allowing scientiststo play their roles [11].In summary, the social and economicgrowth of the developed countries isdependent on an essential emphasis oneducation, science, and technology. Thebasic problems of developing countriesare the weak educational and scientificinfrastructure, and a lack of appreciationof the importance of science as anessential ingredient of economical andsocial development.Strategies and Policiesfor Developing CountriesModern science permeates every aspectof economic and social life. For this reasoneducation, research and technologyas instruments for accelerating developmentshould receive special attention innational planning in the developingcountries. One of the major factors formarginal science and technology developmentin the most developing countriesis the lack of planning and managementof these activities. Thus far,only a few developing countries haveattempted to formulate and adopt anational policy [11], [12].In order to make a realistic plan, notonly a vision, but also scientific leadership,and investment in scientific enterpriseboth by government and privatesectors are required. Short-term financialconsiderations in investment decisions,that have been observed so far indeveloping countries, will always bemore costly and time consuming.The institutions for scientific educationand research oriented, professors, wellequippedlaboratories, modern librariesand archives within these institutions,constitute the minimum requirementsof a scientific infrastructure any developingcountry must provide for. In orderto establish this infrastructure then, thesupport and funding for universitiesshould be increased. The science policyin a developing country should bedetermined in collaboration with thegovernment, universities and industry.This collaboration should take intoaccount technological needs, resourcesand practices. For this purpose, governmentefforts must be addressed to establishan industry-university cooperationto communicate technological advancesto potential users.As Salam [9] says, developing countrieswhich plan to have a rapid economicgrowth, should first consider if theyhave provided ideal opportunities fortheir high-level scientists and nurturedtheir talents for the nations' well-being.Furthermore, these countries mustensure the economic and social wellbeingof their scientist and provide anattractive and well equipped researchenvironment to their migration to countrieswith enriched scientific and socialopportunities. Science and technologybased industry should be identified as amajor source of economic growth and ameans of addressing important socialproblems as well.In conclusion, developing countriesshould be committed to retaining highlevelscientists, stimulating them, andproviding funds and other support toencourage and maintain their productivity.Engineering Educationat Turkish UniversitiesHigher education in Turkey is developingvery rapidly. The average annualgrowth rate of students in higher educationin Turkey during the period 1980-85 was one of the highest in the world:14.1%as compared with 7.8%inCanada, 5.0%in the UK, 1.4%in Italy,0.2%in the US, -0.2%in Hungary, and -5.3%in Poland [13].

Engineering Case studyThe number of students enrolled inengineering is high: 18.33%of the totalenrollment as compared to 8.20%inItaly, 7.90%in Austria, and 3.29%inFrance. The relatively low enrollment innatural sciences, mathematics and computerscience, however, reflects the``marginal activity,'' attitude of developingcountries: 5.46%as compared to15.58%in France, 10.10%in Italy and9.20%in Austria [13].Turkish universities require four yearsof study for the completion of an undergraduatedegree in engineering. Turkishindustries expect engineering graduatesto have the current know-how to solveimmediate problems. This expectationis often reflected in university curricula:there is a tendency to teach as manycourses as possible in the core subject.As a result, the total credit-hour requirementis considerably higher than thatrequired at American universities. Themean number of credit-hours requiredfor the BS degree in Electrical engineeringat eight established engineeringschools (Bilkent, Bogaziçi, Çukurova,Technical University of Istanbul,Karadeniz, Middle East TechnicalUniversity, Selçuk, and Uludag) is161.3. It ranges between 146 and 211.According to the results of a recentquestionnaire completed by 125 electricalengineering departments in theStates, the mean number of credit hoursrequired for the BS degree in Americanuniversities is 133.5 [14].The mean number of semester credithoursof electrical engineering coursesrequired by Turkish universities is100.9. The range is between 77 and166. Even at the three universitiesknown to be closest to the `Americanmodel' the number of required electricalengineering credit hours is high:Bogaziçi 77, Bilkent 78, Middle EastTechnical 83. The corresponding meannumber of required credit hours atAmerican universities is almost half ofthis: 52.9 [14].The emphasis on mathematics andbasic sciences (with the exception ofchemistry) is strong. The mean numberof mathematics credit-hours is 22.7,compared to 17.8 at American universities.The mean number of required physicscredit-hours (11.9) is higher thanthe American mean (10.9). The chemistrymean (3.9) is, however, lower thanthe American mean (5.1) [15].The increase in the number of core subjectcourses in Engineering curriculahas occurred at the expense of generalliberal arts education courses. Thus, forexample, the mean number of credithoursin general humanities coursesavailable to engineering students inTurkish universities is 3.8, as comparedto 18 credit-hours in American universities.This presents another dilemmawhich must be resolved for the universityin a developing country, if the aesthetic,psychological, sociological, andother cultural relations and consequencesof scientific and technological developmentare to be taken into account.ConclusionIn developing countries economicgrowth can mainly be enhanced by ascience, and technology policy.However, science and technology canplay their role in development onlywhen the integrity of the whole enterprise-researchinstitutions, universities,publications research priorities andemphasis and the education of creativescientists, as well as those active inscience is preserved. Thus, the simpleststrategy in developing countries is firstof all, to increase the percentage ofGNP that is to be devoted to universitiesand research institutions.Developing countries should understandthe fact that perceiving investmentin sciences as a time-consuming, wastefuland costly activity will bring furtherlimitations on their economic growth.In conclusion we believe with Salam [4]that it is a political decision on the partof those who decide on the future ofdeveloping countries to take propersteps toward creating, mastering andutilizing the resources of science andtechnology.References1. Shishido T. Japanese IndustrialDevelopment and Policies for Science andTechnology. Weekly Science, 219, 21January 19832. Troen S.I. Higher Education in Israel:An Historical Perspective. HigherEducation, 23, 45, 19923. Wechsberg J. A Walk Through theGarden of Science. London: Weidenfeldand Nicholson, 19674. Salam A. Notes on Science, Technologyand Science Education in theDevelopment of the South (Prepared forthe 4th Meeting on the South Commission,10-12 December 1988, Kuwait). Trieste:The Third World of Academy of Sciences,19885. Sharafuddin A.M. SciencePopularization: A View from Third World.Impact of Science on Society, 14, 347,19886. Keyworth G.A. Four Years of ReaganScience Policy: Notable Shifts in Priorities.In D.O. Gray, T. Solomon, and W. Hetzner(eds.): Technological Innovation, 14,Amsterdam: North-Holland PublishingCompany. pp 27-39, 19867. Ruskenveld Y.V. Partners in Innovation?Science and Public Policy, 15, 19, 19888. Rajagopalan T.S. and Rajan T.N.Technology Information Base in India: ADevelopment Perspective. In E.V. Smithand S. Keenan (eds.): Information,Communication and Technology.Amsterdam: Elsevier Science Publishers.pp 441-450, 19879. Salam A. Ideals and Realities.Singapore: World Scientific, 198710. Sinclair C. Science and Technology inGreece, Portugal and Turkey. Science andPublic Policy, 15, 354, 198811. Choi H.S. Science and TechnologyPolicies in the Industrialization of aDeveloping Country-Korean Approaches.Paper for the Background Documentationat the task Force Meeting on the Role ofScience and Technology in theDevelopment of the South, SouthCommission, 31 May 1988, Geneva,Switzerland12. Ramanathan K. Evaluating theNational Science and Technology Base: ACase Study on Sri Lanka. Science andPublic Policy, 15, 304, 198813. Nicolae V., Smulders R.H.M. andKorka M. Statistics on Higher Education.Bucharest: European Centre for HigherEducation, 198914. Aspnes J. A Summary and Analysis ofBachelor of Science Degree RequirementsReported by 125 Electrical EngineeringDepartments. IEEE Transactions onEducation, 37, 122, 199415. Bilsel A. Basic Sciences, Humanities,and Social Sciences in Turkish and NorthAmerican Engineering Programs-AComparative Study. EMU Report, 1995(unpublished)Energie & Mines85November 2006

ENGINEERING CASE STUDYRessourcesHumainesIn India, Engineering SuccessSebastian Mallabymallabys@washpost.comThe classroom of the futurewill feature electronic whiteboards. The teachers of thefuture will write equations onthese boards with electronic pens. Andthe students of the future won't have tochoose between concentrating on theteacher and scribbling the equationsinto notebooks.They will devote all their energy to listening,then download the equationsstraight into the laptops they've pluggedinto their desks. Okay, that isn'tquite right. The classroom I'm describingis not some figment of the future.It's the reality I visited a month ago atthe Vellore Institute of Technology.The what ? Vellore is a small town insouthern India, poor enough for someof its buildings to have thatched roofsrather than the rain-proof metal sort.Until a few years ago Vellore was notableonly for its large Christian medicalcenter, erected with the help of foreignmoney. But now it has sprouted this9,000-student technical college, completewith a sports stadium, an incubatorfor start-up high-tech businessesand a bio-separation lab. Everywhereyou look, fresh buildings are underconstruction: over here a new laboratorycomplex, over there a gleaming studenthostel with its own swimmingpool.The college started out in 1984 withjust 180 students, and its extraordinarygrowth is a symbol of the modern Indiaas much as forts and palaces symbolizethe India of old. Its success is part ofthe explosion of technical schools allacross this country, which in turn ispart of India's technology-fueled economicmiracle.In 2005 India produced 200,000 engineeringgraduates, about three times asmany as the United States and twice asmany as all of Europe. But the reallyastonishing statistic is this: In 2005India enrolled fully 450,000 students infour-year engineering courses, meaningthat its output of engineers willmore than double by 2009.As striking as these numbers is the wayIndia is getting there. What's made thisengineering takeoff possible is not anincrease in the supply of universitiesfinanced by taxpayers or foreigndonors; it's an increase in demand foreducation from fee-paying students ademand to which entrepreneurs naturallyrespond. More than four out offive Indian engineering students attendprivate colleges, whose potentialgrowth seems limitless. In 2003 theVellore Institute of Technology received7,000 applications. In 2005 it received44,000.Something similar is happening to theIndian school system, which has experienceda huge growth in private provision.Since the early 1990s the percentageof 6-to-14-year-olds attendingprivate school has jumped from lessthan a tenth to roughly a quarter of thetotal in that cohort, according to India'sNational Council of Applied EconomicResearch.And this number may be on the lowside. James Tooley of the University ofNewcastle in Britain has found that insome Indian slums about two-thirds ofthe children attend private schools,many of which are not officially recognizedand so may escape the attentionof nationwide surveys.The causes of this private-school explosionshed interesting light on debatesabout development, not just in Indiabut throughout the poor world. Thestandard assumption among antipovertycampaigners is that educationleads to development; if you supplyclassrooms and teachers, progress willfollow.Up to a point, India's success in brainintensiveindustries such as softwareand pharmaceuticals lends substance tothis theory: India's government haslong invested in a few elite engineeringschools, whose graduates are at theEnergie & Mines86November 2006

Engineering Case studyImprovingthe human potentialheart of the country's high-tech success.But it's also true that this elitepool of engineering excellence countedfor little so long as statism stifledIndia's economy. It was only aftermarket reform began in the 1990s thathigh-tech India took off.Meanwhile, the recent private-educationboom in India shows how causalitycan also flow the other way.Education may or may not spark development,depending on whether economicconditions favor it, but developmentcertainly can spark an educationaltakeoff. Since India embraced themarket in the early 1990s, parentshave acquired a reason to invest ineducation; they have seen the salariesin the go-go private sector, and theywant their children to have a shot atearning them. Private elementaryschools improve kids' prospectsbecause they teach in English, the passportto India's modern sector.Colleges such as the Vellore Instituteof Technology promise the qualificationsneeded to work in the autoindustry or in software. Once parentsunderstand that education buys theirkids into the new India, they demandit so avidly that public money forschoolrooms becomes almost superfluous.Of course, India's progress isn't simple.The best engineers get snapped upby industry, so it's hard to find decentteachers to staff Vellore and otherengineering schools. As a result, manyof the new colleges teach kids little ofvalue, and some science graduates endup unemployed. But the story ofVellore points to an important lesson.Apparently unconnected developmentpolicies - cuts in tariffs and oppressivebusiness regulation, or projects tobuild roads and power grids - cansometimes stimulate new educationalenrollment at least as much as directinvestments in colleges or schools.“The companies that willsucceed tomorrow will bethose that know how tocoincide their strategicproject and the skills oftheir employees.”The approach which consists of acquiringtechnologies through turnkeycontracts making use of foreign companiesand experts has reinforced thetechnological and economic dependenciesof the developing countries. It hasgenerated few employment opportunitiesin favour of the latter whilst maintaininga maximum cost in the acquisitionof technologies.A large proportion of the country'smain industries with a high technologicalcomponent has been made throughinternational consultancy and engineeringorganisations. These behave likeblack boxes. There is no connectionwith the local consultancy, engineeringand research and development organisations.As long as these links are notestablished, they will not be able tocontribute to the country's scientificand technological development.The experience of B&R-Cis enlightening in this matterBrown & Root-Condor (B&R-C) wasborn from the desire to associate anAlgerian company whose assets areknowledge of the local environment,the existence of a potential in termsof engineering and an internationalcompany Kellogg Brown & Rootpossessing the know-how and thetechnology.One of the objectives of creating B&R-C is to break the rationale of “blackboxes” and manage to create, inAlgeria, the conditions that enableengineering to develop with all theconsequences it generates in terms ofcreating wealth and developing humanpotential.Malika AMARAAbdelhamid YELLOUYes, we do have human potential inAlgeria. What we need is to develop it,train it, provide it with the same conditionsand bring it to work with thesame standards as international companies.Starting from a core of twentyengineers covering a restricted numberof disciplines, within the space of fourteenyears it finds itself with more than950 engineers and technicians whocover a much larger and increasinglycomplex range of disciplines and specialities.Some of them did not exist, orbarely existed in Algeria.It needed a great amount of effort todevelop what particularly affects thehigh technology disciplines and projectmanagement techniques such ascontrolling costs, planning, projectestimation, etc.How has the companydeveloped ?As the personnel are the company'smain capital, their training and developmenthave been one of the company'smajor preoccupations. This actionhas been more crucial for B&R-C giventhe fact that the Algerian universitiesand business schools train engineerswith a theoretical syllabus base whichdoes not enable them to become immediatelyoperational. For some specialities,there is practically no compatibilitybetween the training of students andthe needs of the job market. To remedythese insufficiencies, the trainingmethod used in B&R-C has been oneEnergie & Mines87☞November 2006

ENGINEERING CASE STUDY☞Energie & Mines88of “Mentoring” and the total immersionof employees in the realisation ofthe projects acquired by the company;furthermore, a large number of engineersand executives have benefitedfrom related and intensive actions,given through the company's learningcentres and national and foreign organisations,to upgrade their knowledge,teach them or improve their English aswell as for vocational re-training targetingmodules focused on technical andmanagement aspects.The company has organised mixedteams comprised, on the one hand, ofemployees of B&R-C and, on the otherhand, experts and engineers from itsKBR shareholders.These teams have worked togetherthroughout the duration of the project,from its estimate until its implementationand delivery to the client. Hence,for example, parts concerning the engineeringstudies or even the supervisionof the realisation of the projects areentrusted to the B&R-C personnelwho, working closely with the engineersand experts of its partner KBR,access a complete arsenal of procedures,standards, software and knowhow.To develop the managerial skills andcreate a pool of Algerian managers, theemployees with high potential havemirrored the foreign managers in thedifferent central departments of thecompany.Hence, the company's local personnel,whilst gaining knowledge and skills,actively participate at the operationallevel in the realisation of projects and atthe supervision level in the support andsupervision of these projects.This is a long and expensive processwhich requires a lot of effort both fromthe personnel concerned and from thecompany as, in addition to the developmentof its own personnel, this mustcreate a common operating environmentwith its clients and its local subcontractorsto enable them to be at thesame level in terms of standards andqualifications.Thanks to this approach, B&R-C hasmanaged to master certain domainssuch as civil engineering, mechanics,November 2006structures, but there is still a lot to dohere, for example, in terms of process,instrumentation, project estimation,project management (control of costs,planning).The company has thus become,through the strength of things, a “teaching”school. Dozens of engineershave been able to develop their skills atan international level. Their qualificationsare recognised throughout theworld since, unfortunately, a goodnumber of them have been recruited tojob positions, some for manager positions,with renowned foreign companies.Attracting and developing theskills is all well and good, butwe still need to be able toretain them!This is why B&R-C has set about offering,absolutely, motivating workingconditions. There are two types ofthese: the working environment andprofessional development.The working environment: this meansmaking available to the employees allthe tools and technologies required toenable them to work with the samemeans as those of our internationalcompetitors. The company must beable to offer the same services at thebest costs, quality and timeframes.Hence, the immediate circulation andexchange and sharing of informationflows through adequate and personalisedInformation and CommunicationTechnology (ICT) supports are one ofthe essential components of the challengeof competition.This is why the company has set up aneffective information and telecommunicationssystem. This consists of anetwork of information and telecommunicationswith access, on the onehand, to the intranet developed by thecompany and, on the other hand, theinternet which enable the company'sdifferent sites and the different users toconnect with each other, wherever theymay be in the world. It mainly enablesthe resources to be shared, whetherhardware or software.These are the same basic applicationswhich must be used by almost allemployees. It has given the employeethe same working environment andenables him/her access to its data,regardless of where they are in theworld. It particularly enables a quickand voluminous flow of data to andbetween the different sites, whichfavours a better realisation of projects.In addition to this common operatingenvironment, each employee is given aPC and has access to the tools andapplications related to their specialityand authorised by the company.Professional development: this is doneat two levels. The first consists of thepersonnel development of theemployees. To enable their full developmentand better understanding of thedifferent problems they are faced with,programmes for cognition and managementof situations inherent in thecompany's life and even in their privatelife are given to the employees. Thesemust lead to a balance of professionaland private life and, consequently, tobetter performance from employees.The second concerns the employees'career. In addition to putting in placeskills appraisal and salary policiesbased on the performance of eachemployee, the company offers veryinteresting career prospects insofar asit offers new jobs in relation to the jobslinked to the project management, procurementand construction activitiesand which give them a certain amountof added value.

Engineering Case studyConclusionThe experience of B&R-C shows thatit is possible to create Algerian engineeringcompanies that are capable ofbreaking the rationale of “black boxes”by creating an Algerian entity and personnelfor turnkey projects, from theirdesign to their commissioning. Givenits size and its youth, the companyB&R-C alone can only satisfy a smallpart of the market with regards thecountry's development plan.This fact must lead the State to encouragethe emergence of other nationalengineering companies as these willprovide added value in terms ofgrowth, acquisition of know-how andthe creation of jobs. To do this, it hasto give Algerian companies the meansof their policies as Passion, alone, isnot enough to achieve Excellence.Likewise, it must adopt policies in thedomains of Training, Sales andInformation and CommunicationTechnologies (ICT) aiming at puttingin place a viable environment that isfavourable to the evolution of this typeof company which is the spearhead ofpowerful economies such as theUnited States of America, Japan andthe United Kingdom.The State must also put in place newsocio-economic game rules aiming tofavour knowledge and technologythrough teaching and quality academicdevelopment that is in line with theneeds of the market. It must takeincentive measures to stimulate theinvestments in the field of engineeringand its corollaries which are researchand development.Last but not least, this means developingand putting in place, supportedby the ICT, network bases in viewof benefiting from our national knowledgebases and adopting policies interms of technology to enable a stronggrowth rate to be supported along witha major technological acquisitionsrate.Skills managementAlot of company heads arenaturally inclined, and this istheir mission, to supervisethe daily operations of theirrespective companies. This is a normalsituation, except that, in the years tocome, one of the major competitiveadvantages of a company will be itscapacity to attract, develop, encourageand retain skills. Some companyheads, who have already taken thedecision to manage the skills, havequickly understood that their companieswill need to improve the methodsof managing these skills.The obligation of becoming a talentedmanager requires a fundamental changein the way in which the companyheads perceive their role as well as asignificant commitment over time.Most large companies consider skillsmanagement as being part of theirgeneral strategy.This is an essential way of securing,developing and motivating theemployees with the appropriate skillsand approaches to achieve the company'sobjectives.But how many of our strategic objectiveshave been fully achieved by ourcompetent employees? Very often, wenotice that we do not have the rightpeople available to take responsibilityfor a shortcoming when it arises or thatwe are unable to keep the people wewant. Even worse, the competent peoplecan be quite simply under used.So, what can we do to seize these missedopportunities? I think that theMartin KILMURRYOperations DirectorPygmalion Corporate Limitedgreatest and the only challenge is toachieve a real synergy between theSkills Strategy and the Company'sStrategy.A lot of processes concerning personnelare often put in place withouttaking account of a clear correlationbetween the final objectives and thecorporate culture.Thinking about recruitment, managementand development of performances,means asking oneself how muchwe establish processes based on a clearanalysis of skills and qualificationswhich the employees must possess tobe operational at a higher level.To what extent to we develop their abilitiesand their motivations to respondto the needs of the company in themedium term ? It is absolutely vital togive a clear definition of what the word“skill” means for each company. Thequestion is simple : are people withthese qualities achieving the targetedresults ?Each company must have a very clearsense of its future strategic direction. Itmust also, however, invest in the developmentof its personnel in terms offeedback and coaching, not only targetingthe strengths of each employee butalso identifying their specific qualitieswhich the company might need in thefuture.Fundamentally, this process is notdone in one stage - the results are linkedto the way in which the people aremanaged, trained and motivated andtheir direct impact in the companyEnergie & Mines89☞November 2006

ENGINEERING CASE STUDY☞must be identified and analysed. It isthis connection quality which makes asignificant difference - by linking thecompany's strategy to the everydayexperience of its employees.It is absolutely important that the individualambitions and the company'sobjectives converge towards the samegoal. All too often they are perceived asbeing unequal partners. However,companies that actually set about discoveringthe innate talents of each persontend to succeed.We have to outline different paths foremployees to enable them to make progressand develop, otherwise we willonly have access to a restricted categoryof people. This approach requires anopen mind and questions such as“How can we use the skills and energiesof this person?” “How can weorganise our work differently?” or “Arewe targeting the wrong things?” But ifthese questions are actually asked, a lotof objectives can be achieved.“Alignment” is another key element of asuccessful Skills Strategy. When weselect or train employees, most companiesinsist on the skills, the knowledge,the experience and the behaviourrequired for the job. Some companiesare starting to become interested nowin the behaviour required to execute thejob efficiently in a team or a specificculture. We need to understand therelationship between the personal motivationsand the types of corporate culturesin which they will develop.To achieve significant results eachmanager – whether a president of adivision, a director of a department, anoperational director or a section manager– must reinforce the skills of theirdirect employees. The managers oflarge companies – and the companyhead in particular – have the additionalresponsibility of ensuring that all theskills of the companies are continuallyreconstituted and reinforced. It isessential that the boards of directorsplay an important role in the managementof skills by :• setting up a skills committee comprisedof managers with the best provisions;• ensuring that the company has askills appraisal process solidified bymeasurable plans and actions;• making regular reviews to examinethe strength of the company's pool ofskills;• facing up to the complex task ofmanaging incompetents.What is Skills Management ? Thisshould be everything which wouldmake the company successful throughthe understanding of the concept ofskills and in the way in which they areused in view of achieving the company'sspecific objectives.It also means ensuring that we givetheir correct value to the innate talentsand the aspirations of our employees,that we identify the obstacles whichmay spoil our efforts and, finally, theway in which the personnel managementprocedures are applied whichmust be linked not only to each otherbut, also, be very closely linked to thecompany's objectives. SkillsManagement is, at the end of the day,understanding how to manage theemployees in terms of alignment andaptitudes. If we adopt these approaches,not only will the company succeed,but we will thus have personnelwho give satisfaction and are efficient.Energie & Mines90November 2006

Engineering Case studyThe strategic positioningof the HR function (*)In this report, wewill try to highlightthe need to renewthe view and perceptionof HRM by thecompany's directors.At a time of profound changesin our national economy,confronted with the hard realityof the market economy, itis essential to identify the strengths andweaknesses of human resources managementto understand the large axes onwhich we should intervene in order toimprove productivity and take up thechallenges of economic globalisation.Nowadays, the most important factorof success relies on what has perhapsbeen the most neglected or overlookedup to now: HR. Efficient HR managementis therefore deemed the source ofa key competitive advantage forAlgerian companies. The winning companieswill be those which are able tobetter manage their human resources,i.e. better take up their challenges.The part taken by the dynamic of developingintellectual capital (intangibleassets) in the battle for competitivenessis today a determining factor when weexamine the recent evolution in thefield of strategy which, beyond theparadigm of the competitive positioningof the 1980s, has granted increasingimportance to the internal resourcesof which the intellectual capital isone of the most important. Indeed, thiscapital gives a company a competitiveadvantage as it possesses the followingcharacteristics : it is a valuable, rareresource that is difficult to imitate andcannot be replaced.Given a strategic dimension, thehuman resources function thereforeimposes itself today as a fundamentalfunction of organisations.HRM : a revampedand valuable functionIf we judge it by a certain number ofreflections on the future of humanresources management, the latter tendsto access the rank of a real strategicfunction inside companies which havediscovered within their personnel oneof the greatest unexploited deposits ofcompetitiveness. The recognition of thesocial imperative in the battle for competitivenessdoes, in fact, constitute ahistoric opportunity for a revampedand valuable HR function. This changein the status of the social function insidethe company has in real terms resultedin the following two forms :• the actual integration of HRM in theoverall strategic reflection, whether, forexample at the level of future investments,redeployment and the diversificationof activities or the developmentof new products,• the adoption of reasoning and operatingmethods by HRM within the frameworkof a really strategic approach.For the social function, this meansbeing more consistent and above allpre-active (anticipatory approach,being prepared for expected changes)and pro-active (provoking the desiredchanges) in terms of the main missionsgiven to it.Omar BOUKHEDIMIDirector of Administration and InsuranceBrown & Root - CondorThe integration of HRMin the company's strategyIn our opinion, there is no strategy ifonly one dimension is taken intoaccount. What is important to enableHRM to be really integrated in the overallstrategic reflection is that the functionactually participates in drawing upand implementing the strategy; thisimplementation is however only possibleif the personnel is perceived no longeras a cost that has to be minimised,but rather as “the resource of resources”that must be optimised. Thisimplication can be solidified by the factthat the HRM managers are full membersof the strategic planning bodieswhich are the company's “strategiccores”. Humans are always at the centreof the difference between companiesthat win and those that lose.Indeed, an American manager (HenryFord) said: "If I were given the choicebetween losing all my equipment, allmy clients or all my personnel, I wouldnot hesitate to choose to select thehuman potential with which I canconquer everything”. In other words,the company must ensure it has qualityhuman resources, the best suited to itsneeds, and whose cost is in line withthe creation of value they induce. Thecreation of value precedes its distributionin this sense that the company cannotdistribute wealth that it has not yetcreated.Evaluation of HRMA large part of the contemporary challengesof HRM directly results from thechanges that have taken place in theexternal environment of companies.☞(*) Report presented during the Third Energy Week in AlgeriaEnergie & Mines91November 2006

☞ENGINEERING CASE STUDYEnergie & Mines92In the current context of the Algeriancompany, particularly in the perspectiveof membership to the WTO and theEuro-Mediterranean partnership,already exacerbated by the characteristicsof the environment (globalisation,uncertainty, innovation, competitiveness,etc.) which will profoundly modifythe context in which our companiescontinue to act, it becomes imperativefor the HR function to be judged on itsefficiency with regards the numerouspartners (or "stakeholders") with whichit is interfaced (shareholders, suppliers,creditors, directors, personnel, unions,competitors, clients, media, authorities,host countries and regions, variouspartners, etc.) and with regards itscontribution to the company's performanceand mission.However, each of these partners hastheir own reference and its own criteriafor evaluating efficiency (quite a complexconcept), the managers - includingHRM - are solely responsible forthe consistency and dynamics of theentire company, and it is incumbentupon them to evaluate the performanceof the company's human resources.The "human resources value" is a crucialdimension of the organisationalefficiency, which implies a sharedresponsibility of HRM between theplayers of the organisation to evaluatethis efficiency. The revamping of HRMand its future challenges impose correctingthe lack of visibility engenderedby numerous errors and inconsistentapproaches characterised by the questfor short term financial gain and thereduction of costs. The company'shuman development is a main source ofthe creation of value and long termcompetitiveness.The challenges of HRMIn light of the experiences gained andsuccesses elsewhere, analyses of specialistsand professionals of the HRfunction, account taken also of a changefrom a traditional paradigm to arevamped paradigm of HRM, andtaking inspiration from the works of J-M Peretti, particularly, we have usedone of the key trends or major challengesof HRM: a more strategic management.Undeniably, the "human resources"dimension must be taken intoconsideration in the formulation of thecompany's vision, the mission and theNovember 2006strategy. A strategic "human resources"function therefore implies an ability toinfluence, a priori, the business decisionsand the strategic managementpractices as well as an ability to align, aposteriori, the measures related tohuman resources.The role of HRM is no longer solelyadministrative, i.e. focussed on theactivities, but increasingly strategic,focussed on the human factor. Asmanagement is above all managinghumans.The HRD must not be frightened ofresourcing and must endeavour tomake the ever-changing HR function areal development tool for the companyin terms of performance and quality.Faced with these problems, the HRDmust invest more in the dynamic ofperpetual change being experienced byour companies. The resources mustquickly adapt to the expectations of themarket and therefore permanentlyadapt.ConclusionThe raw material of a company is itsgrey matter. In fact, the success of acompany today has more to do with itsintangible assets - namely its intellectualand organisational capacities -than its intangible assets. Gosselin(1996) emphasises the urgency of“considering employees as a strategicresource”.In reality, in the context of the Algeriancompany, it should be noted that themain factor of success in the immediatefuture corresponds to what has beenoverlooked up to now : human resourcesGiven the stakes, with regards theglobal movement, and faced with theconsiderable technological progress,Algerian companies must refocus onthe most valuable capital they have :human capital. As a strategy can onlybe “good” with a human dimensionand component.The recent changes in HR management- the theories on administration byskills, organisational learning, managementby skills and particularly conductingchange - reposition the HR functionat the centre of the changes beingexperienced by companies due to thequick technological developments, thegrowth in competitiveness and the globalisationof exchanges. Insofar as theentire HR landscape has changed,human resources management must,today, take up new challenges as thecompetition does not forgive those thatdo not adapt.References[1] A. Gosselin, Réaliser la stratégie :avant tout une question de ressourceshumaines, dans T. Hafsi, J-M.Toulouse etautres, La Stratégie des organisations :une synthèse, Montréal, les EditionsTranscontinental, pp.295-300 (1996).[2] G. Hamel & C.K. Prahalad, LaConquête du futur. Paris, InterEditions,(1995).[3] Le Monde, Les experts en managementredécouvrent le facteur humain,(22/10/1996).[4] M. PORTER, ''L'avantage concurrentiel'',(Paris InterEditions, 1986).[5] J-M. Peretti, Gestion des ressourceshumaines, Vuibert Entreprise, (8E éd.,1999).[6] O. Boukhedemi, Les Défis actuels dela fonction RH dans le contexte de l'économiealgérienne : le cas de la sociétéBrown & Root-Condor, mémoire MBA(ISG Alger, juin 2003).

Engineering Case studyImpact of the workforceand of the growthin the oil sectorIan FORSYTHAberdeen Press & JournalThe world's oil andgas industry is ina stagnation phase,unless urgent measuresare taken toresolve an increasingrecruitment crisis.The latest warning on thenegative impact of skills'shortages today comes from3i, the first companyin Europe specialised in the capitalinvestments in partnerships and jointventures.Graeme Sword, a partner at 3i based inAberdeen and president of its oil, gasand power department, indicated thatthe governments, the educators and therepresentatives of the industry mustnow join forces to encourage the injectionof new blood into the ageing workforceif we do not want to face theconsequences.His comments come further to thepublication, by this company, of itsthird annual report on the state of theworld's oil and gas industry.The document analyses the main trendswhich, today, have an impact on business.It identifies four main opportunityand challenge generating points forthe energy industry and investors :• The growing demand for oil, in spiteof its high prices, particularly in Chinaand India.• The changing relationships betweeninternational and national oil companies• Supply chain resource constraints,reserve replacement challenges andmature field decline rates.• The chronic shortage of skilled personnelin the industry's sector and theway in which this shortage can beresolved.Mr Sword stated : “For years, wethought that capital was the main constraintof the projects undertaken, butnow it is deemed that this constraint ismore the workforce. Through theirboards of directors, companies say theymight operate a lot better if only theyhad more personnel.Everyone seems to recognise that this isa really big problem, but the questionasked is: what are we doing about this?Industry must improve its way of interveningon the job market. We have toimprove the training and developmentof personnel through the boards ofdirectors, implement cultural changefar from the expansion-slowdown mentalityso that employees feel moreconfident in committing to long termcareers.Mr Sword added that the entire oil andgas industry was in the process of dealingwith a period of spectacular changewhich might lead to a restructuringand to a shake-out on a massive scale.He also said : “Oil companies mustfind fresh crude reserves to replacedeclining production output from existingfields. The supply chain is at fullstretch, with a chronic shortage of peopleand an ageing workforce; prices arehigh and demand continues to rise.However, all these challenges provideopportunities for the industry whichmust take advantage of the momentumof change. To succeed in the future,innovation and development of newbusiness models will be more importantthan ever.”Energie & Mines93November 2006

ENGINEERING CASE STUDYTransfer of technologiesand internationalisation processP. JUDETInstitute of economic research and planningUniversity of Social Sciences, GrenobleEnergie & Mines94The transfer of technologies :a new way ?The transfer of technologies has, overthe last few years, been the subject of agreat deal of literature. Literaturewhich was soothing for a long timeinsofar as it led people to believe that itwas enough to simply establish theconnection for the transfer to be madebetween industrial countries and countriesdeciding to become industrialised.This transfer constituted one of theaspects of the bilateral or multilateral“aid” - aid in which there was no hesitationin including all private industrialinvestments.Since the failure of the "first decade ofdevelopment" had to be admitted, it isdifficult to escape a certain amount ofrealism. Everyone recognises today thatthe transfer of skills comes up againstobstacles, poses problems, it is notautomatic, it is random and it is onerous.The modern technologies are nota free good; they are appropriated,negotiated and sold; the patents'mechanism contributes to creating ararity which entails the establishment ofa price system.The transfer of technologies takes placewithin the framework of a market.Some people emphasise today that thisis a completely unequal market,controlled by the large multinationalfirms and the engineering companieslinked to them.“Most patents are in the hands not ofindividual inventors but of large transnationalcompanies… The monopolisticcontrol of the market and theconcentration are reinforced by amutual licence granting system betweenlarge companies, which has theeffect of transforming the oligopolisticNovember 2006structure which exists at the world levelinto a monopolistic structure at theregional level” (1)."Transfer of technologies and largemultinational firms” is in fact one ofthe heated points of the current discussion.For numerous economists and businessmen,the positive role of the largemultinational firm is obvious. It is asort of postulate. "We initially assumethat the multinational company contributesto global welfare because itfavours international communicationthrough the transmission of knowledgeand resources. Part of this growthaffects the installation countries; therest is distributed between the corporatedirectors and the suppliers, on theone hand, and the American consumerson the other hand” (2); a postulatewhich is verified through the technologicaladaptation capacity of the largefirms: "The adaptation of technologicaltransplants to the resources and capacitiesof developing economies is perhapsthe largest contribution whichmultinational firms can bring to theseeconomies…” (3).“The international organisations implicitlyadopt this way of seeing, by organisingmeetings between large firmsselling technology and private or publicindustrialists belonging to developingcountries. After numerous failures, thisis the new way proposed for transferringtechnology to the developingcountries” (4).It is true that the large multinationalfirms manufacture technology: theresearch budget of the largest of themis higher than the research budget ofany developing country. Their systematicpatent buying and exchanging policyensures them a stock of technologiesthat is largely superior to the product oftheir research. Thanks to a global networkof employees, the large firmspractice a policy aiming to prevent anddiscourage any invention impacting theexclusivity of the processes and productsthey intend to reserve for the currentor future market. The large multinationalfirms, directly or through theirsatellites, then propose negotiating alicence or know-how transfer agreement:they have brought together allthe assets beforehand to negotiate in aposition of strength; their services arehence expensive.This is indeed a “new way” as the technologyhas fallen into the hands of thelarge multinational firms - more subtlethan the “concession” imposed by forceor the 100% owned subsidiary - an efficientarm, both at the front line ofpenetration and later extracting ofdefence : “This is the dawn of a new eracharacterised by the exploitation oftechnology and no longer as before bythe, often abusive, exploitation of acountry's natural resources” (5).This new way is only, definitively, arenewed form of dependence that hasbecome less visible since it can survivethe nationalisations and it is likely toinfiltrate into apparently more autonomouscompanies. Furthermore, yousimply need to go through the publicationsof the large firms themselves toget information on the objectives andthe means of their policy (6). Here wewill simply mention a few aspectsafter placing the phenomenon of thelarge multinational firms within theframework of revolution of the globaleconomy.

Engineering Case studyInternationalisation processand large multinational firmsIt should be noted, beforehand, that theapproach by the multinational firm islikely to mask the fact that it claims todraw up, i.e. the internationalisationprocess which entails the new industrialisationpractice (7). The analysis bythe firm, in fact, is not adequate tounderstand the internationalisationprocess. However, the economic categoryof branch or of industry, such as arelationship system between productgoods,production process and circulationprocess, enables the internationalisationmovement itself to be understoodof three components which definethe branch :• internationalisation of the productiveprocess,• internationalisation of the goods produced,• internationalisation of the circulationprocess.We note that the main characters of theindustrial system are changing, that anew type of industrialisation is progressivelybeing put in place in favour of themost advanced countries and that thelarge multinational firm is only theresult and the agent of the process.The analysis in terms of branches andof their components reveals the followingcharacteristics of the currentinternationalisation process.A trend towards thesupremacy of a technologicalprocess imposed by thelarge multinational firm(s)dominant in the entireglobal branch.• We note, for example, in the steelindustry, the supremacy of the steelindustry “on water” linked to the internationalstandards in terms of ores(content of over 60%), new procedures(oxygen steel works), installed capacity(5 million tonnes) :– The construction of large petrochemicalplants always under the remit of thesame large international engineeringfirms, Lummus, Kellogg, Power-Gas,Snam Projetti, Technip, which ensurethe reproduction of the technologies oflarge multinational firms and, hence,their domination.The transformationof a “product” strategyinto a “set of goods”strategy.Whereas the "product" is a good whichresults from an operation or aftermanufacturing operations without adirect relation to the market, the"goods” and the “sub-unit” or the “setof goods” is a complex of goods andservices which corresponds to a marketand this is where the law of value isexercised like a system transformingthe value into production price. Theobservation reveals today that the largefirms, but also the not-so-large firms,are in the process of abandoning a“product” strategy to adopt a goodsstrategy and, above, all, sub-units or setof goods. We no longer produce justpipes, but we sell piping units; we nolonger produce just furnaces, but wesell the thermal treatment process; weno longer produce just the alternator,the transformer, but we "sell” a plant…These groups of goods need an internationalarea to be realised; the multinationalfirms are, at this level, theinstrument to highlight the value ofproducts in the form of goods.We have seen a general downstream"descent" towards the market; the oilcompanies are going into petrochemistry,then the production of syntheticfibres up to tending to control the productionchains which lead to the finalmarket (clothing). The movementwhich goes from the product to thegoods and whose end process is thedelivery of the “turnkey” factory is closelylinked to the internationalisationprocess and also to the game of multinationalfirms.The importance of internationalcommercial companiesInsofar as they reveal the importance ofthe international product circulationnetworks, these networks are owned bythe multinational firms; they designtheir strategy. Access to these networksis very often the necessary condition ofthe transformation from “products”into “sub-units” or “sets of goods”.This has the effect of including apparentlyindependent firms in an internationalgame dominated by the multinationalfirms (8).Through numerous examples, we notethat it is not the technological brancheswhich dictate the structuring of thefirm and of the industry which is beinginternationalised but the desire tocontrol a market, to tend towards thefinal valuation of the product in theform of goods or sets of goods. Therestructuring line of the firm and ofthe industry corresponds to what canbe called an economic branch insofaras it routes towards the control of themarket.We will also emphasise within the frameworkof this process the role playedby the engineering companies, whetheror not they belong to the multinationalfirms. The missions of these companiesare, in fact :• to ensure the supremacy of the technologicalprocesses developed andowned by the large firms;• to ensure the transformation of theproduction into “sets of goods” in theform of plants, “turnkey” factories, etc.A few consequencesof this processA few aspects highlighted by this processare particularly important andmust be emphasised:The technologies are not freely offeredon a market where everyone has access;the technologies are guided and, to acertain extent, imposed by the largemultinational firms. In this sense, thepower of the large firms limits the choiceof the technologies and introducesrigidity.☞Energie & Mines95November 2006

ENGINEERING CASE STUDY☞Energie & Mines96Up to the 1970s, for example, thedirect reduction of iron ore, throughnatural gas in particular, was a technologyset apart by the desire of the largesteel companies in favour of the reductionof coke.On the other hand, there is a singleproduction technology for aluminium:the one which is implemented by theworld's large producers. Other processesexist for processing the current oreand other ores; they are owned by thesame producers that refuse to disclosethem, as they want to continue toimpose their technology.Today we question the interest of largecapacity steam cracking (4 to 500,000tonnes) plants constructed by the largefirms in the last few years.We may ask ourselves if, in this domainas in others, the race to the largedimensions initially proceeds from afinancial calculation, economies ofscale or even the desire of large firms toincrease their (global) market share byreducing the share of their competitors(9).The large firms are linked to the mainengineering and technology consultancycompanies; they inspire the specialisedpress; they use the services of thebest universities and brilliant economists;they are capable of making thetechnology market.10 years ago, we repeated in thecongresses and seminars that planningthe direct reduction of iron ore throughnatural gas was unreasonable. Today,all countries wishing to produce aluminiummust go through the conditionsof Alcan, Alcoa, Kaiser, Reynolds orPechiney. Everyone is impressed andaccepts as a dogma the need for economiesof scale. The technologies' marketis prepared in such a way that the choiceof players is limited to ratifying thechoice already made by the vendors.The "rigidity" which characterises thesupply of technologies is, above all,sensitive in the domain of so-calledbasic industries: metallurgy, chemistry,petrochemistry. On the contrary, itseems to make room for certain flexibilitywhen we go downstream to thetransformation of these basic products.At this level, the manufacturing activitiesof the large firm appear in perpetualand rapid evolution.November 2006Decomposition of the production processes,delocalisation of part of theseprocesses, pure and simple abandoningof other parts of these same processes,transformation of new, less capitalistictechnologies into more capitalistictechnologies, but also the oppositemovement from highly capitalistic technologiesto less capitalistic technologies.The activity of the large multinationalfirm is translated by a perpetual compositionand recomposition of its productionprocesses, depending on theglobal market; the restructuring line ofthe firm and of the industry correspondsto what we may call an “economicbranch”; depending on theopportunities offered by the multiplecombinations of factors availablethroughout the world. In a few months,Burroughs transfers its manufacturingof simple calculators from France toBrazil, Rolleiflex its production ofcameras from Germany to Singapore,Dim its hosiery productions to Israeland South Korea.In the framework in which the largemultinational firms move, there is nolonger any preference, a priori, for thenew “capital intensive” technologies orfor the “labour intensive” technologies.Both can correspond to an optimalcombination depending on the multitudeof possibilities to which a globalhorizon enables a large multinationalfirm to access.This is inserted in the prospects of anew international division of labourpresented by some as the "new orthodoxy"(10) or the "new frontier" (10)which do not really affect the old industries,textile, leather, clothing, so muchas the components, sub-units andassembly-based electronic and electricmechanical industries. The power ofthe multinational firms relies on theirability to compose or recompose thetechnical lines and identify the activitieslikely to correspond here or there to afavourable combination of factors… "inthe short and medium term, the identificationof labour intensive activities inview of their transfer will be the firstdriving force of research and developmentin terms of a labour intensivemanufacturing activity. When newlabour intensive technologies are created,they will probably be created wherethe skills exist, as the R&D is itself anactivity requiring highly skilled workforce.They will be created and will thereforebe the property of the same largemultinational firms which today ownthe “capital intensive” technologies thatare available" (11)."The large multinational firm is thereforein the process of appearing as thelarge supplier of "labour intensive"technologies as well as "capital intensive"technologies: hence the real problemwith the technology, its ownershipand the price to be paid to get it isclearly highlighted” (12).The loop tends to be complete: fromthe most capitalistic technology to theleast capitalistic technology: the largefirm, thanks to its global horizon, playson the largest range of technologies itselects, integrates by taking possession.At the same time that it understands thecontrol of large multinational firmsover the various technologies, the internationalisationprocess puts the placeof technology into perspective. Theglobal horizon of the large multinationalfirms is initially a market horizon;the initial preoccupation of the largemultinational firms is the exchangevalue of the product, i.e. the goods (thetransformation from the product to theset of goods) and its realisation on themarket. In this perspective, the technologyloses its absolute nature; it is subordinateto the market; it is thereforeadapted in accordance with the market.In a recent publication, BusinessInternational describes how the productionand technology of SouthAmerican industrialists have beenremodelled: manufactured productsmodified or totally refocused in accordancewith suggestions from tradingcompanies or chains of stores.On the other hand, a new investment inYugoslavia has given the opportunity tothe large firm Dow Chemical to explainthat "selling licences is a thing of thepast - at least for the most moderntechnologies - and that, consequently,the company is not interested in onlyselling its process know-how” (13).The managers of the company Dowemphasise the fact “Western technologyis the only thing that counts. A companywith the best technology mightnot be profitable unless its technicalknow-how is combined with the excellentscience of conducting business

Engineering Case study(business management)” (14).We could go on and on about this leadershipof the market and on theconsequences resulting from it: thelarge firms are enlarging their controlof the market and remodelling inaccordance with this market (economiclines) the technical lines which theyhave or which they monopolise, weimagine from their weight on theconsumptions structure and on the distributionof income; we also imaginethrough a new technical division oflabour that they are putting in placetheir influence on the social division oflabour. There is nothing clandestine inthis, though, since a new internationaldivision of labour is the objective that isvery clearly proposed.The current practice constitutes a goodcomment on the statement often repeated,according to which “technology isnot neutral" (15).Research routesand directionsThe problems mentioned above deservea finer and more strongly arguedanalysis. Here, we will simply quicklymention a few research routes.A clear positionThe refusal of the international divisionof labour and development based oninternational subcontracting: at leastthe position is clear in Algeria: it has,on many occasions, been mentionedand put into practice by the leaders ofthis country, that it suffices to recallhere the speech made by Mr Liassinebefore the Arab Economists Congressin October 1970: "A certain notion ofthe economy would always tend toshow us that it is healthier never toinvest, always immediately consumeour potential surpluses and remain afew more decades excluded from themodern world…” (16)A recent publication by T. Vietoriszupholds this position : “The comparativeadvantage results from the generallevel of the technical evolution ofadvanced and backward countries.Keeping the trade trends on this trackis the best way of perpetuating the divisionbetween rich countries and poorcountries. The development-relateddecisions must break the framework ofthe comparative advantage and notreinforce it... The enormous weight ofthe economic tradition which supportsthe principle of the comparative advantageis opposed to the definition ofvalid criteria of the success of technologytransfer projects… The technologytransfers recommended from the traditionalpoint of view are likely to perpetuatethe dependence rather them enablingit to be broken…” (17)We cannot underestimate the efficiencyor the subtlety of the action of largefirms to maintain their dominationbeyond the barriers of taking majoritystakes and even total nationalisations.This surprising capacity of recuperationof the large multinational firmsappears through the integration in theirnetwork of the Indian engineering activities.“A recent study has shown thatIndia has numerous technical personnelwith good qualifications who, probably,are paid the lowest salaries in theworld. It may therefore be astute to useIndian firms (as subcontractors) tocarry out projects and also control thework site. The use of Indian teams -both in India and abroad - on vast projectsmay produce the sufficient marginrequired to be awarded a contract.The international companies may thusmake savings and substantial gains…”(18).The international division of labour isnot linked only to certain types of productsor to certain movements of theproduction process: it tends to a relationshipof strength which is establishedinitially at the market level fromwhich all the recoveries are possible,including the design and constructionunits of the engineering companies.From the current practice of the largemultinational firms a lesson of relativisationis learned :• relativisation of the technology inrelation to the market;• relativisation of the type of technologyused: there are modern technologiesand old technologies; capital intensivetechnologies and labour intensive technologies.The optimum is not linked toone type of technology rather than another;it depends on the extent of the largestrange possible on which we canplay simultaneously.Algeria resolutely refuses to importout-of-date technologies at the sametime as worn out or obsolete machinesand installations. In the context whereAlgeria is situated, this refusal is arational position. In this domain, thecontext is determining: the transferfrom France to Brazil by the companyBurroughs of its simple calculator productionworkshops (worn out installations)or the sale by the Lyon-basedindustrialists to private Algerian industrialistsof their textile workshops donot all have the same meaning as thetransfer of worn out machines by thelarge Chinese national factories to thedistrict factories or popular communeworkshops. In the first two cases, thisis a relationship of domination; in thelast case, on the contrary, of a contributionto an integration process. Atbest, all the technologies are positivewhen they participate in the integrationof an independent system.The key problem, in fact, is that of theintegration and, finally, the technologicalindependence; T. Vietorisz emphasisedthis by remarking that “increasingcomplexity is of no use if the structureis not suitably integrated.From the point of view of its technicalcapacity, a country can be consideredas integrated insofar as it is capable ofindependence at the technical level. Infact, one of the best definitions that canbe given to underdeveloped countries isbased on their inability to create theirown technology” (19).Algeria is situated in this integrationperspective; numerous initiatives testifyto this; development of engineeringcapacities ("prime contractor" researchfirms, project engineering (proper)then execution research firms) developmentof traditional and non-traditionalforms of vocational training,development of the first research centres,awareness of the central and regionalauthorities of the constraints ofindustrialisation… The path whichleads to the constitution of an independenttechnological base is long; itslength cannot be shortened by a choicein favour of international specialisation,as the specialisation, according toVietorisz, is “only a complement, not asubstitute of national independence onthe technological plan”.☞Energie & Mines97November 2006

ENGINEERING CASE STUDY☞Energie & Mines98We therefore need to implement dynamicindependent sequences, focusalmost exclusively on the national market.It is possible to list the first elementsof this in Algeria; for example :setting up of a prime contractorresearch firm – encouragement tomanufacture (SN Metal) speed reducers,rollers, crane bridges of largerdimensions, setting up of SN Metalengineering – design and constructionof handling facilities, etc.There are other examples revealing thetransformation that has been in progresssince a one-off initiative to a complexaction, producing, in the end, thesetting up of an independent and integratedtechnological base.The power of the large firms is coextensiveto the current internationalisationprocess. The large firms haveaccess to the global market: the flow ofinformation which reaches them is perpetual;in the space of three monthsthey succeed in transferring a completefactory from one continent to another.Each of their representatives is “overloaded”by a multitude of other potentialrepresentatives that can be immediatelyupdated. “Their multilaterality”is their wealth; it enables them to playon a multitude of possible combinationsof factors. The weakness of theunderdeveloped countries is to tend tobe fenced into bilateral type relationswhere the pressures may be exertedin enclosed spaces without lateralopenness.The problem of the countries which areindustrialising is the information, theknowledge of the available knowledge,access to the market. Today we speakof the technologies' markets; in fact,the underdeveloped countries have noaccess to this market; their sole accessis through the openings we want to givethem or that they succeed, at a highcost, in gaining through their ownefforts. They have to create, if we cansay so, their own “multilaterality”. Therefusal of the international integration,subcontracting and specialisation goesthrough the implementation of solidaritybetween countries which are industrialising.This solidarity is built bothon the trade relations, the industryconstruction level, coordinated andNovember 2006progressively integrated, but also at thelevel of the construction of independentand integrated technological bases.Apart from this progressively implementedsolidarity, it does not seem thatthere is today, for all dominated countries,possible access to the market, i.e.both to the goods, the information, andto the largest range of technologiesavailable. In any case, as long as thelarge multinational firms keep theirhands on, without positive alternative,the transfer of technologies, the powerof the dominators over the dominatedcan only be prolonged and even reinforced.References(1) Etude effectuée par la commission de l'accordde Carthagène pour l'UNCTAD, pp. 24-25,cite par Jim. Coekcroft : Technological dependenceAn analysis with special reference topatents, transnational corporations in Chile.Rugers University, New Brunswick.C. Vaitsos fait remarquer que les créateurs duproduit ou du procédé ne percevaient que 1 %du droit de brevet total. Les 99 % restantsétaient repartis entre les successeurs des producteurscommerciaux (52 %) et les firmes l'engineering(47 %). Négociation et distribution desrevenus dans l'achat des technologies par lespays en voie de développement. IDEP, Dakar,décembre 1971, p. 3.(2) R. Vernon. - Les entreprises multinationales.Cmann-Levy, p. 241.(3) B. Bomx. - Grandes entreprises et diffusioninternationale des innovations, p. 17.Conférence au Colloque de Rennes, septembre1972.(4) C'est le titre d'un article de BusinessInternational. Novembre 1972, n° 45, p. 361.(5) Business International Corporation nationalismin Latin America. 1970, p. 21.(6) En particulier les publications de BusinessInternational Corporation.(7) Cf. pour tout ce développement C. Palloix,en particulier la note intitWee : Grandes Firnzesmultinationales et transfert des technologies.IREP, Grenoble, roneotee, novembre 1972.(8) Il est intéressant à ce propos d'observer lastratégie du groupe japonais Mitsui s'organisantautour de son axe commercial Mitsui and Co,fer de lance de l'expansion du groupe. AuJapon, les 9 premières sociétés commerciales,dont Mitsui and Co, Mitsubishi Corp., SumitomoShoji... effectuaient, en 1970, 46,7 % desexportations et 59,7 % des importations japonaises,cf. Japon Economie, e 44, 5 octobre1972.(9) Cf. un article récent de Chinzie Actualitémettant en question la rentabilité effective dessteam craking de grandes dimensions.(10) G. K. Hellfiner - Manufactured exports fromless developed Countries and multinationalfirms. The Economic Journal, mars 1973, p. 22et 31.(11) G.K. - Op. cite, p. 33.(12) G.K. Heilleiner - Op. cite, p. 31.(13) Eastern Europe Report, 21 septembre1973, p. 273.(14) Eastern Europe Report, 21 septembre1973, p. 273.(15) A ce propos, il est intéressant (et un peuétonnant) de lire dans le journal polonais ZycieWarszawy l'appréciation suivante : «Ces sociétés(multinationales) affirment souvent qu'ellesjouent un rôle d'incitateurs au progrès et demessagers de paix. Il y a là un peu d'exagération.Ces pouvoirs sans frontières, ainsi quequelques sociétés multinationales aiment às'appeler, sont les produits du capitalismemoderne... Toutefois, tout en gardant un œil surleur rôle négatif, il est impossible d'ignorer leurinfluence positive dans le monde... Dans lecadre d'une économie planifiée, les sociétésmultinationales ne peuvent faire de mal, commecela se produit à l'Ouest».. cité par EasternEurope Report, 21 septembre 1973, p. 275.(16) M. Liassine. Une sidérurgie en Algérie.Pourquoi ? Communication reproduite dansI'Acier Arabe, n° 2, janvier 1973, p. 15 à 23.(17) T. Vietorisz. - Diversification,Interconnection et Intégration, orientation de lapolitique technologique des pays en voie dedéveloppement, p. 16, OCDE, Séminaire deSchloss. Herinstein, 5-8 juillet 1973.(18) Business Asia. - Foreing firms save moneyby using indiatz engineers, p. 255, août 1972.Dans la même ligne des ingénieries et dessociétés de construction roumaines travaillenten Allemagne fédérale.(19) T. Vietorisz - Op. cit., p. 11.[20]T. Vietorisz -Op. cit., p. 21. L'exemple bulgare enseigne quetous les produits de l'industrie bulgare, faisantl'objet d'une spécialisation internationale (chariots-élévateurs,palans électriques, certainesmachines agricoles…) constituent un desmoments d'une séquence autonome dynamique.

Engineering Case studyRelocation or howto do more with less ?R. G. GONZALEZ“More productivityand efficiency withfewer employees”How many times has this sloganbeen repeated, whetherin the industrial sectors ofoil refining or those ofother business activities?In spite of the relatively accentuateddifferences observed over the last twoyears in the petrochemistry sector, thechanges which have occurred since thedecline that put pressure on personnelremain considerable.The severity of the majority of thesechanges is illustrated, as an example, bythe relocation of the R&D centresand central office engineering supportoffices.A reduced number of engineering personnelwere given more responsibilitiesto the detriment of their participationin training courses, symposiums ortrade fairs.This is noted from the simple comparisonof the number of company representativesparticipating, nowadays, inconferences on the industry's sector,such as ERTC, ARTC, AIChE andNPRA, to the number of employeeswho, a generation ago, attended thistype of events.The internal culture of the companyconsisting of training young engineersthroughout a professional career oftwenty years culminating with the titleof manager or executive director hasbeen replaced by relocation.This "transformational relocation” isindeed well in place in other industrieswhich employs highly skilled technicalprofessional personnel.However, a lot of supporters of relocationemphasise that relocating theworkforce and skills is not only a questionof reducing the unit cost peremployee of the payroll composed ofsalaries, benefits and responsibilitybonuses.According to Daniel Marovitz, Directorof Technological Management forGlobal Business in Deutsche Bankspeaking about relocation: "The problemis that if you don't do it, you willnot survive.”In the industry based on the transformationof hydrocarbons' products, therelocation of the work flows of the typicalfunctions of companies, such ashuman resources management andinformation technology is already wellin place.It is perhaps even premature to be ableto predict the extent of the influence ofrelocation on the operations' engineeringexpertise and process activities.The relocation of this type of activitiestowards the graduates of businessschools in developing countries, whichare legion here, will certainly be continuedin the coming years, whether ornot they continue to incur gains in efficiency,innovation and profitability.Other supporters of relocation see inthis the best means of freeing up thehighly paid experts of developing countriesfrom their routine tasks, such asthe updating of sheets and the drawingup of business reports, thus enablingthem to devote more time to lookingfor modern innovative methods tomake the factories run efficiently.If this should happen, other employmentopportunities for professionalpersonnel and highly qualified personnelwould be created in the future.That said, a large proportion of the largestgains in efficiency and innovationis the fruit of close partnerships betweenthe personnel working in thecompany and the technology suppliers.These suppliers, located in differentregions of the world, encompass theorganisations which supply, underlicence, a large range of technologicalservices and services that support thepetrochemical industry and thosewhich offer great expertise in terms ofthe domain of specific process applications.Energie & Mines99November 2006

ENGINEERING CASE STUDYEngineering in India and ChinaNasser IGUERTSIRA & Adel ZAIMBrown & Root - Condor1980s. However, the Indian diaspora isa lot more dispersed in the world andrelies a lot less on the large industrialists.Furthermore, the constraints andthe administrative slowness are less frequentin the Chinese administration.The transportation and electricityinfrastructures were nightmarish inChina between 1993 and 1996. Thesituation in India was hardly better -maybe even worse. The Chinese builtover 30,000km of motorways to easethe congestion of the ports and railways.The Indians, on the other hand,only built 10,000km.Energie & Mines100With their own engineeringsections, the westerncompanies master thedesign, the manufacturingand installation of particularlycompetitive production plants that arecapable of satisfying their economicand social requirements. This certaintechnological advantage, along with thecurrent economic context related toglobalisation, leads them to opt forstrategies that are capable of managingthe opportunities and the constraintsoffered by the emerging countries,more particularly China and India.With giant demographics, China andIndia had a relatively minimum percentageof the world's trade and economy.The modern aspects of India weretotally unknown. The only images drivenon India were those of castes, whereasit was the world's number twoindustrial power in 1950. China startedto timidly open up around 1972-1973.Rather than mentioning a reform, itwould be fitting to talk about a Chineserevolution, given the profound changesthat have occurred since the end of theMao regime. In fact, reforms have beenmade in the domain of education andthe distribution of campaigns.November 2006In India, however, the institutions arerooted and are not disputed. Thisconfers certain stability to the Indianpolitical system.Can China and India be compared ornot? These countries are two megademographiesand two mega-economies.India and China are no longerseen as constraints but rather as opportunities.In fact, both countries offerthe two aspects at the same time, whichnow accentuates the debate on therelocation possibilities of western companiesand firms.China and India are highly decentralised.However, this decentralisation isan obstacle to relocations and causesvery strong local protectionism. Thisdecentralisation and protectionisminduce considerable over-investments(both local and foreign), both in propertyand in the building up of tradenetworks. These weaknesses are commonto the two countries, but they aremore accentuated in China.The large Chinese diaspora settled inSouth East Asia and East Asia constituted,up until recently, two-thirds offoreign investments in China whichwas in an economic boiling zone in theOf all China's industrial sectors, it isthe electricity industry that has experiencedthe quickest development. In2004, the national installed capacityreached 440 million kW and electricityproduction rose to 2,187 billion kWh,which places China in second placedglobally. Almost 120,000MW wereadded to the network in the two years2004-2005 alone. The construction ofelectric networks also entered a periodof rapid development; the large electricnetworks cover the cities and mostChinese rural regions. India is currentlypursuing a policy to modernise itselectric power distribution and productioncapacities. The results of this policywill be noticeable in the comingyears. In short, the electric power deficitis more accentuated in India than inChina.Unlike India, foreign direct investmentsare higher in China. Withregards international trade, China'strade level far exceeds India's tradelevel. China's position in world trade isnot comparable to India's position. Theassembly industry represents a Chinesespecificity and now constitutes 30 % ofChinese exports. In fact, the companiesof South East Asia import componentsfrom their parent companies and havethem assembled in China.

Engineering Case studyNorth American and European countriesnow operate in the same way.This industry cannot be conceived forthe time being in India given the lack ofan Indian “Hong Kong” or an equivalentdiaspora. However, India largelywins in the domain of IT and high technologies.In fact, it took India only onedecade to win the contract in terms ofsubcontracting IT, communication andhigh technology services. Furthermore,the new technologies' sector is a newsector for which the lack of infrastructuresis less important and the accessconditions easier.The socio-economic characteristics ofIndia and China show the limits of acomparative approach of these countries.We initially note transitional typelimitations. China's growth is driven bythe exports and investments. As forIndia, its growth, on the other hand, isdriven by internal consumption and thevolume of subcontracting. Chinesegrowth may be voluntarily sloweddown by the authorities unlike India'sgrowth which is likely to suffer a slowdown.The limits of the comparativeapproach of these two countries arestructural. The economies of India andChina exhibit three notorious structuraldifferences. The first concerns thestructure of the economy, the secondresults from the fact that the Indianeconomy is a lot more closed than theChinese one. Finally, the third isexpressed by a greater social maturityof China.The limits of the comparative approachof these two countries are stronglyexpressed by very different internationalintegration strategies. China has aGDP of 4% of world GDP compared to1.5% of world GDP for India. This differenceis even more accentuated interms of international trade where theChinese dynamics largely support it inspite of the opening policy of Indiandirectors since the start of the 1990s.The industrial sector in China is asopen as in India, but its role is greaterin China than in India. As compensationfor the weakness of the industrialsector in India, the services sector thereis very important and represents 50%of added value. This sector has been adriving force of Indian growth since1990, the date from which this sectordiversified and modernised by encompassingtransport, banks, communication,IT, high technologies, researchand development and various aspectsof engineering, education and health.Furthermore, we note a contrastedindustrial specialisation. The accelerateddiversification of Chinese exports ismainly due to the international subcontractingand assembly activities. Indianexports are dominated by textiles.China has chosen an integration routeinto the global economy that is differentfrom the one chosen by India.China has played the globalisationcard, whereas India has opted for a lessaggressive strategy, highlighting theprogress on which its internal capacitiesdepends. The integration strategyin China gives increased dependence tothe Chinese economy with regardforeign technologies and capital.However, in India, the integration strategyhas led to a lot more spectacularperforming accomplishments in thedomain of services where it represents1.5% of global service exports.In the short and medium term, Chinawill undoubtedly continue its currentdirection, but it is difficult to give anopinion on the long term. China isexperiencing great difficulties in termsof training executives and managers.Relocation in China of engineeringactivities seems, for the time being,very uncertain. However, with regardsexecutives, India has an Anglophonepopulation and a very elitist, effectiveeducation system, comprised of worldrated technical and business schools.India has a pool of qualified graduates,perfectly able to assume high level jobsat a lower cost. This pool of skills hasattracted to India a major relocation ofactivities in terms of engineering.Unlike China, India is a favoured destinationfor relocation. In India, sincethe start of the 1990s, we have seen anintense relocation of services (outsourcing),engineering and even researchand development activities. Indeed, agood number of large American companies,pushed by the profitability, havetransferred their call centres or datainput centres and information managementactivities there whether they areinternal to the company (accountancy,computer maintenance) or external toit (insurance processing, bank transactions,credit card statements, etc.).Over the years, the multinationals havepushed relocation further by creatingIndian subsidiaries.Furthermore, they have counted on thelocal research centres and engineeringcompanies to develop new productsthere. The number of software technologyapplications has flourished ineighteen cities of the country. Mumbai,Bangalore, Delhi and its surroundings,Hyderabad and Chennai have all becomeimportant IT centres where originallynational companies that havebecome multinationals such as Infosys,Satyam, Wipro Technologies and Tataand the Indian subsidiaries of multinationalcompanies are side by side orelse tangled together. According to thefirm Deloitte Research, two millionjobs will be relocated from westerncountries to India by 2008, a good partof which will be qualified and specialisedin the service “business”.To conclude, the relocation in theworld of technologies, including engineering,has a name: offshore. It has aprotagonist that draws towards it 80%of contracts: India. It has a history:40% of American companies can't getenough of offshore.Energie & Mines101November 2006

ENGINEERING CASE STUDYProjectsTechnology projects and the need for controlPaul CHAPLINBusiness UnitBrown & Root - CondorTechnological projects may, atfirst sight, seem to obey alogical process with a set ofphysical rules and clear solutions.This is far from the truth forthose that are involved in this type ofproject. All technology projects imply acomplex mix of humanthought, effort, aesthetics,multidiscipline technical skillsand resources management inview of a common objective.This process is very complex.To succeed, the basic processesfor evolving the idea, its detaileddevelopment and then itstransformation into reality thatrequire a control structure.The development of thesecontrols, a process which isconstantly picking up speed,has been caused by the historyof the industrial revolution inEurope and then in the USA.The sophistication and influence ofthese controls have been initiated bythe developed economies of the FarEast and are currently the main drivingforce of success for the developingcountries - the third generation is constantlyevolving.It is certain that, without these controlelements, chaos would reign, withnegative impacts on the timeframes andcosts without ever achieving a qualityproduct.The control management process basicallyrequires leadership qualities.Leading requires taking decisions, andmaking the right decisions depends onthe availability of good information inappropriate time. The data required forthe development of the strategy and thedecision making in technology projectsis collected and made available to thedirectors through several key tools :• Planning, cost control, risk analysisand management - these provide concretedata and information.• HSEQ (health, safety, environmentand quality) provide data on the qualityof the working environment and thequality of the product.• Contractual documents and the strategiesprovide a structure of rules inwhich the project can prosper andmake an interface with the commercialenvironment and the client's environment.The project control tools procurea logical, structured and disciplinesupport for the basic technological activities.These tools are integrated withthe programmes collecting thecorporate data and regularlyprovide data on the history,the progress and the futureforecasts.They do not represent a centralprocess in themselves, buta link supporting the mainactivities during the life cycleof a project just like the centralnervous system in the humanbody providing the informationto make decisions inthe brain.At the end of a project, thedata collected can be analysed,compared, lessons can be learned fromit, and the information is put into thenext generation of technology projects.These control systems also provide datato the company's systems such asfinance, cost estimation, humanresources and, of course, the client atthe end of the day. Without thesecontrol systems, the accepted principlesthat we use in the planning anddevelopment of new projects wouldcause unacceptable risks.Energie & Mines102November 2006

Engineering Case studyIn the perpetual search for better information,specialists in each disciplineare required; cost engineers, planners,contract managers, etc. These specialistsare not necessarily training engineers.However, the technical skills such asmathematics, IT and operationalresearch are an ideal base for such professionals.Most are recruited fromamongst engineers and financiers.The developing countries have, by definitionsmall markets in full growth. Toget bigger, the local companies mustcompete on the international market.This provides the foreign currencyrequired for the country and the marketsenabling the expansion of the company.The management control tools are theminimum required to reassure theinternational clients. It is very difficultfor these companies to acquire thesetools to become rivals internationallywithout being penalised on the nationalmarket given the additional costs requiredto maintain such tools when theyare often not required. To raise thestandards of a national commercialenvironment, it is important to encouragethe development of control toolswithin the framework of grantingcontracts and selecting contractors.All these control processes require highlevels of experience and the involvementof a considerable number ofemployees. This obviously causes anincrease in the price of the final product.However, this additional cost can becompensated by the respect of thecompletion dates, a reduction in accidentsand protection of the environmentand finally, a better quality product.They also provide better visibilityof the progress of a project beyondphysical evidence, whilst reassuringthat the quality and costs objectives areachieved.To conclude, it is obvious that thecontrol of complex engineering projectsimposes additional control tools.Efficient project management combinedwith appropriate control tools providesthe data required for makingdecisions.This thus procures a support formaking progress towards internationalmarkets whilst consolidating its positionin the development of local markets.Such tools offer transparency tothe client and to the contractor, whilstreducing the risks associated with suchperformances.It is only with such tools and humanefforts that a developing country canimpose itself on the global scene.Energie & Mines103November 2006

ENGINEERING CASE STUDYEvolution of techniquesand technologiesNasser IGUERTSIRADirector of EngineeringBrown & Root - CondorEnergie & Mines104HistoryThe term engineer comes from the oldFrench word engigneor, which meant aconstructor of war engines. In its oldmeaning, this term therefore means theperson who constructed or inventedwar machines or designed and carriedout fortification works or strongholds.Beyond these historic origins of a militaryessence, the engineer appears, inits modern version, mostly from the19th century onwards, where it isconfirmed as a front line player inindustrial and social development.The engineering of industrial systemswas born at the start of the century inthe United States in the context of theannual conference of the AmericanSociety of Mechanical Engineers whichwas held in New York on 6 December1912. This is the industrial engineeringconcept that appeared at this time.The first definition established in 1955and reviewed in 1985 by the Institute ofIndustrial Engineers specifies:"Industrial Engineering” means thedesign, improvement and putting inplace of integrated human resources,materials, equipment and energy systems.It uses the skills and know-how inmathematics, physics, social sciences,as well as the design and analysismethods and principles of the engineeringprofession, with the aim of forecastingand evaluating the results wecan expect from such systems.November 2006Definition of engineeringThe term engineering, built on the termof engineer, combines the solutions'investment and technical coordinationmethods and processes enabling –through successive summaries and amultidiscipline approach – complextechnical objects to be achieved.Engineering consists of applying theresults of sciences to concrete, industrialor daily problems. Engineeringcombines all the technological, economic,financial and human aspects relatedto studying and realising a project,whether industrial, scientific or social.Engineering studies, designs, accomplishesactivities whose purpose is therational and functional design ofworks, the drawing up of the project,the coordination and the control of theconstruction. Engineering may makeuse of only a part of these services, forexample, the design studies or monitoringthe construction works.The engineer is specialised in a technicaldomain and mainly works at thedevelopment and/or manufacturinglevel of products by the companies. Heprovides his technical expertise, oftentransforming the problems into opportunities.The engineer in charge of theproject can use tools and machines, butalso, calculations, software applicationsand simulation tools.The engineer quite frequently participatesin the scientific research, eitherby initiating and steering research projectsrelated to an industrial domain, orby working on concrete aspects of theresearch. Fundamental discoveries haveenabled and still enable cascade evolutionsin the technologies.In the primary sector which concernsthe collection and direct use of naturalresources (mines, and energy), thesenew technologies accelerate, or evenauthorise, the resolution of certain problemsposed to the engineer.Evolution of techniquesand technologiesEtymologically and historically, theword technology means the study oftechniques. Increasingly, this worddesignates a set of methods and techniquesaround industrial realisationsforming a consistent whole. We thentalk about a technology. We call technologythe techniques whose wholecreates a new and specific industrialdomain.The confusion between technique andtechnology is common and is often dueto an incorrect interpretation of theEnglish term "technology". In fact,technology covers all manufacturing,maintenance, management, recyclingand even waste elimination processeswhich use methods taken from scientificknowledge or even simply methodsdictated by the practice of certain jobs.We can then talk about art, in its initialsense, and applied sciences in thesecond.

Engineering Case studyThe technique is often underestimated,but it is one of the great components ofthe craft and industrial know-how. It isthe product of all humanity's history,with every person and every era providingits skills. The technique has developedwith humanity and is part of it.The appearance of the world "technology"came about at the start of the 17thcentury where it meant the "usefularts". It wanted, in fact, to suggest theconvergence which took place at thedawn of the industrial revolution betweenarts and science; a convergencewhich up to then was compromised bythe impossible articulation of fragmentedscientific knowledge and artsnecessarily enclosed in a tradition. Theindustrial revolution is a process thatbegan at the start of the 18th centuryand which shook up the productiontechniques.We went from an artisan, manual productionsystem, in dispersed places, toa production making increasing use ofenergy from machines, large series production,centralised production, usingnorms or standards to obtain the samequality products. The transformationfrom domestic work to an increasinglyspecialised work radically changesways of living. The technologies shapedthe everyday life and the representationsof our modern society.We distinguish several industrial revolutions,with a cluster of technical innovationscorresponding to each one. Thefirst industrial revolution is linked tosteam and the progress of the textileand metallurgic industry. The secondindustrial revolution is characterised bythe boom in electricity, oil, mechanicsand chemistry. Finally, a third industrialrevolution would be marked byenergy, the latest technologies and IT.The lack of regression makes this lastrevolution easier to ascertain.Considerable progress has been madesince the 1970s in terms of calculationand design technique in the field ofengineering (development of proprietarysimulators such as IFP's PGGC, BP'sGenesys and BASF's Chemasim); engineersdrew up calculation notesmanually and used design tables toreveal their engineering plans. It goeswithout saying that the time it took torealise a study had repercussions on thetimeframes and, consequently, on thecosts.The oil boom of the 1970s as well asthe major progress made in the field ofIT in the 1980s-1990s has had theadvantage of pushing the oil companiesto invest in research and developmentand design, in partnership with the largestuniversities, static and dynamicsimulation software applications of theprocesses such as Aspen+ developedby the MIT (Massachusetts Institute ofTechnology) and Hysys developed byHyprotec Limited as well as Invensys'Simsci and a lot of others in the field ofprocesses and the abandoning of proprietarysimulators.These developments have revolutionisedthe engineering studies such as thecalculations of materials and energybalances, provisioning of equipment,optimisation of chemical and petrochemicalprocesses, calculation of pipelinenetworks and lines. This has contributedto a very large diffusion of Cape(Computer Aided ProcessEngineering) in the industry.This progress has been achieved thanksto computer aided design tools with theaim of optimising and simplifying thework of designers for the realisation ofdifferent diagrams (PID, PFD, andUFD). We can cite Microstation andPDS developed respectively by Bentleyand Intergraph. These highly performingtools will be used to visualiseindustrial, oil and/or gas plants in threedimensions. Interfaces have been madebetween all these tools. The sameapplies for the calculation software tobe able to integrate all the design elements.These tools and software certainlycontribute to the development and tothe reduction of the costs of engineering.Their association with performingmanagement software applicationsenable the realisation of projects to beoptimised in terms of timeframes, costsand quality.In its capacity as an engineering company,Condor Engineering, which thenbecame B&R-C, has taken on all themodern technologies through differentlarge-scale projects accomplished from1992 to present day. In the same wayas the largest engineering companies,B&R-C testifies to the advantage drawnfrom sophisticated technical means inthe design of projects.This undeniable experience has enabledengineers and other employees ofB&R-C to capitalise on a large amountof know-how and generate significantadded value.By focusing on the daily use of technicalobjects, we have very quickly forgottenthe etymology of the notion oftechnology which fundamentally clarifiesthe hopes aroused since the industrialrevolution by all the scientific discoveriesand the technical progressmade. Technology and Technique thereforeappear from the start and forever intrinsically linked.Energie & Mines105November 2006

ENGINEERING CASE STUDYRealisation of a “Fast Track”project using “Front EndLoading” FELAmokrane ALLACHEProject ManagerBrown & Root - CondorThe desire to quickly accomplish projects entailssources of pressure for each engineering phase ofthese projects. The responses to this challengeconsist of improving the productivity, reducing thecosts of the materials or using more efficient constructionand manufacturing techniques. However, a domain favourableto the reduction of timeframes is the design phase; often,this phase takes up to 50 % of the duration of a project. Atfirst sight, this appears to be an attractive proposal.Nevertheless, it requires in-depth consideration and clarity inthe strategy to succeed in the project.From this graph, it is obvious that it is during the first designstages that the opportunity is presented to the management -Contractor and Client - of influencing the result of the project.Progressively, the design is solidified into a detaileddesign, this influence decreases and therefore the final projectphases are fixed towards a solution which can only berevised with great risks.By focusing on the initial engineering phases, we can drawthe following benefits :• the client can develop the EPC (Engineering, Procurement,Construction) lots together with the contractor;• focusing on the Client's objectives and the requirements ofthe market;• targeting the Client's profitability and not the contractor'scosts;• critical decision-making;• increasing the project definition and, hence, reducing thechanges during the EPC phase;• identifying the alternatives to the basic schedule, the extentand design of the project.The value improvement process (VIP) should be one of thetasks undertaken in the initial phases of a FEL project. Theactions undertaken from these studies may include :• Specialised investigations into the critical aspects of theproject• Cost reduction process with challenges• Technical and financial auditsThe VIP techniques may be focused on :• The selection of the most appropriate technology• The simplification process• The use of a design standard• The waste management• The responsibilities evaluation processEnergie & Mines106November 2006

Engineering Case studyBP: "FEL is the work provided in view of developing a detaileddefinition of a project… which minimises the total cost ofthe project, by preserving the operability and the “maintainability”whilst minimising the changes to the project's scope.”Shell: "FEL is a development process from the businessobjectives to the final acceptance of the definition of the projectscope, which minimises the cycle and reduces the costsof the projects towards the lowest initial capital cost of theproject which satisfies the business requirements”.• The adaptation of the standards and specifications• The provisional maintenance• The constructabilityThere are several examples of VIP and these may be adaptedand developed for the specific projects and the client's requirements.The FEL process, also known under the name FEED (FrontEnd Engineering Design) may be defined as being the processthrough which a detailed definition is established of theproject to respond to the Client's objectives. This notion hasbeen developed and promoted by the American companyIndependent Project Analysis Inc. (IAP).Considerable efforts are required to motivate and keep theengineering team focused on the FEL objectives and avoidmoving towards the traditional approaches. The result ofsuch a process is to launch an engineering project with moreclarity, more definition and earlier. Consequently, the costswill be reduced with the project being completed before thedeadlines and a more motivated engineering team that is alignedwith the Client's objectives.It is obvious that the FEL process will need to be completedeven before the authorisation and financial approval of a project.For this reason, its execution is independent and its deliverablesare specific. These latter will be more developed,more accomplished and will carry fewer risks of changesthan deliverables from a conventional design. The result willbe a basis for a detailed engineering phase during an EPCcontract. The key elements of a FEL process are the following:• A set of engineering documents integrating the specificconditions of the site• An estimate of the cost +/-10%• The project's execution schedule• The alignment of all the project's functions on the objectivesEnergie & Mines107November 2006

ENGINEERING CASE STUDYDefinition planningand its role in the complexengineering projectsMustapha SADOUKRIEngineerBrown & Root - CondorPlanning is an activity which wedo every day and in most ofour tasks. We all have personalagendas and we live with allthe constraints of life such as workinghours, school hours and the structureof working weeks. We plan on a dailybasis, even if it is in our heads and notcommitted down in writing.Consequently, it is not surprising thatthe execution of engineering projectsrequires rigorous planning.However, the extent, the levels of detailand the complexity of the data comprisingsuch planning is more important.Planning always has an immenseinfluence on the results and the qualityof the product supplied.The use of calendars and other techniquesand tools to measure and recordthe passage of time has been known forcenturies. They are a comprehensivepart of human history, and the first useof schedules was probably made by themilitary. The organisation of troopsand weapons as well as the logistic supportduring military campaigns representedone of the most obvious uses ofthe planning tool. Nowadays, theassembly of complex products fromparts manufactured in the world requiresthe use of such detailed schedules.Our current society is structured andordered in time intervals, which aremore demanding than any other periodin humanity's history. This trend willprobably continue and will be undeniablymore accelerated.The basic tools for planning a projector manufacturing a project consist oflisting activities and timeframes; inaddition, we need a representation ofthese two overall elements. More complexschedules may contain, in parallel,the resource requirements, the progressmilestones of the key stages and indicationson the flexibility on the specificplanning elements.Planning is, undoubtedly, at the centreof any good project management, withindicators on the progress made, thehistory of this project and forecasts andfuture challenges in view of completingthe project. This is a project managementtool which integrates all the phasesand all the activities of a project.The development of a schedule requiresthe creation of the list of activities,often described as the work breakdownstructure (WBS). This structure maybe unique for one project or may bedeveloped as a standard for a series ofsimilar projects. The level of details ofthese activities may be considerably different,depending on the size and thecomplexity of the project. The structuresmay cover the teams’ tasks or thestrategic plans of the company, up tocovering the individual activities of asingle person, often called the "lastplanner”. All other activities are there insupport of this last planner.The WBS may be complex and is oftenthe subject of data collection with processingand storage in database computerisedsystems. The latter may beindependent, shared by other systemsor integrated in planning applications.The WBS may obviously be used forother functions such as procurement,human resources, cost control, etc.Energie & Mines108November 2006

Engineering Case studyAfter determining the work to be done,the order in which it will be done will beestablished. The critical elements whichare related according to logic or whichare sequentially followed are in generalthe easiest to place in order. They mustfollow a strategic management scheduleor the order established. Therefore,the reference, the collection of informationand the discussions on thissequencing is an essential part of theprocess.The process is presented as a naturalcycle of tasks consisting of : planning -executing - studying - improving andwhere the individuals create the simplestructures to discuss them and thenprogressively improve them as theinformation comes in and the level ofdetails is distinguished.Once the critical elements are established(those which cannot be compressedover time are related in order), theybecome collectively distinguished asand early and late end dates; the analysisof these days will enable the establishmentof flexibilityin the schedule and will help the decision-makingwhen levelling off theresources.Regular reviews and updates of theschedules are required in order toensure that they reflect the data in realtime and the guidelines provided by themanagers. For most construction projects,the reviews and updates arecarried out on a monthly basis. Theschedule is an organic structure whichwill be developed throughout theproject and in accordance with theinformation available over time.It is possible to put in place differentschedule levels, citing the example ofthe project design phase where the zerolevel may contain 20 to 30 activitieswhich present the highest level. Oncethe design has been done and the typeof the product becomes obvious, theAt the end of the design phase with theavailability of all deliverables - plans,specifications and quantities - the schedulemay be more amply developed at ahigher level. The establishment ofquantities and the sequential order atthis level of details may then determinethe resources required, the number ofpeople, the equipment for each monthor for a defined work period, thesupport equipment and the amount ofpower or fuel needed.The uses for which these schedules areput in place are considerable. It is relativelyeasy to collect and use this dataprovided it is stored appropriately inthe database systems, maintained andupdated with the input of the latestinformation.A considerable number of softwareapplications are available in the field ofplanning; Primavera, Artemis,Microsoft Project, Powerproject are,however, the four that are best known.They all present the same basic elements- the ability to input data directlyusing the keyboard or through thebeing “the critical path”. It is the associationof activities which steers theoverall duration of the project. Theactivities which are not on this path arethose which associate flexibility overtime and order.The room for flexibility, called the“float”, may be used as a means oflevelling off the resources required orof relaxing timeframes in view of reducingcosts. It is obvious that all activitieshave a start date and an end date.However, the activities associated tothe float have early and late start dateslevel 1 and level 2 schedules will bedeveloped with the increase in thenumber of activities which goes up tohundreds, thus reaching level 3. Theseschedules will reflect the levels ofdetails which the individuals or theteams would like during a defined projectphase - such as the procurementlots, the extents of subcontracting services,the specific activities of the site orthe engineering activities.database systems, the Gantt graph (agraph representing the tasks in horizontalbars depending on the specifictimeframes) or another graphic taskrepresentation method and the abilityto analyse and rearrange the differentlevels and the elements of the schedule.These lots of applications are connectedto other systems in order to providethe functions with data such as procurement,cost control, finance, etc.These tools have been available in theirmost basic form for 20 to 30 years;however, they have become a lot more ☞Energie & Mines109November 2006

ENGINEERING CASE STUDY☞sophisticated as a consequence of thedevelopment of computer technologyand the flexibility of the transfer of databetween different applications and programmes.A large number of softwaredesigners have opted for the developmentof a group of programmes, integratingall the management elements ofa company.With the aim of presenting a generaloverview of the current situation of aproject, historic reports are drawn up,presenting the actual progress of theactivities or a part of the activities comparedto the planned progress. Thisprogress implies examining the physicalprogress and measuring the associatedquantities or progress made. It mayalso require progress informationcoming from different sites or subcontractorshired in the works. For an efficientcollection of this information andto maintain its integrity, it is preferableto store the data in databases on compatiblesystems that are able to communicatewith each other electronically.As we move forward in the generalschedule, it is obvious that the focalpoint will be the respect of the nearestdeadline. This is why look-ahead schedulesare developed to analyse only thesections of the schedule which arecoming up.These look-ahead schedules may beused for concentrating the teams'efforts in view of accelerating certainactivities. This may be possible bymobilising more resources on the criticalactivities or decreasing the effortswhen sections of the schedule are awaitingmaterials or have become critical.These are often part of the essentialpoints during review meetings and maybe used as a discussion tool to prioritiseone contractor or another in anovercrowded site.The current level of progress is oftenexpressed by a percentage of the overallduration. A report on the planned percentagesin relation to time is known asbeing the S curve (making reference toits general appearance). This curvetakes its “S” shape after a slow startup,speeds up in the middle and slowsdown towards the end of the project.The representation of optimistic resultshighlights an optimistic curve. If theexpected results are, on the other hand,pessimistic where the project has had alate start-up, the curve will be pessimisticwith a more sloped S. In theory, theproject must progress between thesetwo curves, unless an unforeseen eventarises and influences the course of theproject.The final objective, which is fixed for allsuppliers involvedin a project, is touse the same systemsin view ofdeveloping a completelyintegratedschedule, coveringall aspects of theproject. In practice,this may be difficultto achieve asthe contractorswill have preferencesfor specificapplications justifying themselves bythe experience of their personnel, thehardware and the links with other integratedapplications. This remains amain objective for the client duringcontract negotiations and may be a differentiatingelement between the differenttenderers.Contracts are won or lost not due tothe price. Often, the schedule proposedis taken as being an important criterion,thus confirming the old saying"time is money".Probably, we should all consider theimportance, even, of defining a realisticand detailed schedule the next time wetake another look at such documents.Energie & Mines110November 2006

Engineering Case studyHassi Messaoud fieldmanagement and informationsystemIntroductionThe Hassi Messaoud field is Sonatrach's largest oil productioncapital. As its reserves are proven, Sonatrach aims toincrease, by 2010, its annual production by at least 75%compared to today's level of 400,000 barrels per day (bpd).To reach this objective, Sonatrach has allocated a large budgetfor the launch of several projects to develop the HassiMessaoud field.In this context, on 27 July 2004, Sonatrach signed withBrown & Root - Condor a master agreement entitled“Study and assistance to the optimisation and exploitationof the Hassi Messaoud field”. The agreement should emergewith the optimum technical solutions defining theexploitation improvement opportunities of the field's facilitiesenabling, in the short term, the current production ofthe field to be improved and, in the long term, the optimumproduction management tools to be put in place.To respond to this objective, B&R-C undertook the developmentof a real time operating system for the HassiMessaoud field which was agreed to be called the FieldManagement & Information System (FM&IS).Nazim D'BICHI & Christopher BROWNProject ManagersBrown & Root - Condor- The ValueFinderTM exercise: this is a preliminary diagnosisand evaluation process of the current operating statusof the Hassi Messaoud field on three major sectors:technological, organisational and operational. The resultsof this exercise will enable us to better ascertain the prioritiesand the opportunities which the FM&IS must offer.The final report of this stage was given to Sonatrach inApril 2006. All the skills and knowledge accumulated havebeen requested in order to design a system adapted to theHassi Messaoud field.- Development of an integrated off-line model for the HassiMessaoud field (phase 1 of the FM&IS): the integratedmodel built will be used to simulate the operating of thefield in its current status which will constitute a tool to helpSonatrach's decision-making in the short term. During thisphase, the web platform which has to support the FM&ISand all the real time applications will be developed.The off-line model is comprised of main sub-models asillustrated in the diagram below:Figure 1 : Components of the FM&IS optimisation off-linemodelProject objective and execution strategyOne of the main ambitions of the project is to identify andimplement optimisation opportunities for the entire HassiMessaoud field production chain, covering the reservoir,the wells, the oil collection system, the gas injection andcompression systems and processes. This would require anintegrated model of the entire chain, whose process mayencompass all the aspects of the problem whilst ensuringlong term efficiency.Our strategy to help Sonatrach is to start with the developmentof an off-line model for the entire Hassi Messaoudfield operations system whose simulations will enableimmediate production improvements to be identified. Thefinal intention of such a system is to build this model in areal time system which will enable both the everyday decisionmaking and the development of robust strategic plansfor the long term.The development of the FM&IS goes through three mainphases :☞Energie & Mines111November 2006

ENGINEERING CASE STUDY☞- Gas-lift system model: this includes all the gas-lift producingwells as well as the gas-lift and gas injection installationsand networks. The model was given to Sonatrach in April2006.- Oil production system model: this will be built on the gasliftmodel by integrating the natural producing wells, the productioncollection network as well as the major facilities inthe North (CINA) and South (CIS) centres. The model iscurrently being built and will be delivered at the start of 2007.Architecture of the FM&IS systemThe FM&IS solution will consist of a platform or a corestructure which provides common structural blocks (accessto data, operations, visualisation, security, browsing, etc.)and on which all the components of the system are built. Thecomponents of the system are a logical group of several individualapplications which will be developed by using the corestructural blocks provided by the platform where they arehosted. These applications will access the FM&IS data toprovide the field information to the user.- Deposit model: it will complete the integrated field modelby adding the deposit model which will be developed fromthe 3D seismic survey, currently being processed and mustbe completed in February 2007. The acquisition of this seismicsurvey was finalised in June 2006 and the final report onits quality control will be given to Sonatrach in September2006.- Putting in place of the FM&IS system (Phase 2): the offlinesystem will be converted into real time mode by connectingit to the field's telemetric system. This phase will requirethe development and the generalisation of the telemetrics,which only currently cover 25% of the wells, to the entirefield.Figure 2 illustrates the complete technical approach followedfor the development of the FM&IS.Figure 3 : Architecture of the FM&IS in the existing HassiMessaoud systemFigure 3 shows the architecture of the FM&IS compared tothe existing Sonatrach systems.Figure 2 : Technical approach for the realisation of theFM&ISThe FM&IS structure will be based on the Decision SpaceProduction Integration Platform developed by Landmark.The Decision Space Production includes a suite of modularapplications and a common changing integration platform. Ithas the capacity of being compatible with the majority of theapplications most used by the oil industry to automate theflows of data, to support a gradual approach to integrationand to enable the management of a system working througha completely integrated production operating environment. Italso enables the management of an operating system of aproduction network through multiple integrated operations.The Decision Space Production relies on a philosophy ofmaximising the existing resources.Whereas the core of the FM&IS structure will be built on theDecision Space Production Integration platform, the componentsof the FM&IS and their applications will be installed inthe structure and will be customised according toSonatrach's specific needs.The FM&IS solution will also consist of a modelling of thefield and an optimisation application which will be a keysource of the data for the Decision Space ProductionIntegration. It is the off-line component which will be a partof the FM&IS core.Energie & Mines112November 2006

Engineering Case studyThe flows of data through the FM&ISFigure 4 below shows the flows of data through the componentsof the system which consist of:Figure 4 : Flows of data through the FM&ISThe extension of the FM&ISto other production fieldsThe way in which the FM&IS will be developed gives its theability to deal with the data from several production fieldswith the same structure. The key condition for this to be possibleis that the raw data from the new field to be incorporatedinto the system must be already stored in a database oreven routed to a SCADA system. The second condition isthat the FM&IS hardware is suitably installed in theSonatrach network so that the system can access the datasources of the Production Fields required for it to operatecorrectly. The network's infrastructure must also be appropriateto be able to deal with the transfer of data from the differentproduction fields to the data historian of the FM&IS.The FM&IS must be configured to add each new entity inthe new field (wells, surface facilities, etc.) to the overall hierarchyof all the entities.An integrated model of the new field to be added in the systemmust be built to enable the use of the FM&IS' optimisationapplications. A simple example which shows how theother Sonatrach production fields can be integrated inFM&IS is illustrated in figure 5.- Optimisation and modelling application: this enables theFM&IS to produce optimised operational parameters for theHassi Messaoud field.- The FM&IS structure: based on the Decision SpaceProduction platform and which consists of:- A real time data history: this enables the FM&IS to accessthe field data sent in real time by SCADA or by other telemetricssystems and to store them in a database.- Database applications: these enable the FM&IS to accessthe specific data sent by the structure and by the applicationsrequired for its execution and to store it.- Server applications: these host the levels of the FM&ISenabling access to the data and the execution of the differentoperations.- Web Server: this hosts the web interface of the FM&ISwhich interacts with the user.- The FM&IS applications: these enable access to and thevisualisation of field data in real time as well as correspondingoptimal data. These applications are managed by theFM&IS structure and grouped in accordance with a clearlydefined logic in the system's components.Figure 5: Integration of a new production field in FM&IS.☞Energie & Mines113November 2006

ENGINEERING CASE STUDY☞There are other means of integrating data from a new field asFM&IS has the flexibility of communicating with other,already existing field models, other existing data historians orother existing sources of field data.Access to the FM&IS web server for the most remote users(Algiers for example) will be accomplished simply by configuringa server which publishes on the Hassi MessaoudFirewall PIX as shown in the figure below.The FM&IS system will enable Sonatrach, inter alia, to :- benefit from instantaneous reporting: the FM&IS enables itto see the production performance of any field in real timethrough a personal computer via the internet;- have better visibility and control the field's production andactions to be undertaken by the operating team;- increase the productivity of the operating team;- forecast the impact of the operations on the field's production(production of wells, decline, recovery of reserves, etc.);- plan any improvement of the production due to the drillingof new wells or the application of a development plan;- minimise the production losses thanks to a better analysisof the causality of the loss (typically between 2-4% for animplementation of the off-line model and 4-10% after theinstallation of a real time system).Figure 6: FM&IS Remote accessThe advantages of the FM&ISThe FM&IS is a decision-making assistance system based ona web structure. It provides a clear vision of the total organisation,encompassing the production performances to beachieved as well as the actions which enable these to becomea reality, at each management level and through all functions.It enables the way in which the operational personnel visualises,collects and processes the information provided to bechanged by the field and helps it to take high quality commercialdecisions. The FM&IS provides a 24 hours a day,7 days a week, 365 days a year management and controlfacility; the managing staff and the operating personnel canaccess it at any time and from any place in the world via theinternet.The FM&IS simplifies the management of complex installationsby converting the data into standard, structuredinformation that can be seen by everyone. To design themand manage them subsequently, these systems require experiencedmultidiscipline teams as they cover informationtechnology (hardware, software, communications andintegration), operational applications (control, interpretationand engineering) and management and control applications.Energie & Mines114November 2006

Engineering Case studyRisk managementat the engineeringproject levelPaul CHAPLINBusiness UnitBrown & Root - CondorAppropriately managing risks is probably one of themost frequent reasons in the success of complextype projects. Nevertheless, the positive points inthe opportunity of the risk lead to the greatestsuccesses.Projects are always subject to a potential change. It is ourreactions to this change which decide its fate.Risk : “a quantifiable probability of loss” or “a factor, elementor action which implies danger”.Most definitions of the term “risk” have negative connotationsdue to the use of this term in the domains of finance orsecurity. Risk analysis in the management of projects hascreated focal points for managing the action and theelements of the project which may provide great opportunitiesof success.Undertaking a risk assessment is done at all the importantstages of the development of a project from the tender submittingstage to the delivery and will also be used as feedbackfor the next project. The nature of the risks will vary at eachphase; some risks will decrease, others will become aggravatedand others will be eliminated or transferred to otherstructures.“Seeing is believing”, identifying the risks often providessolutions. If you never understand the risks, don’t be surprisedto suffer consequences.Imagine that the black points on the following graph representthe risks.We think that we can see black points everywhere. However,when we target them directly, they disappear. This is a goodrepresentation of risks; they are often difficult to ascertain,We cannot associate all the risks to unsatisfactory results andconsequences. We can risk our lives in looking for an exceptionalsuccess. Not all risks have consequences in the future;we can live at risk at a given time, and the consequences maybe immediate. “Risks are consequences resulting from foreseeableevents, which may exceed our capacities.”The consequences may, for example, exceed our productioncapacity, a challenge for not having faced up to a “problem”.The risk appears in different forms and throughout all stagesof the life cycle of a project. Risks may have an impact on theschedule or the costs. They may be physical; the soil conditions,problems with the equipment, regulations, as they mayhave an impact on the personnel such as the safety or theavailability of resources. One of the main management tasksis to make an assessment of the risks, document them andstart to analyse their impacts on the project.Experts are appointed to work on these aspects in order toidentify the majority of the risks and provide solutions wheneverpossible.we know they exist, they are a bit subjective, somewhat logical,and often dependent on our point of view of perspective.They are also difficult to manage.Once you have identified the risks, several tools are availableto analyse the probability of their appearance and theirimpacts: financial tools and safety tools.Energie & Mines115☞November 2006

ENGINEERING CASE STUDYThe Pareto principleThis demonstrates that 80% of the consequences are theresult of 20% of the causes.Now, to obtain 80% positive influence in a project, youhave to reduce 20% of the risks.It is completely natural that the risks manifest themselvesalways in a single event. They may be chained or dependenton other events or risks. In the largest disasters, it isoften a serious of events that are unimportant in appearance,but linked, which end in disaster; cut the chain atany point and you avoid the issue. It is often possible toestablish phased reactions to the risks or consider themost extreme solutions.☞These tools essentially estimate the probability of the riskappearing in terms of degrees (high - medium - low) andtheir impact on the timeframes, the costs and safety. If wetake account of the opportunities, we can be more positiveand reconsider them in terms of increasing profits, reducingtimeframes and lowering accidents.To establish certain credibility for what is, in reality, qualitativeevaluations, the tools above can be used with a representativesample of internal and external experts to the project.The resulting information can be analysed by using analysistechniques based on a statistical theory such as the MonteCarlo method. We do not need to understand the theory touse the risk analysis applications and experts in the domaincan assist the project's management if need be. By pushingthese analyses further, we can even establish “What if scenarios”.These analyses enable us to model the impact of specificrisks and accumulate all the risks into a graph.The most familiar graphs of the results are known under thefamily of “S” curves of the best or worst scenario. The latterare used in the establishment of a reaction to a propagationof the risks.As an alternative, the Tornado diagrams show a ranking ofrisks of the largest positive or negative impact. The latter aremore useful to focus the management's efforts on the riskswhich may have the greatest impact on the result of theproject.Risks are often precipitated by specific key events – theawarding of a contract, the result of a topographicalsurvey or a specific phase of the project. We must be particularlyvigilant in these stages, looking for the least riskand finding the means to avoid it at the desired time.Therefore, good management of a project is based on theprevention of the risk, but must also use analysis tools whilstkeeping an eye on the development of events.In spite of its importance, it is surprising that only a fewprojects manage to use risk analysis efficiently. In general, itis considered as being too complicated or takes up too muchtime. If the risk analysis provides you with a list of problemsencountered, if you manage 20% appropriately, you willensure the success of your project, so why don't you use it ?Remember, taking risks must be a decision which the entireteam must take, everyone must be involved and everyonemust take up the challenge. By working together, youwill achieve more success and for those who take the risk,they will be rewarded proportionally, otherwise, why takethe risk ?A little bit of uncertainty is good for everyoneHenry Alfred Kissinger - American Secretary of State from1973 to 1977.Energie & Mines116November 2006

Engineering Case studyThe use of cost controltools in engineeringFarid BENHOCINEProject ManagerBrown & Root - CondorThe quick development ofnations in the commercial andpublic infrastructure marketrequires the manufacturing ofvery high quality products and the useof the latest technology. These are thekey domains of the success of companiesworking in these developing markets.However, reducing the time andrespecting the timeframes for completingprojects entails constraints to themanagement systems and increases therisk both for the clients and for thecontractors.“Costs soar for London Olympics”“Shell plans Qatar gas project as CostsSurge”“EADS Board meets on costs andsuper-jumbo delays”The impact of soaring costs never stopsbeing related on the front pages ofinternational newspapers. The titles ofthese newspapers influence the stockmarket prices, the careers of managers,for the good or bad, and undeniablycontribute to the perception of projectmanagement control by the public. Butwhat does the word “cost” mean, andhow is it estimated and presented tomanagers ?The evaluation of the cost of productsand processes is continuous throughoutthe life cycle of a project. It startsin parallel with the development of thedesign and the drawing up of budgets.It follows the development of the engineeringphases, plans the manufacturingof products and supervises theproduction and construction of thefinal product.It may also be used in the anticipationof the costs of maintenance operationsand, at the end of the day, in thedecommissioning and the recycling. Itis a critical factor of the success of aproject.Historically, the evaluation of costsfinds its origins in the industrial revolution;the costs of the raw material ortransformed material were establishedand used in view of putting in place asale price. Once the analysis of the productivityof workers became a specificdomain in the industrial processes, andthe production costs became moresignificant, the evaluation of the impactof the costs associated to the improvementof productivity followed.Simple analysis tools were used tomonitor the evolution of the costs andreport this historic information for the“after-” event. We can consider this asa “reactive evaluation” of the costs. Insuch a long process, taking into considerationthe time between the developmentand the selling of a product, thismethod of establishing the costs andputting in place a price for a product isacceptable.However, this method is completelyout-of-date given the speed and competitivenesswith which the currentmarkets are developing. New dynamiccost evaluation methods, which accuratelyforecast the results, have become anecessity.Statistical models, complex computermodels, the forecasting of the currentvalue of a currency, the fluctuation ofthe production costs and technologicaladvances must be tools made availableto managers involved in the new generationengineering projects.To provide all these means, specialistsare required in each of the domains inrelation to analysing costs. They mustbe trained on the very latest softwareapplications, more involved in controllingcosts, more dynamic, suggestingimprovement possibilities and moreable to modify the models to satisfy thereality of the projects.The legal contracts and the laws,encompassing a project's activities, arethe rules around which the conflicts areresolved, if the discussions and negotiationsfail. Together, the client and thecontractor sign these contracts at thestart and commit to respect the rulesthroughout the project. When a disagreementon the services or theresponsibilities arises, both parties referto the contract; with the aim of solvingthese disputes, different information isprovided. Part of this informationcomes from archives and correspondence,and to solve the financial disputesmost of the information comes fromstructures, responsible for analysingthe costs.The same accurate information isrequired to justify the payment invoicesand for the correct keeping of the project'sprogress reports (monthly ingeneral). The bulk collection of data isrequired from a multitude of sources atall levels of the organisation; from workEnergie & Mines117☞November 2006

ENGINEERING CASE STUDY☞sites where working hours are accounted,through the procurement departmentfor the invoicing of the materialsreceived and services provided, up toFinance to determine the taxes to bepaid and the costs of bank services.This information must be available withaccuracy and consistency, month aftermonth, up to the end of the project andbeyond. This is a repetitive processwhich uses software applications anddatabases; the use of these systems isclosely linked to crossed databases,audits and reconciliation data whichare required to ensure the accuracy andthe quality of the information.Once this information is collected, amore elaborate processing is requiredto provide it in a more appropriateform, which may be digital or graphic,to be presented in report review meetings.The graphs include the statisticaltrend lines and the curves, they use themodels which present the impact of anymodification or display the potentialresults of different scenarios.People think that the future can be predictedusing a crystal ball, however predictingthe costs of an engineering projectrequires a scientific and mathematicalapproach. The generation of historicdata may be used to establish thetrends and the rates of the past, whichmay then be used for the future trends.Of course, this method is founded,even though outdated. The modernforecasting techniques require transcendingthis analogue analysis methodand using the parameters which enablethe reasons which have led to the fluctuationin costs in previous projects tobe studied.Thereafter, this parametric study needsto be applied in the future situations soas to improve the accuracy of the costforecasts. The collection of data fromsimilar previous projects may reinforcethe credibility of the estimates; however,when this is a new development ofa product or a new technology, historicdata is out of the question. The newgeneration projects, unknown marketsor projects in the initial phase requiregreater attention when establishing theforecasts and the introduction of therisks related to the cost is essential forestablishing the final costs. The moreaccurate and credible a project's data is,the more the design and constructionare successful, the fewer risks ariseand, consequently, the contingenciesbecome minimum.Without any doubt, the largest challengefor an engineering project is tomanage the repercussions of change. Achange which is not taken into accountand managed appropriately will undeniablyaffect the costs and the completiontimeframes, and the result mayeven be catastrophic.During the life cycle of any project, theimpact of the cost incurred by a changeis more important in the final procurement,construction and manufacturingphases. Contrary to this, the changestaking place in the initial phases ofa project have less important impacts;they will only have repercussions on thehours worked during the design phase,which will incur a relatively minimumimpact on the overall cost of theproject.To avoid all these cost impacts, themaxims of project management and theclients must be :• to study, design and fine tune theproject during its initial design anddevelopment phases, to fix the conceptionand the basic design;• to commit the basic design to thedetailed design, to allow change onlywhere necessary;• to establish a change control managementsystem and rigorously review itbefore authorising them for the finaldesign and checking the potential that aEnergie & Mines118November 2006

Engineering Case studysingle change might incur a cascade ofimpacts in other domains;• to discourage engineers from makingminor changes (often superficial anddecorative - engineers like this); theremay be a disproportionate impact onthe costs and timeframes;• to fix the detailed design;• to conform to the plans issuingduring the construction / manufacturingstage and avoid changes unlessthere were errors, omissions ormodifications in the codes or the legalregulations;• to involve the engineers in the construction/manufacturingprocess toensure the feedback and continuity inthe realisation of the design up to thefinal design.Consequently, it becomes moreobvious that the skills need to be trainedand developed to reinforce themwith the very latest tools and techniques,and use the data generated tominimise the cost risks during the executionof these important projects.The respect of these rules will considerablyimprove the reduction of the risksand provide a more rigorous control ofthe costs entailed by the changes madeduring the execution of engineeringprojects.It is clear that controlling costs in anengineering project requires a realorganisation along with a multitude ofskills; these needs will only increasewith the objective of shortening thedesign development cycles and with thetechnological advances made.Energie & Mines119November 2006

ENGINEERING CASE STUDYIntegrated Project ManagementSystem (IPMS)Paul H. W.Close Regional Director Procurement & MaterialsKBREnergie & Mines120IPMS is a mature ProjectManagement, Supply Chain andDocument Management integrateddatabase using the very latestWEB (10g) / Windows versions of theindustry standard Oracle database software.The Supply Chain activities extendfrom the interfaces with Engineering allthe way to total WarehouseManagement and Construction andmaterials issue at the jobsite.IPMS has been proven on over 100major Projects in the last 13 years onevery continent.These projects have included Oil andGas onshore and offshore, CopperMines, Dockyards, Military Logistics,Roads, etc.The total installed cost (TIC) on theseprojects is about $80 Billion with aspend on materials of about $10 billionfrom 13 million man-hours ofEngineering. The system has managedand workflowed about 3 millionEngineering and Supplier deliverablesNovember 2006on these projects. At the current timethere are 75 Projects globally usingIPMS with about 3,500 direct and indirectusers.The system itself has represented about$35 million of development investment.One such project is BP'sACG Project in Azerbaijanwhich started in 2000 andis continuing with successivephases. IPMS has had600 users use the system inthis period but over 2000people on the project in 15countries were servedIPMS information. UnderBP Management on theproject, the team spent$1.5 Billion on materialsand issued over a milliondocuments.The driving force to develop IPMS wasa pursuit of a single, comprehensiveefficient way of working with high productivityand high automation.Additionally, IPMS provides a highdegree of audit, tracking and managementfunctions at the very lowest levelof details. Much of the functionality inIPMS is concerned with forecastingand this is in the belief that with accurateforecasting, IPMS can predictfuture impacts to cost or schedule.With that knowledge it puts informeddecision making into the hands ofProject Management team so they havethe ability to mitigate risk and takeactions accordingly.IPMS is electronically and seamlesslyinterconnected by a wide variety ofinterfaces into a user's other systemssuch as CAD software, EDMS(Electronic Document ManagementSystems), Planning, Cost, Engineeringdatabases, Accounting etc.It comes with an interface managementsystem that contains every interfacetechnology it could ever need, fromsimple text file sharing to the latestWEBDAV, BPEL and SOAP methodologies.All these interfaces are availablefor internal or external systems and asthe user executes projects with a varietyof different clients, these interfaceswill be switched on or off as required. Adistinct advantage can be obtainedwhen the user operates IPMS with thesame package of systems i.e. that theyall share the single Oracle database.

Engineering Case studyalso, such as logistics simulation softwareto model difficult logistics tasks,an eProcurement tool so that allRequisitions and Bidder negotiationand collaboration takes place on theWEB and RFID, where radio frequencytracking is used to automaticallyreceive and trace materials at theConstruction site.The system contains exceptional reportingsystems that are considered industryleading and include :IPMS contains security systems whichcomply with various protocols and legalrequirements (such as Sarbanes Oxley)and work regardless of whether youcome into the system from inside thecompany network of from some externalWEB user.It encourages wide read-only access toall the data to facilitate status and visibilityon each project – often throughthe interactive WEB Dashboard sopeople with no IPMS training, or needto, can use the system can still accessall the data.The system contains a multi-disciplineautomated Material Coding system thathas taken 36 man-years to build outand provides consistent material descriptionsand codes that prevents duplicatedexpenditure, overages and minimisessurplus.The user can deploy IPMS for normalexecution E, EP and EPC type projectswhere they have the Supply Chain andDocument Management responsibilitiesbut can equally use IPMS as aEPCm scope of work managing complexprojects and partners, JV's etc sothat the overall project is centrallyreported and managed.The system can store the data in thedatabase by a Sub-Project feature thatlets the user manage in a single databaseall the different scopes of work fordifferent clients and yet by sharing thecommon material catalogue acrossthem all can move surplus and shortagesituations around to maximize constructionand decrease costs.One such project in Kazakhstan usingIPMS now has 42 EP and EPCContractors in separate SubProjectsfor a project CAPEX value of over $12billion.There are several features in the systemorientated around HSE matters such asdisposal management, reduction inpaper, Safety Issues Tracking etc.One of the most powerful features ofIPMS is Workplanning. In IPMS, thedatabase has data relating to all ofEngineering and is tracking and managingmaterials and quantities throughall aspects of the Supply Chain - forexample on Requisition, Purchase,Expediting, Inspection, Logistics, andWarehousing etc. With an electronicallyimported Construction Plan, IPMShas all the details necessary to reportexactly - based on material availabilityand document status and constructionpriority – what can be built now,tomorrow, next week etc.The outputs of this process at the jobsiteprovide exceptional capability toeliminate idle time, plan work, re-packagework and document deliverablesetc. It is reported that this feature cansave upto 5% of Fabrication costs.IPMS also has peripheral capabilitiesusing integrated proprietary software• standard reports to printers or emailas Adobe Acrobat files• EXCEL templates report from everypart of the system on demand and inreal-time• email alerts where IPMS automaticallyalerts you to events or circumstancesin the database• An interactive, graphical "Dashboard"based on all of IPMS with links to thesurrounding systems that allows drilldownfrom high level analysis and summaryfor Management to lower, successivelevels of detail.• Business Objects softwareIPMS is organized as a set of integratedapplications. They are as follows:Reference ApplicationThe Reference Application withinIPMS controls most of the commoncodes used throughout the system.Project, Subproject, Work BreakdownStructures (WBS), OrganizationalBreakdown Structures (OBS) andstandard code values are maintained.BRC Corporate standard codes arepopulated as part of the project startupprocess and some can be edited forproject specific requirements. Thesecode attributes are stored in one placeand referenced throughout the systemfor consistency, efficiency and control.Document ApplicationThe Document ManagementApplication performs two major functions,document registration and documentworkflow transmittal.The application maintains allEngineering, Supplier and Generaldocument references, revision histories,and document cross references.All other IPMS applications utilize thiscentral repository to perform any ☞Energie & Mines121November 2006

ENGINEERING CASE STUDY☞portion of their work associated withdocuments. This system includesdocument registers, engineering documents,supplier documents, transmittals,and document associations.Material RequirementsPlanning Application (MRP)The Material Requirements PlanningApplication performs the followinggeneral functions: Glossary MaterialCoding, Material Catalogue; MaterialDesign Specification, Material Takeoff(MTO) and Material RequirementsPlanning (MRP).This latter function involves the use ofthe IPMS Material Summary systemthat automatically synchronizes theMTO and purchasing side of the systemso that surplus or shortages arequickly identified and acted upon beforethey impact the project.This module is also the home of severalmajor Engineering interfaces with theCAD Model, the Engineering MaterialSpecification and the EngineeringP&ID and Tagged Equipment databases.Procurement ApplicationThe Procurement Application consistsof the pre-order functions ofRequisitioning, Inquiry (Request ofQuotation) and Award. The Post-POfunctions include Expediting, Trafficand Inspection capabilities.All Procurement Documents such asThe Requisition, Purchase Order, andShipping Instruction etc, are issueddirectly from IPMS. MaterialOperations is, therefore, fully automated.The Procurement operational processesand documents are associated tothe IPMS Workpackage and Trackingutility, and automatically update procurementstatus and projections as aresult of the work performed. Throughthis mechanism, all affected disciplinesare alerted to the relative impact as thework progresses. If there are specificreview and approval milestones for anyof the procurement processes, theTracking utility can be invoked to trackand control these activities.Site Control and ConstructionSupport ApplicationThe Site Control / ConstructionSupport Application consist of 4 generalfunctions: Receiving, Warehousing,Site Support and WorkPlanEvaluation. The Work Planning featureinvolves assessing the document andmaterial availability through all theparts of the procurement cycle(Requisition through to Inventory) andallocating materials and forecastingshop fabrication and erection againstthe MTO. The system uses a prioritycoding system or date identified by theFabricator.IPMS "Dashboard" Summary"It is our evaluation that the KBRDashboard technology is 2 years minimumahead of the competition"ConclusionThe supply chain market is becomingincreasingly aggressive as companiescompete for capacity, resources andmaterials; therefore, it is critical theyeffectively and efficiently manage eachProject Supply Chain. IPMS is a provensystem, delivering quantifiableimprovements to its users enablingthem to take a leadership position innthe market. There is little doubt thatIPMS represents a new era in ProjectManagement.Energie & Mines122November 2006

Engineering Case studyIntegration of Health, Safetyand Environment (HSE) aspectsfrom the design phaseYoucef AOUISSIManager of Health & SafetyBrown & Root - Condor“Survival is not aboutmaintaining profits butrestricting losses.”Peter DruckerThrough experience, we have been ableto observe that, in most cases, thepreoccupation with preventing occupationalaccidents only started to appearwith the construction start-up or, moreserious, after an accident. Safety doesnot only, then, rely on the constructor,with the results we know.Studies have, however, highlightedthat, in the life cycle of a project, thepossibility of influencing the safetydecreases as the schedule advances andthe designers have been, for a longtime, identified as members of the projectteam and have a significantinfluence on the safety of employees(2) (Fig 1).Other studies have shown that a considerablepercentage of accidents couldbe eliminated, reduced or even avoided,by making the best choices during theengineering/design phases and a project'sschedule.This article, inspired by differentresearch works, briefly describes thecurrent status of this concept of integratingsafety in the construction, theapplication difficulties and the effortsto overcome them.☞IntroductionConstruction has always been theindustrial sector that has been the mostaffect by accidents in the world. Itrecords the largest number of fatalaccidents and its frequency rates areamong the highest.As an example, in Algeria, for the year2004, it recorded, all sectors combined,31,776 accidents with stoppage ofwork, 742 of which were fatal. Thebuilding and public works sector,alone, recorded 7,294 accidents withstoppage of work, 241 of which werefatal. One of out three deaths concernedthis sector (1).Energie & Mines123November 2006

ENGINEERING CASE STUDY☞NB :1. In this article, and mindful of beingaccurate, when we speak about “integratingsafety into the construction”,this will mean the safety of the workersduring the construction works and notthe safety of the facility handed over tothe client.2. Designers : Organisations or individualsthat design the facilities beforetheir construction. This may includethe architects, the engineers, technicians,etc.Integrating safety into the design phaseis a familiar concept of Health, Safetyand Environment (HSE) professionals.In the hierarchy of risk control measures,priority is given to the control measuresfalling within the remit of engineeringwhich find their origin in theprinciple of design safety. The use ofergonomics in the design of certaintools or workstations to reduce, or eveneliminate the risk factor of an accidentor occupational disease, is an applicationexample of this integrationconcept. Traditionally, the designers'efforts focused on the safety of aninstallation as the final product to bedelivered (application of anti-seismicstandards, fire safety, emergency evacuation,etc.). These efforts barely touchedthe safety and health of workerswho work there or of the maintenanceworkers for the future maintenanceworks.Indeed, workers in the constructionsector, which is by far the sector that ismost affected by occupational accidents,have only very rarely benefitedfrom the benefits of this concept of“integrating safety during the designphase”.Research works had identified a certainnumber of barriers to the lack of involvementof the designers in the safety ofthe construction workers. In general,the designers emphasised their lack oftraining, as well as the lack of a guideor database and other information anddocumentation systems in the domain(3).The lack of definition of the roles andresponsibility of the clients, designers,planners, subcontractors, etc. was alsoanother barrier.The European Union recognised thisproblem by promulgating, in 1992, aDirective on the “Control of risks intemporary and mobile constructionsites” (4).National laws applying these directivesfollowed, such as the CDM(Construction, Design andManagement) Regulations of theUnited Kingdom, which define theroles and responsibilities of theclient/owner, designers, planners andsubcontractors for all issues of preventingaccidents from the design phase tothe execution phase (5).These efforts made by Europe were theresult of studies on the causes of accidentsand injuries which highlightedthat a large proportion of these accidentswere caused in the upstream, i.e.during the planning, scheduling anddesign stages. These analyses alsorevealed that 60% of accidents in theconstruction sector could have beeneliminated, reduced or avoided if theyhad been taken more into considerationduring the design phase (6).Although it is still too early to measurethe actual impact of these laws andregulations on the safety results, a certainimprovement of safety performancesin the construction sector has,however, been noted as well as a positivechange in the profile of designerswith regards HSE issues.It is important to note, also, that, inparallel to these laws and regulations,numerous research works were carriedout in universities to develop and makeavailable to designers the tools enablingthem to integrate the problems of safetyinto the design.As an example, we cite the “Design forConstruction Safety Tool Box” application– an item developed within the frameworkof a research programme bythe University of Washington andfinanced by the Construction IndustryInstitute (CII) (3). This interactive andflexible programme can also be usedfor training purposes.Finally, for the reader, we add a fewexamples of potential dangers whichthe designers can integrate as of thedesign phase (Fig 2).ConclusionMany countries have recognised andintroduced this concept of integratingsafety into their legislation and establishednorms and standards. They havealso defined the roles and responsibilitiesof all people involved in thisprocess. In Algeria, the legislator hasbuilt this requirement into a decree onspecific health and safety guidelinesapplicable to the building, public worksand hydraulics sectors, through twoarticles (7).The application of the texts does howeverremain subordinate to makingavailable to designers the knowledgeenabling them to get involved andappropriately assume their roles (safetystandards and norms, risk technicalEnergie & Mines124November 2006

Engineering Case studyDangerous activitiesExamples of dangersExamples of interventionfrom designers to control risksWorks on elevated structuresFalling of horizontal roofingProvide a parapet or barrier. Provide reservationsto facilitate the installation of ramps or temporarybalustrades.Falling through light, fragile roofingNot specifying fragile materials. Identifying theexisting elements which are fragile. Positioning theventilation and extraction equipment so as to avoidmovements on the roofing.Works insideor near an excavationWorks near a worksiteand vehiclesDangers of collapsingNon-resistant flooringFlooding, asphyxia, etc.Contacts with contaminated substancesImpact and crushing by vehicles andengines moving in the worksiteProviding adequate information on the type of soiland on the positioning of utilities (gas, water, electricitypipes, etc.) in relation to the depth of theexcavation.Positioning the structures so as to enable:- Secure access and exit to the public roads.- Restriction of reverse manoeuvres.- Isolating pedestrians from vehicles.(Protected paths)Concrete plantSoil pollutionChoice of positioning of the plant(avoid the proximity of streams, trees).Provide a cement settling tank.Require MSDS sheets from the builders.control and identification guide, databaseand other computer tools).The designers must also be trained inidentifying the dangers and preventingthe risks related to construction works.They must listen to the constructors.In terms of responsibility, it should benoted that there has been a majordevelopment in the laws in certainindustrialised countries with the involvementand the legal accountability ofall persons involved in the project otherthan the constructor, i.e. the client,architects/designers, planning engineers,etc. in the issues of health andsafety of workers (8).The dialogue between client/primecontractor, architects/engineers andconstructor must be encouraged(fig. 3) as of the design phase to protectan irreplaceable resource: humanbeings and their know-how.References1. Source Caisse nationale des assurancessociales (CNAS) - 20042. Linking Construction Fatalities thedesign for Construction Safety ConceptBehm, M. Safety Science 43 (2005)589 -6113. A Tool to Design for ConstructionWorker Safety. J Archit Eng ASCE3(1):32-41 (1997). Gambates, J. A.;Hinze, J. W.; Haas, CT.4. Council of the European Communities:Council Directive 92/57/EEC of 24 june1992 on the Implementation of MinimumSafety and Health Requirements atTempory or Mobile Construction Sites.European Commission, Brussels, Belgium(1992).5. Construction (Design andManagement) Regulations: SI 1994 nº.3140. HMSO, London, UK (1994)6. Research into Management,Organizational, and Human Factors in theConstruction Industry, HSE ContractResearch Report 45/1992 HMSO, LondonUK (1992).7. Décret exécutif nº 05 - 12 du 8 janvier2005 relatif aux prescriptions particulièresd'hygiène et de sécurité applicables auxsecteurs du bâtiment, des travaux publicset de l'hydraulique. Articles 2 et 3.8. Research into Management,Organizational, and Human Factors in theConstruction Industry, HSE ContractResearch Report 45/1992 HMSO, LondonUK (1992).Energie & Mines125November 2006

ENGINEERING CASE STUDYEnvironmentProtecting the presentto guarantee the futureNora SI CHAIBEnvironmental ManagerBrown & Root - CondorEnergie & Mines126To protect the future, humanitymust deal with major challenges:understanding andanticipating the climatechanges, slowing down desertification,remedying the loss of biodiversity ofecosystems, avoiding the pollution ofthe air-water-soil environments, compensatingfor the increase in waste,covering the drinking water requirementsand guaranteeing a viable futurefor the future generations. All activitieshave an impact on the environment andall companies must integrate this factinto their development strategy.They must ensure they apply an integratedpollution prevention strategy tothe processes, products and serviceswith the aim of reducing the risk forhumans and the environment, byincreasing the competitiveness andguaranteeing its economic viability.Sustainable development is considerablyenlarging the area of responsibilityof the organisation by integrating thesocial and economic impact with theenvironmental impacts. This conceptimplies a different and innovativeapproach in products and services,requires new production and servicemodes and concerns all functions ofthe company and requires quality dialoguewith all parties concerned.The objective is, whilst protecting theenvironment, maintaining it as best aspossible to improve the competitiveness,and transforming what appears tobe a constraint into a progress factor.The evolution of products and techniquesis now accompanied by thetaking into consideration of environment-relatedrisks.November 2006Controlling these risks and preventingthem requires identification, an evaluationand a proposal of solutions to thedecision-makers as well as participationin the implementation of the measuresselected and, therefore, responsiblemanagement of the environmentand a change of attitudes.Scientific and technical knowledgeenables the phenomena of risks to beanalysed and prevented for man and hisenvironment.To efficiently integrate the managementof the environment which combines thetechnical and scientific data, legal andeconomic aspects, social relations andhistoric factors, ambitious objectivesmust be adopted by introducing newinstruments such as the IOS14001standards which aim to take all themeasures to prevent all the forms ofharm or pollution linked to the activitiesand projects of a company, to useintegrated process modification solutionsto reduce the environmentalimpacts rather than corrective technicalsolutions from the design to the realisationof the project.- To this end, the design of a clean andenvironmentally respectful project integratesthe environment in all the planningactions, hence the realisation ofthe ENVID (EnvironmentalIdentification Impacts) to take accountof all the provisions in terms of protectingthe environment and the regulationsin force in engineering, namely:- Saving on raw materials, water andenergy.- Eliminating, reducing or substitutingdangerous materials.- Reducing the quantity of emissionsand polluting waste.- Recommending recyclable materialsor reducing the environmental impacts.- Reducing the provisioning of equipment.- Selecting low energy consumptiontechnologies.- Integrating waste, waste water andgas emission treatment facilities (purificationplants, incinerations, filters,etc.).- Preventing products at risk (MSDS).- Designing procedures that restrict tothe minimum the gaseous emissions(CO, CO 2 , NOx, SOx, COV, etc.) intothe atmosphere.- Recommending recycling, recoverytechniques.At the regulatory level, the projectsmust take account of the requirementsof the Algerian regulations (laws anddecrees), the recommendations of theprime contractor (standards andprocedures). All new classed installationprojects are subject to a priorenvironment impact study (EIS), inaccordance with the law 03/10 of19 July 2003 on protecting the environmentwithin the framework of sustainabledevelopment.Tomorrow, it is our capacity and ourdesire to innovate, to create new userconcepts alongside our clients whichwill guarantee our growth whilstrespecting and applying the progresscommitment to protect the environmentand the environmental standards.

Engineering Case studyThe secrets of successCreativity & QualityAïssa AIDEL & Mohamed KheireddineBENCHARIF HSEQ DepartmentBrown & Root - Condor“In the race forquality, there isno finish line.”David KearnsGiven its direct impact on theresults of the projectconcerned and therefore onthe engineering companyitself, engineering cannot be donenowadays where there is no quality.Indeed, engineering, which is involvedin all phases and disciplines of the project,requires an organisation and procedureswhich enable the team in chargeof the study to make harmoniousprogress through a review process at alllevels.The current basic engineering jobconsists of solving problems of a technological,concrete and often complexnature, linked to the design, the manufacturingand the implementation ofproducts, systems or services. It is donethanks to a rational attitude, an abilityto analyse, a force of proposals,methods to solve the difficulties, insurancein conducting the production andprojects and a correct management ofinformation systems.This aptitude results from a set of technical,economic, social and humanknowledge, relying on a solid scientificculture which has to ensure the controlof costs, timeframes, safety and quality.Today, these elements are one of thebest guarantees of the continuity of theindustrial company. The shortcomingsin the management of these requirementsare largely responsible for thecosts of non-quality.The quality activity occurs and is exercisedeverywhere… It mobilises menand technical and financial means, itprovides an economic and social sanctionby its enrolment and associates toits purpose concerns about protectingthe realisation of the product whilstworrying about the involvement ofman, life and the environment and,more generally, collective welfare.Engineering's quality process, when itis part of a Quality ManagementSystem (QMS), enables the engineeringterm to get involved in the company'sdevelopment strategy, integrate allthe requirements (explicit and implicit)of the client and achieve/exceed theobjectives fixed in terms ofquality/reliability of the installations,and also in terms of controlling costsand the completion timeframes. It alsogives the client the assurance of havingmade the right choice whilst beingregularly informed and consulted as thestudy progresses. The quality engineermust ensure the application of a qualitypolicy by all ranks of the design, studies,manufacturing of all its aspectssolidified by tests, interpretations, definition,certifications and procedures.The involvement of quality is extremelyvaried, since, regardless of the businesssector and/or the speciality, it is part ofthe various phases of a complex processwhich goes from the understandingand formulating of questions, thedesign and the drawing up of solutions,to the realisation or the control of theproduction, including the multiple relatedtasks such as maintenance, purchasingand logistics.But it should also be emphasised thatquality is not easy and, depending onthe circumstances, it must coordinate,motivate and gain the commitment ofemployees and integrate them in a teamcombining complementary profiles andskills.Engineering's Quality process, whichinitially relies on experienced and rigorousmen, also requires the implementationof procedures adapted to thecompany and specifications specific tothe project which integrate the client'sEnergie & Mines127☞November 2006

ENGINEERING CASE STUDYLaw”, a proposition according to which“bad money chases after good", showsthe damage which can be caused to thebusiness activity when the clients aredisconcerted and unable to evaluate thequality before making their purchasesand arriving at the least expensiveoption. An example in terms of“Gresham's Law” is the presence of“bad” products on a market and theclient's inability to distinguish, a priori,a good product from a bad one meaningthat the supplier of quality goodsremoves its products from the marketbecause it is deemed too expensive.If these quality standards are correctlyunderstood, the client can then confidentlymake the distinction betweenstandard and the certification thatall traded products conform to thisquality.The statement according to which theclient has no contribution to make tothe quality process provides a bad frameworkfor the current context as, inan interactive science, technology andmarket model, the market always hassomething to say on the subject of qualityand clients have a preponderantrole to play in the manufacturing of thequality approach process.In reality, the Quality approach isnothing other than a regression fromthe regression, a failure from failure tofailure, a negation of negation which☞requirements as well as the regulatoryones.Given this, it is obvious that at the engineeringlevel, the quality engineeringmust ensure that these interventionsare integrated in all the projects, studies,choice of equipment, and the realisationof the construction so that theyconform to the regulatory requirements,to the national and internationalstandards and, above all, to the client'sneeds and to its satisfaction which isthe first requirement of the standardISO 9001.If the clients do not have requirements,they cannot make the distinction betweenthe high quality products andlower quality products, and “Gresham'shigh quality and lower quality beforemaking a purchase, and the vendor ofhigh quality products can, for its part,maintain a price for its superior qualityproduct.This is only possible if there is totalconfidence in the product that is thesubject of trade. This assumes the existenceof a quality of a clearly definedthen makes the objective positive in thedirection of “zero fault”. It is, in fact,the weaknesses or the faults ascertainedthat we tend to correct, diminish orremove. But there can only really be“zero fault” when this qualitative objectivealso becomes a global, social andpolitical objective. Hence, a positivespiral may be started where the failureof the failure will not fail to lead to thesuccess of the success. We rememberthe quality a lot longer than the price.GucciEnergie & Mines128November 2006

Engineering Case studyAustraliaACEA skills strategyACEA policyBACKGROUNDSkills shortage in Australia is not a newphenomenon. For example, in 1942 theAustralian Government introduced aprogramme of financial assistance tostudents in some faculties at universitiesto overcome a shortage of graduates,particularly in science and engineering(DEET 1993). ACEA becameaware of critical skills shortages is certainareas of engineering as early as2003. ACEA believes that both urgentand strategic action is required to relievethe current skills shortages inconsulting engineering.Following extensive consultation withmembers, ACEA believes that the positionis as follows:• Engineering design skills in consultingengineering firms are in short supply• A significant number of specialistengineering skills are in critically shortsupply• Project work and infrastructure developmentnationally will suffer fromdelays and cost blowouts; some projectswill be unable to go ahead• Critical shortages will extend over thenext 5 years at least• General shortages may last 5 yearsand beyondACEA believes that a two part strategicapproach is required to ensure that thedemand for consulting engineers is metnow and in the future.SHORT TERM STRATEGY -INCREASING SKILLED MIGRA-TIONACEA's short term strategy is gearedtowards enabling firms to bring talentin from overseas more readily to copewith the immediate crisis. A number ofinitiatives have been pursued including;• Working with government to expandthe Department of Employment andWorkplace Relations (DEWR) SkillsShortage List and the Department ofImmigration and Multicultural Affairs(DIMA) Migration Occupations inDemand List (MODL) lists to betterreflect current skill shortages and to bemore explicit about the detail of skillsrequired, and ensure these lists areupdated on a regular basis.• Working with DIMA to streamlineentry processes for internationallyrecruited staff through an out postedDIMA Officer (IOO) to ACEA.• Working with the ATO to investigateproviding relief on FBT related to theLiving Away From Home Allowance(LAFHA).• Improving education regarding theGovernment Information Portal.LONG TERM STRATEGY -INCREASING HOME GROWNENGINEERSACEA recognises that shortages in ourindustry are affected by cyclicalinfluences. Given that, and what isknown now of current and proposeddemand, ACEA believes that the currentcycle will mean shortages for atleast 5 years and beyond.However ACEA is concerned that thefall in engineering graduate numbers,and the dispersal of design engineersacross a broader range of commercialorganisations not actually deliveringengineering design and developmentservices, may constitute structuralchanges in the education and businessenvironment rather than cyclical ones.If this is the case, and if the current oreven similar level of demand to the currentcontinues, consulting engineeringfirms may have a problem whichextends out beyond 5 years, and longerterm assessment and development ofstrategies is required.SKILLS MAPPINGThe Federal Government's Audit ofScience, Engineering and Technology(SET) Skills has provided more detailedinformation on the skills crisis toACEA, our member firms and to thepublic and more importantly for theSET skills shortage issue to be placedon the public record. ACEA applaudsthe skills audit and encourages continuedresearch in this area.However, ACEA sees the audit as auseful starting point, and would like tosee government expand research intolong term professional skills availabilityby introducing a skills mapping program,such as that suggested byProfessions Australia (PA). The programwould facilitate information collectionand dissemination on supplyand demand issues affecting the professionalworkforce in Australia.Energie & Mines129☞November 2006

ENGINEERING CASE STUDY☞Canada has established a unique skillsmapping program and it is ACEA's suggestionthat this be investigated as apossible template.The Skills Mapping program wouldreview the supply of consulting engineersand engineering techniciansthrough the education system andthrough immigration, assess thedemand for consulting engineering services,whether this hasincreased/decreased and what factorshave influenced the demand, and forecastfuture supply and demand needsfor consulting engineers, throughongoing comprehensive and ongoingstrategic skills mapping againstdemand. As well as being useful toindustry for programming of activity,such information could also feed intogovernment expenditure and policydecisions.EDUCATIONEducation has a profound impact onthe long term skills shortage crisis currentlyfacing the consulting engineeringindustry. The ACEA encouragesgovernment to develop and maintainstrategies to ensure that consultingengineering remains an attractivecareer for graduates and young people,as well as ensuring that Australiaremains an attractive destination forskilled job seekers and encourages thereturn of expatriates.Primary EducationACEA recognises the need for moreattention to maths and science in theprimary schooling years. Developingan interest in science and problem solvingin the early years is fundamental toattracting young Australians into engineeringcareers. ACEA recognises thatthe teaching of science in primaryschools is lacking due to teacher competencyin this area and required syllabus.This is echoed by the DEST SETSkills Audit.ACEA supports government initiativesto up skill primary teachers and providemore and improved resources toenable them to teach a broad and engagingscience syllabus. This would includemeasures to enable more experimentalscience which is more interesting.ACEA would encourage the introductionof a fast-tracked educationdiploma to enable retired engineers toteach in primary schools. ACEA wouldalso seek to ensure that a more stringentrequirement for teaching a minimumamount of science be introducedinto all primary school syllabi.Secondary EducationACEA supports Minister Bishop's June2006 announcement to introduce astandardised Australian Certificate ofEducation in all states and territoriesacross Australia. ACEA applauds a unifiedAustralian Certificate, however wefeel that this would be conditional onminimum requirements in the coresubjects of English, Maths and Science.ACEA believes that these core competenciesare fundamental to a well roundedand capable workforce (in anyoccupation) and provides expandedchoice for school leavers to enter atechnical (e.g. engineering) career.ACEA also recognises the need formore secondary school science teachers,and better resources to enablethem to excite students by teachingscience in an interesting and engagingfashion. We will be engaging with theMaths and Science TeachersAssociations to further investigateneeds in these areas. ACEA wouldencourage the introduction of a fasttrackededucation diploma to enableretired engineers to teach science subjectsin secondary schools.Tertiary EducationACEA supports government initiativesaimed at increasing the number of studentsstudying engineering at university.Engineering graduates are in highdemand, not only from the traditionalmarkets of consulting, manufacturing,mining and the public sector, but alsofrom new and emerging fields such asthe ICT industry, financial services,project management, managementconsulting etc. This means that theoverall pool of engineering graduatesneeds to be increased to feed into thegrowing career paths in various industries.ACEA members have someconcerns about the number and qualityof university entrants into and graduatesfrom engineering courses. Furtherinvestigation in this area is currentlybeing pursued through the appropriatestakeholder bodies.ACEA recommends that considerationbe made to further discounting HECSfees for students in engineering andscientific disciplines of critical shortage.ACEA further recommends thatthe FBT burden be removed for firmswho wish to make a contribution to anemployee to be used to pay off theiroutstanding HECS fees.PROMOTIONACEA recognises that much of the problemlies in the lack of and/or inaccurateknowledge around the consultingengineering profession. There is a hugeneed for the consulting engineeringindustry to better educate itself, teachers,careers advisers, students, educationdepartments, politicians andmedia about the industry, how large itis, what impact it has on society andhow exciting and interesting it is. Thereneeds to be a proactive marketing campaignand education about engineering.The ACEA marketing campaignfor consulting engineering is to bedirected to students in years 9 through12 of secondary schools and universitystudents. Initiatives are briefly detailedbelow.Secondary School Promotion• Consulting Engineering DVD• Promotion of Cadetships with memberfirms• Attendance at school Careers Fairs• Information to be distributed throughthe Australian Network of IndustryCareers Advisors (ANICA)• Participation through ACCI in theimplementation of the AustralianTechnical Colleges• Providing opportunities for membersto speak at schools• Direct programs between memberfirms and schools (e.g. Connell WagnerBridge Building Challenge)University Promotion• Consulting Engineering Guide forstudents• ACEA Student Award for Excellence• Guest lecturing by ACEA members• Attendance at university CareersFairsEnergie & Mines130November 2006

Engineering Case studyInformationsystems in engineeringCommon operatingenvironment (COE)Ahmed TOBBECHEDirector IT-SalesBrown & Root - CondorToday, the agility in decisionmakingand the ability tointerpret and respond to theconditions of the market arerequired for companies to survive.Rather than adopting the strategywhich reigned in the industrial era andwhich consisted of following the marketand selling, today's performingcompanies, in the information era, arefocussed on “feeling and responding”to the client's needs which are constantlychanging. The information technologieshave enormously contributedto this profound change, by greatlyreducing the constraints in terms oftime and space related to the acquisition,the interpretation and the actionon the basis of the information.The decisions are the essence of managementitself. The managers at all hierarchicallevels of a company spendtheir days making decisions on thebasis of information which come tothem from different sources and in differentformats.The information must be appropriate,timely, correct and verifiable.In response to stressful needs in termsof collecting, processing and communicatinginformation, the companies haveset up information systems which are,essentially, aimed at making the businessapplications work which are specificto them.These companies have, over the years,found themselves in possession of amyriad of systems and independentcomputer applications and it is oftendifficult and expensive to make themcommunicate with each other for thepurposes of sharing and consolidatingthe information.The roll-out of a CEO platformresponds to:- the needs to access and exchangeinformation in real time at thecompany level and with the outsideworld;- urgent needs to consolidate theinformation in support of the decision-makingprocess and drawingup a timely and reliable report;- technical requirements requiredfor the roll-out of business andcorporate applications such asERP.The COE aims to gradually update,at the technical level, the differentsites and units by putting them at thesame technological level through thestandardisation of equipment and basicapplications such as the desk-top andportable computers, the servers, thenetwork equipment, the email andoffice automation applications.Energie & Mines131☞November 2006

ENGINEERING CASE STUDY☞Furthermore, this platform has theobjective of ensuring the interconnectionof all of the company's sitesthrough a standard computer networkthat is stable, robust, secured and easyto maintain, being mindful of facilitatingits interoperability, reducing itsmaintenance costs and ensuring it providesthe best performance and a transformationspeed to the very latest technologies.The COE also targets the putting inplace of a corporate policy in terms ofmanaging and protecting the informationand the IT assets. This implies theapplication by all sites of the same procedures,produced from managementand control.The roll-out of a CEO platformrequires the putting inplace of three layers :1. A “basic infrastructure"layer which ensures:- the transport of data throughall the segments of the sector'snetwork- the interoperability of thenetwork's components2. An "application infrastructure"layer (servers, operatingsystems, data storage bays)which ensures:- The availability, the integrityand the saving of the data.3. A “common applications”layer (office automation, emailingapplications, collaboration tools, etc.)which ensures :- The production of information- The exchange of information- Access to the informationEach layer supports the layer which isdirectly above it. It should be pointedout that the “COE” concept was initiallydeveloped and applied by the USDepartment of Defence in 1993(www.sei.cmu.edu/str/descriptions/diicoe.html) and had the aims of :- guaranteeing the interoperability ofthe systems belonging to the differentstructures of the department.- ensuring the reusability of the applicationsand application modules in thedifferent structures' level.- ensuring the correct operating of theapplications in the different installationsites.- improving the operational performances(personnel and systems).- reducing the development and rollouttimeframes of the applications andsystems.- reducing the training needs and costs.- reducing the acquisition and operatingcosts of the systems and applications.The American Department of Energy,for its part, adopted the COE in 2003(http://cio.doe.gov/Conferences/AITC/presentations/errington.ppt) and itwas then adopted by several companiesoperating in different businessdomains.Energie & Mines132November 2006

Engineering Case studyInformation and communicationtechnologiesAmel KASDI KHEDDACHEDirector of CommunicationsBrown & Root - CondorFor a few years now, varioustechnological innovations haveintegrated the majority of ourcompanies' business areas.These changes have progressively led toa transformation of behaviours. In fact,and to only cite this invention, after theFax which, back then, enabled an enormousleap towards the development,the arrival of email revolutionised theexchanges of information.Information and communication systems: a strategic toolIn any organisation, the managementworks to procure the environment, allthe tools, the methods and appropriateprocesses enabling the cooperation ofall players concerned by a commonobjective.Such an expectation is possible. Wesimply need to take advantage of thetechnologies by installing an informationand communication system.We cannot claim that these solutionshave been, as of their discovery, hastilyused; users, who are not necessarilyspecialists, had expressed various andsometimes hostile reactions.The information and communicationtechnologies have also faced variousobstacles. They had been developed tocompensate for the problem of managingknow-how, time and knowledge;their appearance generated systemswhose contributions we propose describingand highlighting.Providing such a system to onesemployees provides them with a dynamicmanagement, cooperation anddecision-making tool.In fact, an information and communicationsystem is a system comprised ofhuman resources, physical resourcesand procedures. The latter enable theacquisition, the storage, the processingand the circulation of the company'sinformation: this process represents the"nervous" system of the company. It isthe central axis around which, in realtime, the company's activities takeplace.This way of exchanging and sharingskills relies on the putting in place of acommon and shareable platform fed bya network that put individuals incontact with each other so they cansucceed in a common project.Each user of the system has an individualand collective role to play. Now,they must centralise, share and communicatewith their team. The new wayof conceiving reality enables efficiencyto be achieved. What is important toremember is that communication isbilateral compared to informationwhich is unilateral.Energie & Mines133☞November 2006

ENGINEERING CASE STUDY☞The best practices of conducting anengineering project“The more information there is, thegreater the chaos”.An engineering project is a challenge tobe taken up and management musttake up these challenges.Among those which we suggest describingare the lack of communication andcoordination. It is important to determinethe one-off consequences linkedto this risk in terms of financial impact,impact on the timeframes and/orimpact on the quality.To compensate for such dangers, the“information and communication system”solution is proposed to the companyheads. The latter concerns theputting in place of:- a common platform,- efficient and performing infrastructures,- and an applications' environment.This particularly enables the communicationof an engineering project to bemanaged. We all know that the studiesand documents produced within theframework of such a project involve alarge number of people from all typesof specialities.Such a need for exchange and understandingis only likely through theimplementation of an information andcommunication system that includesthe different circulation methods,depending on the people involved.This system must, at all times, enablethe people involved in the project tohave all information sought after in realtime and in its final revised version.Re-engineering of the information andcommunication systemHowever, the old design of informationsystems has demonstrated their rigidityand their compartmentalisation.Currently, recomposition is imposed.The time has come for new interactiveand integrated tools.But the fact to be remembered today isthat the strategic importance of informationand communication systemsseems to be an asset.Energie & Mines134To successfully carry out an engineeringproject, good methodology is morethan necessary. In fact, understandingthe project to be carried out, qualifyingthe resources to be used and identifyingthe practices and traps are primordial.These phases lead to the drawing up ofa master plan and an action plan for theproject. But don't we say that definingthings is all well and good, but achievingthem is better?November 2006Having an information and communicationsystem in ones company is avery good asset, but how do you decideon it and how do you convince othersthat this is the right system to use?What must be known is that as technologiesare developing, systems must becapable of adapting to this.Hence, all applications developed mustimperatively respond to requests.

Engineering Case studyEconomic intelligenceAbdelmoumen OULD KADDOURChairman & CEOBrown & Root - Condor“Economic intelligenceconsists of controlling andprotecting the strategicinformation of any economicplayer. This is accomplishedthrough threemeans, namely industrialbasedcompetitiveness,safety of the businesseconomy and reinforcementof the influencewhich our country has.”Alain JuilletResearch and the interpretationof information accessibleto the public have becomevery important with the revolutionof the new information and communicationtechnologies. In reality, thisapproach, or rather this intellectualposition, is nothing other than thecognitive and functional expression ofhuman beings faced with financial gain.In fact, calculated on the example ofhow the central nervous system operatesand interprets the informationreceived thanks to external sensorialstimuli, economic intelligence helps thecompany to use the information availableto become and remain profitable.The end of the Cold War caused anevolution in the definition of nationalsecurity. During the Cold War, thethreat from the Soviet Union was thefocus of interest for national security,and the secret services focussed theirefforts on its surveillance. Currently, inthe post-Cold War “new world order”,national security is more consideredfrom an economic and vitality point ofview than in terms of pure militarycompetences.Furthermore, the threats against oureconomic welfare are numerous. In the“global economy”, it is no longer practicalor useful to make a difference betweennational economic relations andinternational economic relations. Mostnational economies, such as the UnitedStates' economy, are no longer in avacuum where the results are imposedby the domestic preferences alone. Anexample is the devaluation of theMexican peso at the end of 1994 whichthrew the United States' financial marketsinto disarray.We live in a world in which the economichealth of nations and the competitivenessof companies are largely determinedby the ability to develop, sell andseize the economic advantages resultingfrom scientific and technologicalinnovations. The internet and the technologicaladvances continue to remodelour way of managing companies (business)at the governmental and industriallevel; competition and economicpressures are creating quicker andmore efficient ways of managing businessand white collar crimes haveincreased and have become a realitywith a serious impact.Connection to the internet has madethe concept of borders and jurisdictionsin terms of combating this problemobsolete. Organised crime groupscan easily commit their crimes andavoid the provided sanctions throughwhat were clearly defined jurisdictionsin the past. This has made increasedinternational cooperation necessarybetween the organised crime fightingagencies.A greater understanding of the interactionsbetween technology, competition,regulations, legislation and globalisationis needed to successfully managethe equation of competition betweeneconomic progress and criminal opportunities.The extent of criminal sanctionshas increased in the world oftechnology. The technological informationrevolution has fundamentallychanged society and will continue to doso in the future. The development ofinformation technology has causedunprecedented social and economicshake ups.The latter also have their dark side. Thenew technologies defy the legalconcepts in place.Information and communication moreeasily circulate around the worldwithout any border restrictions. Moreand more criminals are committingtheir crimes from other places whichare very far from those where these crimeshave an impact.The present information era requirescompanies to compete with each otherglobally, sharing sensitive informationwith the appropriate parties, whilstprotecting this very information fromcompetitors, vandals, suppliers, clientsand foreign governments. The legislatorsare making increasing use of criminalcodes to establish economic andsocial policies within the framework ofusing and circulating technology. A lotfear that technological progress is facilitatingindustrial espionage and thetheft of “intellectual capital” andmaking new technologies less expensive.In a global economy, there is lessdistinction between the need to protectthe interests of the State and the needto protect trade interests.The state of a nation's economy is alarge part of its national security.This economic status depends on thisnation's ability to compete efficiently onthe world market.Energie & Mines135☞November 2006

ENGINEERING CASE STUDY☞Crimes attacking intellectual propertyare serious crimes, not because of theinjuries or deaths caused to the person,but rather because they steal the creativework from its owner. The theft ofintellectual property is in the process ofcreeping up in stealth; hence, the companies,governments and departmentsin charge of the application of the lawfind difficulties in controlling its enormousimpact on profitability whoseeffect on the national economies doesnot need to be mentioned.Although the civil systems can compensatethe intellectual owners, criminalsanctions are often justified to punishand prevent these contravening activities.In fact, breaches of the intellectualproperty rights often imply no loss ofphysical assets and, as for forgery crimes,require no direct contact with theowner. The latter, often, does not realiseit is a victim until the contraveningactivities are specifically indicated andinvestigated.Economic espionage and the theft ofindustrial secrets are often consideredas white collar crimes. This term wasinvented in 1938 by Edwin Sutherlandduring a speed he gave to the AmericanSociological Society.Sutherland defined this term as a“crime committed by a person ofrespectability and high social status inthe course of his occupation”.Although there have been debates onwhat can be defined as a “white collarcrime”, nowadays the terms generallycovers a variety of non-violent crimes,usually committed in business situationsin the interest of financial gain.It is particularly difficult to take legalproceedings against these white collarcrimes given that the perpetrators arecriminals with sophisticated processestrying to dissimulate their activitiesthrough a series of complex transactions.According to the Federal Bureauof Investigations (FBI), it is estimatedthat white collar crime costs over 300billion American dollars annually in theUnited States. However, the protectionof industrial secrets is consideredincreasingly essential in the competitivenessof the global industrial sector.In parallel, the world has undergone aninformation technology revolution.Since, at least, the start of the 1990s,the power of information technologyhas increased exponentially resulting inincreasingly powerful means for stealingand transferring protected information.This technological evolution inopen societies encourages the appearanceof certain types of criminal andsubversive activities, such as economicespionage.Economic espionage has become animportant business. As at the end ofthe Cold War, a certain number of factors,such as the increased access toand use of computers, greater profitabilityand the lack of resources in companiesto investigate and take legal proceedingsagainst such thefts, hascontributed to the increase in the theftof industrial secrets in the last fewyears.The major growth in economic factorslinked to the definition of a nation'ssecurity has the result of generalisingthe theft of patented information in theform of industrial secrets. The level oftheft of industrial secrets seems to havequickly increased over the last fewyears.Economic espionage particularly threatensintellectual property rights (IPRs)which have become the most valuableassets in world trade. The IPRs may beowned or stolen for a profit and are avital issue in today's competitive economy.The IPRs have become a field ofinternational interest and a controversialsubject due to the increase in therates and costs of technological progressand increasingly transparent nationalborders. Intellectual property refersto the legal rights corresponding to anintellectual activity in the industrial,scientific and artistic domains. Theselegal rights, generally in the form ofpatents, registered trade marks andcopyrights, protect the moral and economicrights of the creators, in additionto the creativity and circulation of theirwork. Industrial property, which is anintegral part of intellectual property,extends the protection to industrialdesigns and inventions.The numbers will tell us whether or noteconomic intelligence in the post-ColdWar era is a success. Are companiescontinuing to earn money because oftheir intelligence efforts? If not, is thenumber of cases where foreign governmentsmake use of corruption to obtaincontracts abroad decreasing? Is themoney lost because of industrial espionagedeclining? In the same perspective,has the number of industrial espionagecases in America decreased?Economic espionage is not simply aproblem of intelligence; it implies fundamentalquestions linked to a nation'seconomic interests which, in their turn,are part of its national security.ReferencesB. Raman - Directeur, l'Institut des étudestropicales, ChennaiS. Gregory - L'Intelligence économiquedans l'ère de l'après-Guerre froide.Snyder - La réforme de l'Intelligence dansl'ère de l'après-Guerre froideH. Nasheri - Les Dimensions de l'espionnageéconomique et la criminalisation duvol du secret industriel.Rapport annuel du Congress sur les collectionséconomiques étrangères etespionnage industriel.L'Intelligence économique- Université deLyonEnergie & Mines136November 2006

Engineering Case studyIntellectual property rightsAlan GREENSPANMarket economies require arule of law. A societywithout state protection ofindividual rights, especiallythe right to own property, would notbuild private long-term assets, akey ingredient of a growing moderneconomy.Since its early stirrings in eighteenthcenturyBritain, modern economicdevelopment has been characterized byan ebb and flow in the intensity of stateinvolvement in shaping the economicenvironment. According to the legendsof the early American West, the onlylaw west of the Pecos River was administeredby Judge Bean. I am not surehow much law that was, but I do knowthat much protection of property insparsely settled western communitiesjust after the Civil War had to be privatelyprovided.Understandably, trade was limited insuch an environment. Economicgrowth was greatly facilitated by theemergence of civil government, whichprovided, among other things, consistentand predictable enforcement ofproperty rights.More recently, the states of the formerSoviet Union suffered for a time manyof the alleged characteristics of theAmerican Wild West--legal chaos, rampantcriminality, and widespread corruption.This difficult period of transitionin the Soviet satellite countries followedfour decades of central planningin which the arbitrary enforcement ofan inefficient set of rules resulted inmassive economic failure. With fewexceptions, the new leaders of thesecountries recognize that their futureeconomic success will depend on anefficient and predictable rule of law.A tension has always existed between adesired continuity in the laws and regulationsgoverning trade and businesspractices and the necessary updatingthat is required to keep pace with a growingand, hence, changing economy.Uncertainties that stem from the arbitraryenforcement of the body of prevailingrules result in higher risk and anassociated elevation of the cost of capital,which in turn inhibits economicgrowth.Implementing an effective rule of law,however, has its own difficulties. Onekey component, a law of contracts,governs the resolution of certain disputesbetween parties. Yet if adjudicationwere requested for more than a verysmall fraction of contracts, our courtsystem would be swamped into immobilityand the performance of our economywould suffer. Thus, if our marketsystem is to function smoothly, the vastmajority of trades must rest on mutualtrust and only indirectly on the law.A more general concern is that laws cannever be fixed in perpetuity. As societiesand economies evolve, the detailsof the law, though generally not its fundamentalprinciples, need to change.But any uncertainty about the clarityand fixity of the law adds to the risk oftrade, which as I noted, is reflected in ahigher real cost of capital.We in the United States endeavored tolessen legal uncertainty by embeddingour most fundamental principles in aconstitution, which we made difficult toamend. The commercially and economicallysalient specifics are typicallyexpressed in federal or state statutes. Ingeneral, this arrangement seems tohave provided us with a healthy balanceof continuity and predictability and,yet, also the requisite flexibility torespond to evolving economic andsocietal circumstances.Reflecting that flexibility, the directionand the emphasis of legislative revisionover the generations have mirrored thechanging structure of our economy. Inrecent decades, for example, the fractionof the total output of our economythat is essentially conceptual ratherthan physical has been rising.This trend has, of necessity, shifted theemphasis in asset valuation from physicalproperty to intellectual property andto the legal rights inherent in intellectualproperty. Though the shift mayappear glacial, its impact on legal andeconomic risk is beginning to be felt.Over the past half-century, the increasein the value of raw materials hasaccounted for only a fraction of theoverall growth of U.S. gross domesticproduct (GDP). The rest of thatgrowth reflects the embodiment ofideas in products and services thatconsumers value. This shift of emphasisfrom physical materials to ideas asthe core of value creation appears tohave accelerated in recent decades.Energie & Mines137☞November 2006

ENGINEERING CASE STUDY☞Energie & Mines138Technological advance is continuallyaltering the shape and nature of oureconomic processes and, in particular,is promoting the trend toward increasingconceptualization of U.S. GDP.The size of our radios, for example, hasbeen dramatically reduced by the substitutionof transistors for vacuumtubes. Thin fiber optic cable has replacedhuge tonnages of copper wire.New architectural, engineering, andmaterials technologies have enabled theconstruction of buildings enclosing thesame space with far less physical materialthan was required, say, 50 or 100years ago. More recently, mobile phoneshave markedly downsized as theyhave improved. The movement over thedecades toward production of servicesrequiring little physical input has alsobeen a major contributor to the markedrise in the ratio of constant dollars ofGDP to ton of input.This dramatic shift toward productdownsizing during the past half-centurystems from several causes. The challengeof accumulating physical goodsand moving them in an ever morecrowded geographical environment hasclearly resulted in cost pressures toeconomize on size and space.Similarly, the prospect of increasingcosts of discovering, developing, andprocessing ever-larger quantities ofphysical resources has shifted producerstoward downsized alternatives.This shift appears effectively to haveanswered the dire concerns that wereexpressed, in a report from the Club ofRome three decades ago, about theprospects of running out of the physicalresources that allegedly were necessaryto support our standards of living.Another cause of product downsizing isthat, as we moved the technologicalfrontier forward and pressed for informationprocessing to speed up, thelaws of physics required the relevantmicrochips to become ever more compact.November 2006More generally, in the realm of physicalproduction, where scarce resources arecritical inputs, each additional unit ofoutput is usually more costly to producethan the previous one; that is, production,at least eventually, is characterizedby increasing marginal cost. Bycontrast, in the realm of conceptualoutput, much of production is characterizedby constant, and perhaps evenzero, marginal cost.For example, though the set-up cost ofcreating an on-line encyclopedia maybe enormous, the cost of reproductionand distribution may be near zero if themeans of distribution is the Internet.The emergence of an electronic platformfor the transmission of ideas atnegligible marginal cost may, therefore,be an important factor explaining therecent increased conceptualization ofthe GDP. The demand for conceptualproducts is clearly impeded to a muchsmaller degree by rising marginal costthan is the demand for physical products.But regardless of its causes, conceptualizationis irreversibly increasing theemphasis on the protection of intellectual,relative to physical, propertyrights. Before World War I, markets inthis country were essentially uninhibitedby government regulations, but theywere supported by rights to property,which in those years largely meant physicalproperty. Intellectual propertypatents,copyrights, and trademarksrepresenteda far less important componentof the economy, which wasmainly agricultural. One of the mostsignificant inventions of the nineteenthcentury was the cotton gin. Perhaps itwas a harbinger of things to come thatthe intellectual-property content of thecotton gin was never effectively protectedfrom copiers.Only in recent decades, as the economicproduct of the United States hasbecome so predominantly conceptual,have issues related to the protection ofintellectual property rights come to beseen as significant sources of legal andbusiness uncertainty.In part, this uncertainty derives fromthe fact that intellectual property isimportantly different from physicalproperty. Because they have a materialexistence, physical assets are morecapable of being defended by police,the militia, or private mercenaries. Bycontrast, intellectual property can bestolen by an act as simple as broadcastingan idea without the permission ofthe originator. Moreover, one indivi-

Engineering Case studydual's use of an idea does not make thatidea unavailable to others for their ownsimultaneous use. Even more importantly,new ideas--the building blocksof intellectual property--almost invariablybuild on old ideas in ways that aredifficult or impossible to trace. From aneconomic perspective, this provides arationale for making calculus, developedinitially by Leibnitz and Newton,freely available, despite the fact thatthose insights have immeasurablyincreased wealth over the generations.Should we have protected their claim inthe same way that we do for owners ofland? Or should the law make theirinsights more freely available to thosewho would build on them, with the aimof maximizing the wealth of the societyas a whole? Are all property rightsinalienable, or must they conform to areality that conditions them?These questions bedevil economistsand jurists, for they touch on some fundamentalprinciples governing theorganization of a modern economyand, hence, its society. Whether weprotect intellectual property as aninalienable right or as a privilegevouchsafed by the sovereign, such protectioninevitably entails making somechoices that have crucial implicationsfor the balance we strike between theinterests of those who innovate andthose who would benefit from innovation.In the case of physical property, wetake it for granted that the ownershipright should have the potential of persistingas long as the physical objectitself. In the case of an idea, however,we have chosen to strike a differentbalance in recognition of the chaos thatcould follow from having to trace backall the thoughts implicit in one's currentundertaking and pay a royalty to theoriginator of each one. So rather thanadopting that principled but obviouslyunworkable approach, we have choseninstead to follow the lead of Britishcommon law and place time limits onintellectual property rights.It is, thus, no surprise that, as a resultof the increasing conceptualization ofour GDP over the decades, the protectionof intellectual property has becomean important element in the ongoingdeliberations of both economists andjurists.Of particular current relevance to oureconomy overall is the application ofproperty right protection to informationtechnology. A noticeable componentof the surge in the trend growth ofthe economy in recent years arguablyreflects the benefits that we have derivedfrom the synergy of laser and fiberoptic technologies in the 1960s and1970s. This synergy has produced verylittle that is tangible in informationtechnology. Yet the information flowthat it facilitates has fostered the creationof vast amounts of wealth.The dramatic gains in informationtechnology have markedly improvedthe ability of businesses to identify andaddress incipient economic imbalancesbefore they inflict significant damage.These gains reflect new advances inboth the physical and the conceptualrealms. It is imperative to find theappropriate intellectual property regimefor each.If our objective is to maximize economicgrowth, are we striking the rightbalance in our protection of intellectualproperty rights? Are the protectionssufficiently broad to encourage innovationbut not so broad as to shut downfollow-on innovation? Are such protectionsso vague that they produce uncertaintiesthat raise risk premiums andthe cost of capital? How appropriate isour current system--developed for aworld in which physical assets predominated--foran economy in whichvalue increasingly is embodied in ideasrather than tangible capital? Theimportance of such questions is perhapsmost readily appreciated here inSilicon Valley. Rationalizing the differencesbetween intellectual propertyrights as defined and enforced in theUnited States and those of our tradingpartners has emerged as a seminal issuein our trade negotiations.If the form of protection afforded tointellectual property rights affects economicgrowth, it must do so by increasingthe underlying pace of output perlabor hour, our measure of productivitygrowth. Ideas are at the center ofproductivity growth. Multifactor productivityby definition attempts to captureproduct innovations and insightsin the way that capital and labor areorganized to produce output. Ideas arealso embodied directly in the capitalthat we employ. In essence, the growthof productivity attributable to factorsother than indigenous natural resourcesand labor skill, is largely a measureof the contribution of ideas to economicgrowth and to our standards ofliving.Understanding the interplay of ideasand economic growth should be anarea of active economic analysis, whichfor so many generations has focusedmainly on physical things. This workwill not be easy. Even as straightforwardan issue as isolating the effect ofthe length of patents on overall economicgrowth, a prominent issue recentlybefore our Supreme Court, posesobvious formidable challenges. Still, wemust begin the important work ofdeveloping a framework capable ofanalyzing the growth of an economyincreasingly dominated by conceptualproducts.Energie & Mines139November 2006

ENGINEERING CASE STUDYKorea - Strategyfor technological leadershipTaoufik FERHATDirector Oil & Gas - SalesBrown & Root - CondorEnergie & Mines140Les potentialités de la Corée du Suddans le domaine de la microélectroniqueont connu durant ces 25 dernièresannées une expansion rapide etremarquable en termes de dimension etde capacité d'infrastructures, de revenusenregistrés et d'impact sur le marchémondial. La Corée du Sud a construitet continue deSouth Korea'spotentials in the field of microelectronicshas, over the last 25 years, experiencedrapid and remarkable expansionin terms of the dimension andcapacity of infrastructures, recordedrevenues and the impact on the worldmarket. South Korea has built andcontinues to develop an independentcapacity in a large spectrum of microelectronictechnologies, ranging fromthe engineering of DRAM, SRAM andASIC to electronic equipment, packagingas well as the development of newIT equipment. The country's currentstrategy is to ensure dominance notonly in the manufacturing of electroniccomponents and products but, also,innovation in the domain of the newtechnologies. South Korea is determinedto maintain its competitiveness inthe domain of microelectronics on theinternational market in the long termand it is also ready to commit theappropriate financing and resources toachieve this national objective.SRAM : Static Random AccessMemoryDRAM : Dynamic Random AccessMemoryASIC : Application-Specific IntegratedCircuitNovember 2006The Korean manufacturers are dominatingthe DRAM and household electricalsmarkets. The development of thesemi-conductors industry has beenspectacular. In 1994, after just a decade,the Korean industrial conglomerateswere able to take possession of 25%of the global semi-conductor market.Today, Samsung is the no. 1 DRAMmanufacturer, hence South-Koreanmanufacturers are considered by theirJapanese and American counterparts asbeing highly competitive.Role of the public authoritiesThe Korean government has spared noeffort in giving priority to the developmentof local technological capacities,whilst creating world class industrialinfrastructures, which were in placeeven in 2001. It has firmly and proactivelymaintained this position withregards the internal development ofadvanced technologies. The governmentsupports industry in South Koreain at least four different ways:1. It gives the legal and legislative basesfor the development of a highly technologicalindustry through a national bankingregulation, low interest rate onloans, appropriate taxation on selectedimported products.2. It supports the education and R&Ddevoted to the high technology industryby directly financing institutes andpublic schools, universities and othereducational institutions, essentiallythrough the Ministry of Science andTechnology, the Ministries of Trade,Industry and Energy; and Informationand Communication. This aid oftenimplies a partnership with emergingand experienced companies.3. It finances the development ofinfrastructures, including the motorwaysand the transport networks, thepopularisation of internet services, etc.and the construction of “scientific

Engineering Case studyparks” - the best known of which is theTaedok scientific park, which is about40km from Seoul.4. It uses its authority and influence incooperation with the industry, the educationalestablishments and the mediato promote a sophisticated technologicalculture in South Korea.The government's support is expressedby tax advantages for R&D, the revampingand improvement of the performancesof manufacturing plants andfactories and the development ofhuman resources. The government alsosupports and finances countless projectsin line with the nation's priorities.Its support continues to be focussedtoday on supporting new prioritiessuch as the IT sector and the start-upof a local semi-conductor equipmentindustry.The government and the "Chaebols"have worked independently and alsotogether to acquire foreign technologiesfrom industrialised countriesthrough direct and indirect methods.However, the final objective for thecountry is still to make a transitionfrom a development system based oninvestment to another one based oninnovation in which the competitiveadvantage for the country will be translatedthrough its great innovative capacities.This has motivated the industryto emulate American and Japaneseexpertise in the domain of microelectronics.The Koreans are in the processof improving and revamping their educationaland R&D infrastructures in analmost obsessive way.A large support from the public fundsfor science and education has givensolid foundations for the developmentof technological infrastructures. Theeducators are focussing on the developmentof new creative, independentand cooperative talents within thepopulation which will be the mainplayers for self-sufficiency in thedomain of high technologies. They arethus continuing to upgrade the qualityof technician and engineer training,making the R&D participate fully.The community culture'scontribution to the economicsuccessNationalisation plays a key role inKorean culture; there is, among theworkers and professionals, a commondetermination for Korea to become aneconomic giant on the world market.The business groups appear to be largefamilies where the growth of the entiregroup is an objective to be achievedthrough the growth of the smallest entities.The companies up to a certainpoint enjoy the loyalty of employeesand make this well known to them. Inaddition to patriotism, mutual management-employees'loyalty and teamwork, the Koreans are characterised bya corporate culture and are known forbeing preserving, highly focussed andpassionate workers; they invest 10%and more of their income in R&D.Importing technology vs.building up domestic capacitiesHistorically, a large part of the microelectronictechnologies, the source ofKorea's success, comes from foreigncountries, mainly the United States andJapan. Having made the decision tohave the objective of self-sufficiency intechnological innovation, Korea hasput in place a strategy so as to remaincompetitive on the global electronicsmarket whilst committing to joint ventures.The consequences of such a policyare the maintenance of a technologicallink with the world leading companiesin the domain, the sharing of thecosts linked to R&D, the attenuation ofthe local labour costs, the guarantee ofhaving more advantageous trade transactionsand the contribution to the progressof the community.The Korean government, the educationalinstitutions and the private companiesall collaborate with the foreignuniversities. The objective of this collaborationis to train Korean engineers inthe new frontiers of advanced technologies.Another strategy adopted by the SouthKoreans in order to accelerate the technologicaltransfer and increase self-sufficiencyis the recruitment of foreignersand nationals living abroad who haveskills, sufficient know-how and experiencein the domain of the high technologies.Korea has intensively recruitedKorean engineers trained in theUSA as well as foreigners to overcomethe technological shortfalls.Korean companies continue to paylarge royalties for foreign technologies.The amount of royalties from 1995-1996 reached 1.9 billion dollarsAnother important aspect at the originof the development of the microelectronicsindustry in Korea has been the useof old equipment manufacturers' agreementswhich have enabled the Koreancompanies to sell their products underthe name of other companies to compensatefor the shortfall due to the lackof recognition of their name on themarket. The vision of Korean companiestoday is to be the leader on theworld microelectronics market withmanufacturers using their own tradenames, thus increasing their prestigethrough technological innovation.Roles of the universitiesKorea's commitment to education andteaching is shared by the government,the cooperations and most of the population.Today, the literacy rate in thiscountry has reached 95%. A large percentageof pupils from secondary educationgo to university, and about 20%of students from business schools get amasters' degree. The population's educationin all the domains in Korea is anabsolute priority, more specifically inthe branches of sciences and mathematics.The Korean university system istoday a source of national pride.Together, the public and private universitiesoffer adapted programmesto support the development of themicroelectronics domain. In the sameway as in industry, universities encouragenationalism and a passion forexcellence.Energie & Mines141November 2006

PartnershipPARTNERSHIPBefore the Business Council for International UnderstandingMr Bedjaoui calls upon the Americanbusiness community to reinforce itsinvestments in AlgeriaEnergie & Mines142In New York, MohammedBedjaoui, Minister of State,Minister of Foreign Affairs,called upon the businesscommunity of the UnitedStates to reinforce anddiversify its investments inAlgeria which now has, hesaid, the conditions of amutually advantageousand beneficial partnershipfor both countries, indicateda diplomatic source.Speaking before the Business Councilfor International Understanding(BCIU), set up in 1955, upon theinitiative of President Eisenhower, topromote American trade and cooperationwith the rest of the world, MrBedjaoui felt that, with the return ofpeace, safety and stability, and the puttingin place of important reforms, particularlypolitical, economic and socialones, Algeria offers major investmentopportunities to foreign partners, andparticularly American ones.Algeria, which has over these last fewyears put much effort into improvingthe situation of several economic sectorsand making the business climatehealthier, has become an attractive destinationfor foreign investment, andalso offers large partnership prospectsin all domains, he specified in thespeech.November 2006“I hope that Algeria and the UnitedStates will be able to make the most ofthis opportunity to contribute to furtherstrengthening their relations andraise them to a level of considerablequality able to serve the interests of thetwo people and the two countries”, hestated. In his speech, the Ministerreported on the different measures andinitiatives by the Algerian governmentto achieve stable and healthy macroeconomicpolicies, to accelerate thestructural reforms, to achieve the economictransition and to create appropriateconditions for productive investment,recalling that the decade of terrorismthat Algeria experienced is nowno more than “a bad memory”.Algeria, he added, has now restored itspolitical stability, reinforced its institutionalcapacities and is rebuilding thebases of economic and social growth.It has also put in place a series of politicaland economic reforms aiming toconsolidate the State by right, goodgovernance, the democratic values andthe market economy, he furtheremphasised to a large audience mainlycomprised of heads of state organisationsand institutions, company managers,bank portfolio managers, membersof diplomatic institutions andmembers of business consultancy andinternational trade institutions.For the Minister of Foreign Affairs,present in New York, where he led theAlgerian delegation in the works of the61st session of the General Assembly ofthe United Nations, the efforts made bythe Algerian authorities reflect theirdesire and their profound convictionthat the reforms are determining factorsfor a sustainable social and economicdevelopment.Growth figuresThis undertaking will enable Algeriancitizens to enjoy the benefits of growthand have access, inter alia, to thehealth, education, vocational trainingservices, whilst giving them the opportunityto play a large role in society, hestated, emphasising that the reformwork is completed by several othermeasures, programmes and initiativesincluding the application of a nationalreconciliation programme, as well as aseries of political, legal, administrative,economic and social-type reforms andmeasures. He also recalled certainresults gathered at the socio-economiclevel and indicated the improvement ofthe financial situation, with, particularly,a significant growth rate of 5.1%,large foreign exchange reserves, asignificantly declining unemploymentrate, particularly investments totallingover 16 billion dollars, in the last fewyears, 2.8 billion dollars of which werecontributed by foreign partners, thereduction of foreign debt, the reductionin inflation (from about 30% in themiddle of the 1990s to 3% in 2005),and GDP of around 6% in 2003-2004.The head of Algerian diplomacy, who,from 11 to 13 April, made a workingvisit to Washington during which hespoke with his American counterpart,Mrs Condoleezza Rice, on the future ofAlgerian-American relations, also recalledthe major economic growth andrecovery programmes initiated byPresident Abdelaziz Bouteflika, aimingto improve the living conditions of thepopulations, to modernise the infrastructure,develop the market economyand promote national economic integration.Mentioning the international dimensionof new Algeria, he cited, amongother objectives, the creation of conditionsfor a greater integration in theworld economy, by using and showcasingits advantages, particularly itsgeostrategic position at the crossroadsof several regions and civilisations, itspopulation's capacities and skills, particularlythose of its workforce, the existingindustrial infrastructures, naturalresources and the new economic policyoffering more insurance and a betterbusiness climate.The government is continuing itsefforts to deepen the reforms to attractmore investments, excluding hydrocarbons,emphasised the Minister, addingthat new legislations are reinforcing the

Partnershipguarantees offered for investment, are facilitatingthe transactions and awarding of contracts,are making the business climate healthier, liftingthe bureaucratic barriers that have existed up tonow and giving more advantages to stakeholdersand entrepreneurs.The generalised system of preferencesA mechanism to help Algerianexports to the USAConvergence of viewsAlgeria has committed to a vast programme ofreforms for its public finances. The stabilisationof the macroeconomic environment facilitatesthe creation of companies, encourages thefinancial institutions to increase their capital,participates in making the budgetary policymore flexible, favours access to credit and tooffering new products, he noted, announcingthat new reforms are underway whereas Algeriais setting about taking advantage of the associationagreement with the EU and concluding anagreement with the WTO. The efforts made areproducing results, replied the Minister, citing,amongst others, energy and mines, telecommunications,agriculture, infrastructures,transport, the habitat, hydraulics, but also justice,health, education or services in general.Dealing with the political aspect, he said that atthe regional and international level, Algeria hasfound its place again and is fully enjoying itsrole by contributing to the stability, peace andsafety in our region as in the rest of the world.Speaking about Algerian-American relations, heexpressed his conviction that both countriesshare numerous objectives and are called uponto further develop their cooperation and partnershiprelations.Algeria and the United States share a convergenceof views on a large range of issues ofcommon interest. Our partnership benefitsfrom a solid economic and political base whichwe hope will support and consolidate furtherstill through a cooperation at the security andmilitary levels, in-depth dialogue and greatercooperation in view of establishing a sustainablestrategic partnership. He also drew the audience'sattention to the development of bilateraltrade which increased to 3.3 billion in 2004,making Algeria the no. 2 partner in Africa (afterSouth Africa) and in the Arab world (afterSaudi Arabia) of the United States whichremains its no. 1 economic partner. It is also animportant exporter of LNG and oil products forAmerica where it plays a major role in securingits energy supplies, he further indicated.Over these last few years, Algeria hasbecome a focal point for the UnitedStates not only in the hydrocarbons sector,but also in those particularly of agriculture,hydraulics, transport, construction,the habitat, new information andcommunication technologies, the pharmaceuticalindustry and trade. Theimportance which the Algerian market isarousing from American business communitiesis reflected by the growth inturnover (over 11 billion dollars in2005), but also by the intensification ofbilateral relations as well as by the puttingin place of mechanisms, instrumentsand cooperation tools that areable to favour a reconciliation betweenthe two economies which have complementaritiesand reinforce the cooperationrelations. Among these instrumentsis a mechanism called the GeneralisedSystem of Preferences (GSP), which is asystem for exporting, through customs,products on the American market.Algeria has benefited from this systemsince March 2005 and this system nowenables the Algerian operators to exportsome 3,400 products to the Americanmarket and to benefit from the customsduties excess. The United States decidedto enable Algeria to benefit fromtheir Generalised System ofPreferences, both because of the qualityof the relations existing between the twocountries and to take account of theeconomic reforms made by Algeria, inthe last few years, particularly in termsof international trade, investment, businessrights, anti-corruption measures,adherence to international agreementsand conventions, protecting the environment,energy or intellectual andindustrial property, remarked a specialistin Washington. Unfortunately thissystem, which enables Algerian producersto export their products withouthaving to pay customs duties in theUnited States, is still little known andabove all little used by the Algerian operators,regrets a manager from theUnited-States-Algeria Business Council(US ABC), adding that his organisationhas for two years been working toencourage mutual knowledge of bothmarkets.Algeria has the abilities to develop andvary its exports on the American market.The products eligible for exporting arein place and have a good quality-priceratio. Algeria will simply have toconform to the quality standards andrules in force on the American marketwhere we increasingly find productscoming from Arab countries, Maghreband Africa, noted, for his part, a civilservant from the American Departmentof Trade. In this respect, he added thatthe time has come to make the institutionsset up between the two parties,such as the US ABC, more dynamic, toensure the entry in force of the cooperationagreements and conventionsconcluded, the Trade InvestmentFramework Agreement or Tifa, whichnow links the two economies, and toopen up outlooks for trade. TheGeneralised System of Preferences,managed by American customs authorities,defines the list of products and theeligibility criteria for the customs dutiesexcess regime and all the facilitationsand the benefits granted to these products,including most manufactured orsemi-manufactured products subject tocustoms duty, some agricultural products(including dates, olives, olive oiland wines) or fishing products as well asthe primary industrial products whichdo not generally benefit from a customsregime, he further remarked. For theAlgerian market, the non-eligible itemsmay be particularly textiles, productsfrom the leather industry, householditems, all products for which theAmerican producers are in competition,including electronic, glass and steel products,noted the same source, whichdoes not mean that agreements may beconcluded on some of these non-eligibleproducts, particularly arts and craftsand textile items. The GSP deserves tobe used quickly by both business communities.All the existing mechanismsmust be shaken up, said an Algerianbusinessman established in the USA.Energie & Mines143November 2006

PartnershipPARTNERSHIP■ 44 companies (3 inhydrocarbons) representing51 firms, 18 ofwhich new exhibitors.■ An investment potentialof 2.5 billiondollars for 2006.■ 858 million dollarsof investments, excludinghydrocarbons,in 2005.Present for the 7th consecutive year atthe Algiers International Trade Fair, theUnited States of America reinforced itsparticipation in this 39th AITF with 44companies representing 51 firms, particularlyin the services and latest technologysegments.Algiers International Trade FairStrong US presenceThe ICT, the pharmaceutical industry,energy, agriculture, the aeronauticsand automotive industry are, amongstothers, the key sectors in the Americanpavilion, which is catching the interestof the Algerian economic operators.The United States Ambassador,Mr Richard Erdman, present on theoccasion of the United States' Dayorganised in the company of Mr DanielE. Harris, Under Secretary of theDepartment of Trade, reconfirmed hiscountry's interest in the Algerian marketdue to the potentials it offers, indicatingthat the trade between bothcountries did, in 2005, amount to11.5 billion dollars, part of which isgenerated by hydrocarbons, recording25% growth compared to 2004, i.e.1.3 billion dollars. On another topic,Americans have invested in Algeria theequivalent of 858 million dollars,excluding hydrocarbons.“This potential should reach 2.5 billiondollars at the end of 2006, confirmedthe Ambassador. This growth is drivenby a convergence of interests, anopening up of the market and a betterintegration of Algeria in the world markets”,he argued.Also on the same occasion, Mr RichardErdman mentioned his country's support“for the reform efforts initiated byAlgeria”, particularly in terms oftransparency in managing and fightingagainst corruption, he specified.With regards the competition on theAlgerian market, the speaker said that“this will enable benefits to be drawn interms of transparency and quality”.Describing the national market as thelargest in Maghreb, the Ambassadorsaid that Algeria had “importantresources but which do howeverremain unexploited due to a lack ofknow-how”. As to the eventuality of afree trade agreement between both parties,he specified that his country isinterested by such an agreement withthe Maghreb and Middle EasternStates, confirming that “what is importantfor Algeria in the short term is thesuccessful completion of the negotiationsin view of its membership to theWTO; a framework which will definethe bilateral relations on the basis ofmore solid and beneficial foundationsfor both countries”.Asked about the development of theOpen Skies project, which will enableopportunities for direct air links betweenboth destinations, the Americanambassador replied that “the matter ismaking positive progress”, withoutadding more. For his part, Mr DanielE. Harris explained that the serenity,transparency, respect and intellectualproperty rights and particularly themeasures facilitating the repatriation ofcapital are profit-making opportunitiesexpressed for the Algerian market bythe Americans.Energie & Mines144November 2006

PartnershipAlgeria-USAChakib Khelil receives an Americandelegation from the NNSA■ The possibilitiesof creating sisterlaboratories examinedThe Minister of Energy and Mines, MrChakib Khelil, received in Algiers anAmerican delegation from the NationalNuclear Security Administration(NNSA) led by Mr Kenneth E. Barker,we learn from the Ministry.The audience, which took place at theMinistry's head office, in the presenceof the managing director of theCommissariat national de l'énergie atomique(Comena), Mr MohamedDerdour, related to cooperation interms of training in the domain of thesafety of nuclear activities for peacefulpurposes, specified the same source.The audience enabled both parties toexchange points of view and examinepossibilities of creating sister laboratories,he pointed out.During its trip to Algeria, the Americandelegation from the NNSA will havemeetings with the Comena managers.The NNSA is a semi-autonomousagency within the AmericanDepartment of Energy, responsible forenhancing national security throughthe military application of nuclear energy.Its main mission is to enhance thesafety, security, reliability and performanceof the U.S. nuclear weaponsstockpile without nuclear testing, toreduce the global danger from weaponsof mass destruction, to provide theUnited States Navy with safe and effectivenuclear propulsion and to supportthe conduct of the United States inscience and technology.In February, Algeria hosted a seminaron the means of guaranteeing the securityand safety of nuclear power plantsand protecting people and the environmentagainst risks of using nuclearmaterials for peaceful purposes.Algerian Development CorporationA structuring port project worth6 billion dollars■ 100,000 jobs will be generated by this project, whichshould be completed in 2015.Algerian Development Corporation (ADP) is a company ofAlgerian law, with American capital. Its representative in theAmerican pavilion, Mr Iskounène, who is also responsible forthe container terminal at the port of Béjaïa, told us about astructuring project worth an amount of 6 billion dollars plannedin the deltas of Issers in the wilaya of Boumerdès.The project in question encompasses an industrial zone,a port for hydrocarbons, a site for the processing of iron, atrading port, a seawater desalination plant, an electric powerplant, a shipyard and a business centre.100,000 jobs will be generated by this immense port complexwhich will be completed in 2015, whose works must be startedin 2007. According to Mr Iskounène, the project has been submittedto Mr Hamid Temmar, Minister of Participations and thePromotion of Investments.Energie & Mines145November 2006

PartnershipPARTNERSHIPAlgeria-RussiaPresident Vladimir Putin in Algiers■ Four master agreementssigned■ Numerous Russian companiesintend to increasetheir presence in AlgeriaGazprom wishes torealise projects withSonatrach in thedomain of LNGThe President of the RussianFederation, Mr Vladimir Putin, on avisit to Algeria, described the future ofthe relations between the two countriesas “very promising”.This visit, upon the invitation of thePresident of the Republic,Mr Abdelaziz Bouteflika, was concludedwith the signature of four masterbilateral cooperation agreements, onceof which related to the cancellation ofAlgerian debt, estimated at 4.7 billiondollars, contracted with Russia.These master agreements related to theeconomic and financial relations andthe treatment of the debt contracted byAlgeria with Russia, the non-doubletaxation, the promotion and protectionof investments and the cooperationbetween the Algerian and RussianChambers of Commerce and Industry.For Algeria, which committed to buygoods and services from Russia for anequivalent amount of the debt, thismarks a “significant development” inthe cooperation between the two countriesalready bound by a strategic partnershipagreement. Both countriesexpressed their interest in “greatly”increasing the volume of trade andfinancial investment and agreed on theneed to “raise” the level of their partnershipin several domains and businesssectors. Both presidents had faceto-facemeetings which lasted overthree hours, thereafter extended tomembers of both delegations. This visitwas an opportunity for PresidentBouteflika to call for the intensificationand the diversification of trade betweenthe two countries.Recalling the in-depth discussionswhich took place in April 2001 with MrPutin, when the Algerian Presidentvisited Russia, the Head of State indicatedthat these discussions are nowpart of the framework of a “cooperationmarked by exemplary relations”based on a “foundation of commonconvictions” and “mutual interests”."Very positive results have been able tobe achieved since our meeting inMoscow in terms of reinforcing ourpolitical dialogue, both multilaterallyand bilaterally, as fully demonstratedby the high level visits exchanged betweenour two countries and also withinthe framework of our bilateral cooperationwhich has already added significantnew and promising impetus”, furtheremphasised the President of theRepublic.For his part, the Russian Presidentfocussed on the “high status” and the“quality” of the relations linking hiscountry and Algeria “both at the politicaland at the economic level”.President Putin, who noted that Algeriawas the first Arab country with whichRussia has signed a strategic partnershipagreement, specified that theAlgerian-Russian relations “date backseveral years”.He also stated that he had examined,with President Bouteflika, cooperationin the economic domain, adding thatthe two countries have agreed toextend this cooperation to the domainof mechanical construction, the energysector and the transport sector.President Putin, in this perspective,The Russian gas giant Gazprom hasexpressed its interest in the realisation ofprojects in partnership with Sonatrach in thedomain of the production and selling ofliquefied natural gas (LNG). According to theRussian daily newspaper Russkaïa Gazeta,the Chairman of the Board of Gazprom, MrAlexei Miller, who accompanied the RussianPresident Vladimir Putin on his visit toAlgeria, emphasised that his companywould like to realise projects with Sonatrachin the domain of LNG. Other than the gaspipeline construction and prospecting operations,Gazprom is also interested, he said,“in producing LNG in partnership withSonatrach”, underscoring that “Algeriaenjoys great experience in this domain”,added the same source. He furthermoreindicated that Sonatrach might be asked toparticipate in the construction of LNG plantsin Russia, adding that the latter “is workingfor the development of LNG production”. MrAlexei Miller, according to the newspaper,denied any competition between his companyand Sonatrach in terms of supplying gasto Southern Europe, emphasising that“Russian gas is not competitive”. "Algeria iscloser to Southern Europe than Russiawhich cannot, consequently, compete with itfor this market”, he confirmed. He furtherspecified that the Russian party would liketo collaborate with the Algerian partners “onthe market study in view of reaching anagreement on this subject”, announcing “theupcoming signature of a memorandum ofunderstanding on cooperation in the domainof hydrocarbons between Gazprom andSonatrach”.confirmed that he had fixed with presidentBouteflika “targets” described as“very promising for the future”,emphasising that “a lot of Russiacompanies are already on the Algerianmarket and intend to increase theirpresence”.Energie & Mines146November 2006

PartnershipAlgeria-RussiaFirst meeting of theAlgerian-Russian Business CouncilRussians will submittenders for the fourthmobile telephonyoperating licence.To enable a very solid political relationshipand a very old friendship to be reinforcedand to enable economic cooperation,which is currently minimum, totake on a more substantial shape, theAlgerian-Russian Business Council, setup last March, is determined to set downthe bases of an energy partnership and adynamic approach which targets, in thefield, the objectives of both countries interms of business relations. The Councilheld its first working meeting in theSheraton hotel in the presence of businessmenfrom both countries, supervisedby the two chairmen of the Counciland executives from the AlgerianChamber of Commerce. The main aimof this meeting is to solidify the desireand the ambitions of the Algerian andRussian authorities to move quickertowards a business and economiccooperation in a more pragmatic andmore active way to make up for a greatdelay in this domain. This desire wasexpressed through the strategic partnershipagreements signed in Moscow in2001 and in Algiers in 2006 between theAlgerian President and the RussianPresident who insisted on the importanceof reinforcing the bilateral cooperationin the domains of investments,stake-holdings and company acquisitions,exports and imports and exchangesof information concerning thepotentials of both countries.The Algerians therefore took advantageof the Business Council meeting toexplain to the Russian operators the possibilitiesand advantages of our countryin terms of investment, particularly inthe agriculture and tourism sectors. Thebusiness opportunities, the regulatoryframework, the tax and para-tax advantages,the investment facilities - everythinghas been explained attractively inorder to convince the Russians andguide them towards the most useful sectorsand particularly those which haveyet to be discovered. The constructionsector is one of these and, according tothe Chairman of the Business Council,Mr Kamel Abderrahim, Russian companiesexcel in the domain of constructionand can easily compete with Chinesecompanies in terms of quality and cost.Indeed, it is the Russians who built thecity of Boumerdès. The interest of thelatter is, however, focussed on the gassector and on research in the miningdomain; no less than seven oil companieswere part of the business delegation.Russians are also interested in mobiletelephony and intend to submit tendersfor the fourth operating licence.Scientific research, biotechnology, shipconstruction, agriculture, etc. are alsosectors which interest the Russian businessmenand on which they intend togather as much information as possible.It should be pointed out that there is ahuge lack of information on the Algerianeconomy for Russian businessmen andthat trade and economic exchanges betweenthe two countries are derisory,since they only represent 500 milliondollars - generally in favour of Russia.The few products exported to Putin'scountry fall within the framework of ourdebt repayment. Therefore, the Algerianmarket is completely unknown byRussians. Algerians, however, do knowthe Russian economy as, in the 1970s,Algerian companies were automaticallydriven towards cooperation with Russia,which meant that a lot of Algerian executiveshave been trained in this country.Their experience will be very beneficialin this desire to consolidate the economicrelationship between the two countries.The field of this cooperation henceled to the signature of the rules of theAlgerian-Russian Business Council andthe establishment of its different sections.Mr Abderrahim said he was determinedto move found to translate in thefield the political desire to reinforce thiscooperation and to produce positiveresults as quickly as possible.Balance of TradeA surplus of 2.6 billion dollars in AprilAlgeria's trade in the month of April 2006 balanced with a surplusof 2.6 billion dollars, up by over 52% compared to themonth of April 2005, according to the customs data collected bythe Centre national de l'informatique et des statistiques (Cnis).Exports amounted to USD4.33b, i.e. an increase of 21.36%compared to the month of April 2005 (USD3.57b), whereasimports recorded a reduction of 7.47%, totalling USD1.7b comparedto USD1.84b in the month of April 2005. During the monthof April 2006, hydrocarbon exports continued to represent themajority of sales from Algeria to overseas with 97.35% of thetotal volume and an increase of 22.04% compared to the monthof April 2005. As for exports excluding hydrocarbons, theseremain marginal with only 2.65% of the total volume of exports,i.e. a value of USD115 million. The main products exported,excluding hydrocarbons, are particularly comprised of the group“semi-products” followed by the group “raw products”, the group“foodstuff”, “non-food consumption goods” and “industrial equipmentgoods”. The breakdown of imports per financing methodshows a significant predominance of cash, which remains themost used method with 84.40% (USD1.44b) recording, however,a 6.67% decline compared to the month of April in the previousyear. The largest of the remaining imports (9.14% of thetotal volume) was financed through credit lines, and the remainderusing the currency account and financial transfers.Energie & Mines147November 2006

PartnershipPARTNERSHIPInterview with Mr Renato Urban“The Gazprom-Sonatrachagreement is in the same spiritas the Gazprom-ENI one”The first part of the interview focuses on the agreement betweenSonatrach and Gazprom and on the possibility of creating a naturalgas OPEC as well as the potential repercussions on Italy.For Mr Urban, the meeting which tookplace in August 2006 betweenSonatrach and Gazprom falls withinthe framework of the meetings regularlyorganised between the two companies.These are technical-type meetingsduring which these companies aim todefine a common trade policy to avoidallocating to the same market volumesof gas which might compete with oneanother.With regards the agreement signed betweenSonatrach and Gazprom(Mr Urban recalls that this agreementwas signed by the Vice President of theSonatrach Sales Activity and the Vice-President of Gazprom, in the presenceof the Algerian Minister of Energy andMines and the Russian Minister ofIndustry and Energy), Mr Urban seesno relation with the creation of a gasOPEC, without, however, excludingthe possibility that two large producerscannot agree on concerted actions tomaximise their profits within the frameworkof the energy policies of theirrespective countries.• Mr Urban feels that the agreementbeing negotiated between Gazpromand ENI is part of the same spirit.After mentioning the characteristics ofthe gas industry compared with the oilindustry (particularly in terms oftransportation and the complexity andparticularity of trade agreements), MrUrban focused on the difficulty of creatinga gas OPEC in the short term.Hence, the main danger for Italy is notthe creation of a hypothetical gasOPEC, but this country's chronic inabilityto construct new natural gas importingand storage infrastructures.Whilst numerous foreign companieshave set up in Italy since the deregulationof the natural gas market in 2000,attracted by the profits to be made onthe final market, none of them havemade investments in the transportationand storage activities. However, noneof them have stopped courting theinfrastructures built by ENI - infrastructureswhich continue to ensureItaly's natural gas supply.In reality, only the major ones have thenecessary qualifications and the financialmeans required to realise this typeof project.• The second part of the interviewdeals with the specific situation of theItalian gas market.Mr Urban explains that the tensionsrecorded in the 2005-2006 thermalyear are explained by the difficult weatherconditions recorded last winterwhich caused an increase in demand inthe residential sector, but also the productionof electric power designed forimporting.If these factors should be repeated nextyear, the market will encounter numerousproblems, in spite of the provisionstaken by the Ministry ofEconomic Development. These preoccupationsare exacerbated by the statementsmade by the Russian Minister ofEconomic Development, NormanGref, who recently stated that RussiaEnergie & Mines148November 2006

Partnershipwill have to face a shortage of naturalgas production in 2007 in parallel to arapid increase in local demand.In response to a question on the highlevel of gas prices in Italy compared toother European countries, Mr Urbanemphasised that this situation wasexplained by the taxation applied tonatural gas in this country. In fact,import prices are in line with thoseapplied on other markets. The differentattempts by the Italian Ministry ofEconomic Development to bring gastaxation in line with those of otherEuropean companies have come upagainst opposition from the Treasury.With regards the difficulty of developingimport infrastructures in Italy, MrUrban considers that it is unimaginablethat the government and the oppositionreach an agreement on a domain asstrategic as natural gas. The recentreferendum cancelled the reforms interms of energy, by moving the decisioncentre to the regions. Indeed, thelegislation has not integrated storageand re-gasification terminals as pointsthat are under the exclusive remit of theState.In practice, this text leaves the decisionmaking on storage and the newtransportation and re-gasificationinfrastructures in the hands of theregions. In other European countries,energy is a strategic sector which onlydepends on the State and is managedin the interest of the entire country.In Italy, there is no planning body, evenin the Ministry of EconomicDevelopment, that can only be limitedto collecting the authorisation applicationsand checking the conformity ofthe project with the legislation in force.The risk might be finding oneself withimport infrastructures which will havecost billions, but without natural gas.The inter-departmental commissionrecently put in place by Prime MinisterProdi is looking to find a solution tothis problem but, as it does not havedecision-making power, it can onlyfavour and accelerate the LNG projects'approval procedures.To conclude, and for Italy to end itssupply crisis, Mr Urban recommendedlifting the regulatory bans which todayprevent some of the Adriatic's gasreserves from being exploited, which heestimates at about 30Gm3.Mr Renato Urban, Director of Urban Gas& Power, formerly marketing director ofAgip SPA, an expert on the Gas systemmonitoring and emergency technicalCommittee of the Ministry of EconomicDevelopment.

Analysis ANALYSISEnergy Europe in questionEnergie & Mines150By Mohamed Sofiane Kasbadji *Recent take-over operationsand merger projects involvinglarge European groupshave highlighted the difficultiesencountered byEuropean institutions inderegulating the energymarket faced with nationalconsiderations.November 2006Hence, the Italian Group Enel,which said, a short while ago,that it was looking forward tolaunch a take-over bid for theFrench Group Suez, has considerably reducedits enthusiasm. Enel now wants toobtain guarantees from Brussels that its bidwill not be countered by the French governmentfor “national security” reasons.Now, in Brussels we are indeed attentivelystudying the planned merger between Gazde France and Suez, designed as a counter,it seems, to the solid attempt from theItalian Group against Suez. For theEuropean Commission, this means evaluatingthe conformity of this planned mergerwith the competition law or with the operatingrules of the domestic market.Furthermore, we can even mention the possibilityof referring the matter to theEuropean Court of Justice, as France issuspected of contravening communityregulations. Having been referred the case,Mrs Neelie Kroes, the Commissioner incharge of competition, does not hide herreticence towards the consolidation operationsunderway in the energy sector (notonly in France, but also in Spain) which, inher opinion, restrict competition on the gasand electricity markets.Being wary of the "national champions",Mrs Neelie Kroes has made it known thatthe Commission will “always look withconcern at any attempt by national governments,directly or indirectly, to interfereunduly in the process of cross-border restructuringin Europe”.The Commissioner of Energy, Mr AndrisPiebalgs, is not of this opinion. He feels, tothe contrary, that the GDF-Suez merger,“apart from the emotion it arouses, will bepositive for competition on the French market",a point of view which endeavours touphold the French who uphold that thisoperation will enable the emergence of asolid competitor of Electricité de France(EDF). However, the Commissioner incharge of the domestic market, Mr CharlieMcCreevy, is concerned and has asked forexplanations from the French governmentwhich he suspects of having, through thismerger operation, hindered the free circulationof capital and of contravening the legislationon market abuse.Mr Charlie McCreevy has asked for similarexplanations from Madrid which is trying toprevent the German company E.On frombuying Endesa and who supports the mergerof the latter with Gas Natural. In themeantime, the French Finance Minister, MrThierry Breton, has filed a bill on anti-takeoverbid measures whereas the head ofSuez, Mr Gérard Mestrallet, upholds thatthe Group's performances (profits up by48% in 2005) provide a convincing responseto shareholders tempted by an Enel bid(Suez' stock market capitalisation is 43billion euros) and is more tempting thanwhat has been proposed to them within theframework of the merger with GDF.Hence, four years after the BarcelonaSummit, which launched the deregulationof the energy markets on 1 July 2004 forprofessionals, and on 1 January 2007 forprivate individuals “it's the open season”:European companies from the sector arelaunching in a wave of unprecedented takeovers.Already in 2003, the acquisition ofRuhrgas by E.On was not able to preventthe German Cartel Office; the same wouldhave been the case in Portugal if the commissionhad not vetoed it at the end of2004. This is what is happening in Francetoday with the Suez-GDF merger, with thecapital of the latter Group having been, inthe meantime, opened up to the private sector.The European Commission has fewarguments likely to counter these repetitiveinitiatives aiming to protect or establishnational champions. Hence, in 2002, uponthe instruction of the Luxembourg Court ofJustice, Madrid and Rome renounced blockingEDF, which multiplied acquisitionswhilst being protected in France by itsmonopoly. The States refused to set up acommon policy in a divided Europe. TheBritish and Dutch want to control 100% oftheir hydrocarbons; the French intend to dowhat they want in nuclear matters, whereasthe Germans, the Austrians and the Italians,who do not want nuclear power stations intheir countries, intend, nevertheless, to takeadvantage of those of their neighbours.With regards the Suez-GDF merger project,it has provoked the wrath of theBelgian authorities: they fear that theBelgian energy market will become annexedby France if this operation goes ahead andfeel that Belgium's energy independence isthreatened. To the economic nationalismand euro-scepticism which accompanies it,should be added, in the same perspective ofthe security obsession in terms of energy,the proposal launched by Poland for anenergy NATO. The President of the PolishRepublic, Mr Lech Kaczynski pleaded forputting in place a Euro-Atlantic energysecurity organisation designed to guaranteethe supply of its members. This devicewould be open, on the basis of a treaty, bothto the countries of the European Union,and also to those of NATO, such as theUnited States and Turkey. The initiativewhich excludes Russia is not arousingenthusiasm.Germany, for example, would prefer an"Energy OSCE” which would have, on thecontrary, Russia and even Kazakhstan asmembers. The Polish initiative does, however,talk greatly about the concerns of newEU members on energy matters, as Russiaremains the main supplier of the central andeastern European countries. Its deliveriesrepresent over two thirds of their naturalgas consumption (some Baltic countries are100% dependent on it, compared to 25%for the European Union). These countrieshave not appreciated the fact that Germanyhas set up an agreement with Russia toconstruct, at the bottom of the Baltic Sea, agas pipeline which carefully bypasses theirterritory; but the new member countriesthemselves are not defending the sameinterests and their respective approachesdiverge. Prof. Elie Cohen (DauphineUniversity) states that Europe has failed inits energy policy: "The deregulation hasbeen considered market by market; thecommission's objective has been to break upthe national monopolies and not to build anintegrated European electric platform bydeveloping the interconnections to the borders."But the operators are not interestedin this, as each one wants to remain masterof its own country and the European energymap which is being drawn is one of six orseven national champions.M. S. K.* Oil expert

PartnershipAlgeria-European UnionTowards a summit withthe hydrocarbon supplier neighbours ?The French Prime Ministerproposes the “emergency”holding of such a meeting.The French Prime Minister, MrDominique de Villepin, proposed inBrussels the “emergency” holding of asummit between the European Unionand its large oil and gas producingneighbours and suggested the appointmentof an “Energy Representative”who would represent the EU.Among the major hydrocarbon exportingneighbours to the EU, Algeria is insecond place for gas, after Russia andbefore Norway (40% of the EU's gasimports come from Russia, 30% fromAlgeria, 25% from Norway).With the doubling of its exports by2010, Algeria would get closer toRussia's level.Mr de Villepin also proposed to thepresident of the EU executive body, MrJosé Manuel Barroso, the appointmentof a special French energy representativefor the European Union who will beresponsible for “energy diplomacy”.During a press conference held at theend of a meeting with the president ofthe European Commission, the head ofthe French government specified thathis proposal does not aim to create anew European body, but to appointsomeone who can “put everything into”this common energy strategy.On the other hand, Mr Villepin consideredit "important to plan to enhance”the EU partnership agreements with itsneighbours through “a genuine energystrategy”. The head of the governmentprefers to “enhance” these agreementsrather than establish new energy partnerships.Workshop on the future of the partnership between Algeria and Europe“Europe is losing its interest in theSouthern Mediterranean countries”The participants in the Algeria-Europe workshop, that met inAlgiers, deplored the “failure” of the Euro-Mediterranean(Euromed) process, putting it largely down to Europe“losing interest” in countries on the south bank of theMediterranean. "The history and geography, the humanexchanges, the imperatives of assuming together the constructionof a country's future (…) mean that both partiesmust have a strong, favoured relationship, showing trust andmutual respect”, emphasised the Ministry of State, Ministryof Foreign Affairs, Mr Mohamed Bedjaoui, in an openingspeech at the workshop which took place in the APS conferenceroom. But over ten years after the adoption, inNovember 2005, of the Barcelona Declaration, the foundingtext of Euromed, the “situation is uncertain”, regretted MrBedjaoui during this one day meeting organised by theRéseau intermaghrébin économie et société (Rimes)."Barcelona was a virtuous aspiration which was not achieved"revealed, for his part, the financial expert Mohamed Mihoubduring a discussion in which about thirty researchers andrepresentatives from the different Ministries took part.For Mr Mihoub, Europe, for several years “now only has eyesfor the countries of the East”, adding that “Europe's enlargementfrom 15 to 25 countries, on 1 May 2005, has harmed”the Euro-Mediterranean process.He stated that Europe's enlargement was still underway andthat “things should not therefore change a lot in the nearfuture” concerning the “European priorities”. A representativeof the Ministry of Small and Medium Enterprises (SME)made the same analysis, confirming that “Europe is no longerinterested in us, but in the countries of the East”. For her,"the Barcelona process is a total failure". "Today we note thatdialogue with the Arab countries is not a priority for the EU”,stated, for his part, Mr Mohamed Chami, managing directorof the Algerian Chamber of Commerce and Industry (Caci).For his part, the managing director of the APS, Mr NacerMehal, stated that a lot of agreements signed within the frameworkof Euromed have not been become a reality, quoting,as an example, “a training programme for Algerianjournalists worth an amount of 4 million euros, dating backsix years, which has never seen the light of day”. "Thebureaucratic debates are in the process of gaining the upperhand. We must no longer look at the theory - we (now) haveto look at the reality" he hammered forward.For his part, the economist Malek Boussaïd felt that theEuromed is of a “purely commercial” nature. "Where we havemade a mistake, he said, is that we have taken for given thepromise made in the Barcelona Declaration to make theMediterranean a region of shared prosperity”. The presidentof the Rimes, Mr Mohamed Bahloul, did however state thatpart of the responsibility of the failure of the Barcelona processis incumbent upon the countries of the south bank of theMediterranean which, in his opinion, "have not been able toput together arguments and considerations".Energie & Mines151November 2006

PartnershipPARTNERSHIPEnergie & Mines152November 2006Algeria-ItalyThe Italian Minister of Economic Developmentwelcomed by Medelci and KhelilThe pace of partnershiprelations will be acceleratedon the eve of theRomano Prodi's visit toAlgeria next November.The Minister of Finance, Mr MouradMedelci, and the Italian Minister ofEconomic Development, Mr Pier LuigiBerani, held, in Algiers, a working meetingin which both parties defined thepriority investment projects which mustbe realised within the framework ofpartnership. In his speech before theItalian Minister, Mr Medelci emphasisedstraightaway that Algeria “wishesnot only to maintain good relationswith Italy but also to develop them anddiversify them by identifying new pathsfor economic cooperation and largerbusiness opportunities. "It is not thepolitical desire which is lacking, but it isthe organisation of relations betweenthe two countries and their projectionin the future which must be better perceivedand better understood” he stated.Making reference to the planned visitnext November to Algiers of the Headof the Italian government, Mr RomanoProdi, Mr Medelci stated the need toaccelerate the pace of cooperation andpartnership relations between the twocountries.During this meeting, which was alsoattended by Mr Karim Djoudi, Ministerof Financial Reform, Mr Medelci alsopresented to the Italian MinisterAlgeria's economic and financial situationwhich is characterised by sustainedgrowth, foreign exchange reserveswhich are reaching remarkable levels,an active debt reduction policy and therealisation of vast public investmentprogrammes whose cost exceeds 100billion dollars.Speaking in turn, Mr Bersani said hewas "impressed" by the accomplishmentsmade by Algeria, particularly inthe economic and financial domain. Hefurther considered that it was fundamentalto “give more consistency, moreThe Italian Secretary of State for Trade, whostayed for two days in our country as part ofthe 39th Algiers International Trade Fair, aswell as the Ambassador of the same countryto Algiers, respectively Mr Mauro Agostiniand Mr Giovan Battista Verderame, during apress conference, expressed their country'ssatisfaction as to the Italian participation inthis important event before revealing theinterest expressed by Italy in theentire Mediterranean region and Algeria inparticular.The two speakers, whilst emphasising thequality of the bilateral relations in politicaland economic terms, did not fail to welcomethe decision made by the Safex executives todesignate their country as a host of honourfor the next Algiers International Trade Fair,adding that their government intends tomake this large business event an areacapable of reinforcing Italian presence inAlgeria.They further stated that, between Italy andAlgeria, there is a traditional and positivecooperation to be consolidated further, particularlythrough programmes likely to makethe Italian SME known in its organisationalpragmatism and stability in the relationsbetween the two countries”. Thereinforcement of the energy relationsbetween Algeria and Italy, particularlythe state of progress of the secondunderwater gas pipeline project (Galsi)between the two countries, was also, inAlgiers, at the centre of the talks betweenthe Minister of Energy andMines, Mr Chakib Khelil, and theItalian Minister of EconomicDevelopment, Mr Pier Luigi Bersani."We have discussed Algerian-Italianrelations in the field of energy, particularlythe increase in the capacity of thefirst gas pipeline (Enrico-Mattei) andabove all the quickest completion possibleof the Galsi project which willconnect Algeria to Italy via Sardinia,indicated Mr Khelil to the press at theend of the discussions. Other issuesrelated to the electric interconnectionproject but, also, the dialogue betweengas producers and consumers withinthe framework of the Euro-Mediterranean discussions were covered,added the Minister who describedthe relations between the two countriesas “excellent”. For his part, the ItalianMinister specified that this meetingshould given “major impetus and accelerate”the realisation of the Galsi projectwhich “has already exceeded itsfirst phase”, he specified."I think that we are able to speed up therealisation of this project through aninter-governmental agreement whichmust solve the problems related to theauthorisations, taxation and regulationsas well as the definition of theinfrastructure which concerns theItalian territorial waters”, specified theItalian Minister. "I think that, as of thismeeting, the project will be given majorimpetus”, he said.940km long, 640km of which inAlgerian territory, the Galsi (the nameof the consortium responsible for constructingit) has a transportation capacityof 8 billion cubic metres/year.Press conference with the Italian Secretaryof State for Trade and the Italian Ambassadorforms and corporate networks. On the sameoccasion, they recalled that their country,within the company privatisation processinitiated by Algeria, intends to develop specificprojects.Mr Agostini and Mr Verderame announcedthe request from the Italian Institute ofCommerce to define the projects deemedinteresting, on the one hand, and which canbe niches for the investors and operators, butalso to draw up the programme on Italy's participationin the 40th Algiers InternationalTrade Fair, through which it will particularlybe a question of presenting the experience ofItalian companies, and a representation in allregions without any distinction. We nowintend to put in place specific promotion programmes,particularly concerning thehydraulics, buildings and public works sectors.They also confirmed that their country isinterested in Algerian gas, before adding thatItaly, which hopes to be Algeria's partner interms of energy, is considering intensifyingthe informative actions so that both countriesget to know each other more, given thatAlgeria has initiated a privatisation process.Italy expressed certain interest in Algerian

PartnershipSecond Algerian-Italian gas pipelineMr Khelil : “The completion of theproject will be accelerated”The construction of theunderwater gas pipelineproject which will connectAlgeria to Italy viaSardinia, by 2009, will be“accelerated”, confirmed,in Algiers, the Minister ofEnergy and Mines, MrChakib Khelil, who welcomedthe Italian Minister ofEconomic Development,Mr Pier Luigi Bersani."We will accelerate the completion ofthe project", stated Mr Chakib Khelil inan interview with the Italian presswhich accompanied Mr Bersani.In this respect, he indicated that anAlgerian delegation would go to Romebefore the end of this year to discussthe terms and conditions for completingthis important work of a transportationcapacity of 8 billion cubic metres/year.The Algerian mission in theItalian capital should also, according toItalian investments inAlgeria will increasecompanies. The speakers felt that the two countriesare called upon to increase reciprocal knowledgeof the investment opportunities offeredcapable of arousing the interest of economicoperators.The speakers, still within the framework of theprivatisation process, did not hide the interestshown by their countries in the cement plants putup for sale, whilst adding that Algeria concealsnumerous potentials capable of arousing theinterest of economic operators and investors.Mr Agostini and Mr Verderame further said thatvisit of the Minister of Participations and thePromotion of Investments, Mr Hamid Temmar, totheir country, in view of presenting the roadshows, concerning the privatisation of the companies,upon the invitation of the Milan Chamberof Commerce, is an opportunity for the Italianoperators to discover the investment opportunitiesin Algeria.With regards the current volume of investment inAlgeria, they noted that this is likely to increaseprogressively, as mutual trust solidifies. In thedomain of mutual cooperation, the speakerswanted to specify that Italy has contributed to therestoration of certain cultural sites, such asCasbah and Medina de Constantine.the Minister, discuss the possibility forthe national company Sonatrach totake shares in re-gasification terminals'projects as it has already done in GreatBritain and Spain.Mr Khelil also indicated that a marketingcompany for the gas which will berouted by this gas pipeline, named"Sonatrach-Italia", was created lastJuly.Less than a third (30%) of the quantitiestransported will be sold bySonatrach on the Italian market, hespecified.Emphasising the interest of this gaspipeline for Italy and Europe, theMinister insisted on the necessity tosign, as quickly as possible, the intergovernmentalagreement which shouldenable the construction process of thislong pipeline to be started.This will connect the Hassi R'mel gasdeposit, in the Algerian South, to thecity of El Kala on the east Algeriancost, then Cagliari, in Sardinia, andOlbia and Pescaia, in the north of Italy.Furthermore, the Minister did not failto highlight Algeria's efforts in view ofpromoting this project through promotionand marketing meetings, both inAlgeria and in Italy.Questioned on the agreement concludedat the beginning of August betweenSonatrach and the Russian gas giantGazprom, an agreement which inEurope caused concerns about a possibleemergence of a “gas cartel”, theMinister repeated that this “cooperationagreement between two companies”was however similar to the onesalready signed by the Algerian companywith the Anglo-Dutch companyShell, the Norwegian company Statoiland the British company British Gas."This is nothing new - these are agreementswhich we have already signedwith Shell, Statoil, BG, etc.” said theminister, stating that the same countriesand the same companies that areconcerned about the possible impactsof this agreement have signed similaragreements themselves with Gazprom."So why not Sonatrach?" he exclaimed,asking: "Why is the agreement betweenthe Italian ENI and Gazprom notposing problems for the EuropeanUnion whereas the Sonatrach-Gazprom one is?”For him, "the concern is misplaced andresponds to egotistical considerations".As for the possibility of swap transactions(exchange of assets or projectsbetween two companies) betweenSonatrach and the Italian ENI, MrKhelil noted that there were “possibilities”in this domain and that the twocompanies were in the process of examiningthis, in spite of their “complexity”."The difficulty is finding the projectswhich satisfy each party's objectives",he explained, emphasising that the twocompanies have already cooperated incertain projects.In this respect, he recalled the swaptransaction made by Gazprom whichsupplies the United States withAlgerian LNG, and Sonatrach whichsells Russian gas on other markets.As for a potential "Gas OPEC", theMinister was very clear, setting asideany possibility on the matter for thesimple reason that there “is not oneworld gas market, but rather three differentmarkets, namely the European,Asian and American markets”.The Minister once again explained that,unlike the oil industry, the gas industryrequires heavy investments, long termcontracts, without mentioning theinterdependency of producers andconsumers, which excludes an organisationfor gas producers.Energie & Mines153November 2006

PartnershipPARTNERSHIPEnergie & Mines154Mr Pier Luigi Bersani (Italian Minister of Economic Development)“Italy wants to increaseits economic presence in Algeria”Italy wants to reinforcefurther its presencein Algeria, particularlyin the energy,services and SMEsectors, indicated,in Algiers, the ItalianMinister of EconomicDevelopment, Mr PierLuigi Bersani, at theend of an official twodayvisit to Algeria.During a press conference,Mr Bersaniexpressed “the strongdesire of the Italiangovernment to increasethe Algerian-Italiancooperation and toreinforce the alreadylarge presence ofItalian companies inAlgeria”.“These two days have been prosperousand the meetings held with the Algerianexecutives have enabled us to confirmthat the next visit by Romano Prodi(the President of the Italian Council) toAlgeria will be very positive”, emphasisedthe Italian Minister.In his opinion, these meetings haveenabled the “already excellent” relationsbetween the two countries to beintensified and Italy, on this occasion,"has sent the Algerian government avery clear message which speaks ofcooperation and possibilities of intensifyingthe relations by investing in theinfrastructures which connect the twocountries”, added Mr Bersani.On this subject, the Italian Ministermentioned the realisation of the underwaterAlgeria-Italy gas pipeline projectvia Sardinia, baptised Galsi, as well asNovember 2006Mr Pier Luigi Bersani (ItalianMinister of EconomicDevelopment)the SME sector in which "Italy alreadyhas a significant presence in Algeria”,he emphasised.Shortly before this meeting with thejournalists, the Italian Minister indicatedthat these Algerian-Italian get-togethersshould give “major impetus toand accelerate” the realisation of theGalsi project, which should be completedin 2008-2009.“I think that we are able to acceleratethe realisation of this project throughan inter-governmental agreementwhich must solve the problems relatedto the authorisations, taxation andregulations as well as the definition ofthe infrastructure which concerns theItalian territorial waters”, specified theItalian Minister.940km long, 640km of which inAlgerian territory, the Galsi (the nameof the consortium responsible for constructingit) has a transportation capacityof 8 billion cubic metres/year. Withregards cooperation in terms of SME,Italy wishes to create a “work verificationstructure for Italian companies inAlgeria”, indicated the Italian Minister,estimating that his country's companies“can take even more place on theAlgerian market, by enlargingthe cooperation domains which arenumerous”.For example, he noted, Italy hasexpressed its desire to be able to getinvolved in all gigantic infrastructurescurrently being built, just like the East-West motorway or the Algiers's metro."Also, numerous Italian companieshave submitted tenders in managingservices" connected to these infrastructures,pointed out Mr Bersani.To a question on the sectors which mayfurther benefit from the Algerian-Italian cooperation, Mr Bersani citedthe transport sector where there are, inhis opinion, "enormous possibilities forcooperation, particularly in the railwaysector where Italian companies havesubmitted tenders for the realisation ofnumerous projects”. Italy is also interestedin the privatisation of Algeriancompanies, particularly mineral waterproductions, construction materialsplants and buildings, he indicated.This is why the first visit to Algiers ofthe current Head of the ItalianGovernment, Mr Romano Prodi, plannedfor mid-November “will be of astrategic nature and will be fundamentalfor the continuation of the bilateralAlgerian-Italian cooperation, enablingthe domain of trade to be enlarged”,confirmed the Minister. According tothe figures of the Italian Embassy,Italian exports to Algeria amounted to958 million dollars in 2005, whereasItalian imports from Algeria amountedto a total of 3.789 billion dollars."These figures will practically explodewith the completion of all projects currentlyunderway between Italy andAlgeria and on which both parties areworking tooth and nail”, specified MrBersani, emphasising that the Algerian-Italian cooperation could be used as acooperation model between Europeand the Southern Mediterranean.

PartnershipAlgeria-ItalySetting up of the board of directorsof the Algeria-Italian ForumAbout forty Italian companieswere present at thefirst meeting of theAlgerian-Italian BusinessForum which was inauguratedby the putting inplace of its board of directors."We are makinginvestments five timesmore than in Tunisia",declared the Simestrepresentative.This meeting of contacts takes placemore than three years after the twocountries, through their Ministers ofForeign Affairs, agreed, as of 2003, toput in place this cooperation framework,which is "an admission of thedelay”, according to the operators fromboth countries, if only in relation to thesolidity of the "political and economicrelations between the two countriesand whose trade dates back to the1960s in the domain of energy infrastructuresin particular”.For the Italian Ambassador to Algiers,Mr Giovan Battista Verderame, Algeriais a partner of “choice for Italy, due tothe energy requirements of the Italianeconomy” but also with regards itscountry's Mediterranean policy whichis counting on the stability in thisregion and “Algeria's role throughoutthe Mediterranean region”.Hence his call for Italian investors toget involved in the "sustainable developmenteffort" of our country. ThePresident of the Algerian Chamber ofCommerce, Mr Bendjaber, defined theoutlines of this action which must bebased "on a mutually beneficial partnershipfor both countries”.This is also the desire of Mr Chami, copresidentof the business forum, whorecalled "the Algerian-Italian friendship,even in the most difficult of times".Indeed, "Italy is the only country tohave kept its consulate open” in theblack decade, he emphasised.But that said, there is a finding of"insufficiency in the level of economicdevelopment between the two countries"and that the operators must takeup this challenge. In addition, we arerightly starting to promote the puttingin place of an easier European partnershipthan with “the Chinese andAsians whose dynamics seriously worrythe other side of the Mediterranean”.This worry is summarised by the presidentof the Association of the Region ofRome which groups together 1,500companies, Mr Francesco Morabito,who defends that the “Mediterraneanstrategy of the Italian industrialiststhrough the putting in place of the projectof Rome, the capital of theMediterranean”, expresses an availabilityto focus the investments on thisregion, part of which includes Algeria.Hence, another Forum ofMediterranean countries will bringtogether six countries, includingAlgeria. Another meeting will call uponcompanies from the countries of Egypt,Morocco, Italy, Tunisia, Lebanon and,of course, Algeria; "a business meetingto which companies from Ukraine andRussia will be invited”, continued theItalian representative. This trend isconfirmed by the Simest, a financialcompany that develops and promotesItalian companies abroad. This company'smissions are to facilitate the financingof projects, the feasibility studies,export credits, etc.For Mr Bottini, its representative, “weare making investments five times morethan in Tunisia” and our action will befocussed on the SME. It is now theturn of the company heads to makeproposals since the Italians are moreinterested in the infrastructures such astransport, water, training, etc.Energie & Mines155November 2006

PartnershipPARTNERSHIPEnergie & Mines156November 2006Algeria-SpainContract to sell 1 billion cubicmetres of gas to SpainIn Algiers, Sonatrachsigned an Algeriannatural gas purchaseand sale contract withthe Spanish electricitycompany Endesa. Thiscontract, whichconcerns a volume of0.96 billion cubic metres,was signed by theChairman and CEO ofSonatrach, MrMohamed Meziane,and the chief executiveofficer of Endesa,Mr Rafael Miranda.The agreement, which is staggered over20 years, is part of the framework ofthe future underwater gas pipeline projectwhich will directly connect Algeria(Béni Saf) to Spain (Almeria) andwhose transportation capacity is 8billion cubic metres / year. Sonatrachhas already signed two contracts of thesame type with the Spanish partnercompanies of Medgaz, namely the oilcompany Cepsa with a volume of 1.6billion cubic metres/year and the electricitycompany Iberdrola (1.6 billioncubic metres/year).A sale contract for 0.96 billion cubicmetres of Algerian natural gas a yearwas signed in Algiers between thenational hydrocarbons companySonatrach and the Spanish electricitycompany Endesa. The contract wassigned by the Chairman and CEO ofSonatrach, Mr Mohamed Meziane,and the chief executive officer ofEndesa, Mr Rafaeal Miranda.Of a contractual duration of 20 years,this transaction is part of the frameworkof the gas pipeline project whichwill connect Algeria (Béni Saf) to Spain(Almeria), Medgaz, whose transportationcapacity is 8 billion cubic metres/year,extendable to 16 billion cubicmetres/year in the second phase.Sonatrach and Endesa (the no. 1 electricityproducer in Spain) have alreadybeen bound, since 2001, by a long term(15 years) LNG sale and purchasecontract for a volume of 1 billion cubicmetres/year. They are also shareholders,10% and 21% respectively, in theReganosa (north Spain) re-gasificationproject. The amount of this contract is250 million dollars for 1 billion cubicmetres, calculated on the basis of thecurrent gas price, specified the vicepresident responsible for Sonatrachmarketing, Mr Ali Hached."If these prices stay at their currentlevel, an amount of 5 billion dollars willbe gathered in 20 years' time” headded.For his part, Mr Meziane emphasisedthat this agreement is “added to thesuccessive agreements we have concludedwith our other partners on theMedgaz Trans-Continental gas pipeline”,namely the Spanish companiesCepsa (1.6 billion cubic metres/year)and Iberdrola (1.6 billion cubic metres/year).With this agreement, which"is a further milestone towards theobjective to export 85 billion cubicmetres a year of gas that we have setourselves by 2010”, Sonatrach “consolidatesits position on the Spanish andEuropean markets as a reliable longterm supplier”, he added.The project, in which the French companiesTotal and Gaz de France (GDF)and British company (BP) also participate,is already seeing “a start of theconstruction on the Algerian Souguer-Arzew section and the appeals for tendersfor the 1st Arzew-Béni Saf sectionare underway”, continued Mr Meziane.The construction works will go on untilthe end of 2008 for all sections over alength of 1,050km, 550km of which onthe Algerian territory, 200km under thesea and 300km on the Spanish territory,explained the same speaker. Thecommissioning of this "strategic projectfor Spain and for Europe" is expectedfor the start of the year 2009.For his part, Mr Miranda "congratulated"the conclusion of this agreementand described Sonatrach as an "essentialpartner for the energy security ofseveral European markets".After recalling the importance of thecooperation relations between the twocompanies that are “leaders in theirrespective countries and in the entireMediterranean region”, the Spanishexecutive indicated that his companylooked forward to the “entry, by theend of the year, of the first methanetanker into the Reganosa re-gasificationterminal” in Spain."Sonatrach and Endesa have been mainplayers in the establishment of tradelinks between Spain and Algeria andwill continue to be so both with Spainand with the other countries of theMediterranean region where both companiesoperate”, he added.Mr Miranda, on the other hand,emphasised that his company hasbought for the Spanish market, since27 January 2001, the day when Endesareceived its first liquefied natural gas(LNG) tanker from Sonatrach, 1.59billion cubic metres of Algerian gas,worth an amount of 310 million dollars."The agreement we are signing today ispart of the long term Endesa gas supplyportfolio in Spain which, with this operation,will reach 7 billion cubic metres”,said Mr Miranda, adding that“there were opportunities and concreteprojects which represent a solid cooperationand commercial base to continueto build for the future”.

PartnershipAlgeria-SpainThe Spanish hope to compensatethe energy bill■ 105 million euros ofexport credit lines infavour of Algeriancompanies.■ Spain rankedAlgeria's 6th largestsupplier in 2005 with900 million eurosA delegation of businessmen from theregion of Catalonia stayed in our country.The three-day visit is part of theframework of the partnership agreementsigned in 2003 between the Caciand the Chamber of Commerce andIndustry of Barcelona (CCIB) and aimsto promote the cooperation field betweenthe two parties and hence enablethe companies present to prospect theAlgerian market for a potential contributionto the economic recovery programmeinitiated by the Algerian State.The Caci representative, Mr Loudini,indicated that this meeting with theCatalan businessmen, which was heldin the Sofitel hotel, the second of itskind after the one held in 2004, was“an entrepreneurial meeting to discusspartnership possibilities in a contextwhich is increasingly favourable”. Thespeaker spoke of economic growth,macroeconomic stability and the strategicposition of relations between Spainand Algeria - factors deemed to encouragethe bilateral cooperation.In fact, Spain is the no. 3 trade partner,excluding hydrocarbons, of our country.Also, trade with Algeria represents35% of the total volume of Spain'strade, which makes our country a priorityzone for the CCIB, emphasised MrLoudini.The speaker, on behalf of the Ministryof Participation, reviewed the measurestaken by the Algerian State to encouragethe movement of business mainlyfocussing on the readjustment of thelegislative framework, the reduction ininterest rates, the stability of theexchange rate and the revision of thetaxation system brought in line withMaghreb standards in a free marketcontext. Mr Hamoud Benhamdineannounced, on this occasion, the imminentvisit of Mr Hamid Temmar toSpain with the aim of explaining theprivatisation approach initiated by ourcountry and explaining the potentials ofthe public companies likely to be privatised.54 Spanish companiesoperating in AlgeriaFor her part, Mrs Maria Jesus Vidal,the business associate at the SpanishEmbassy in Algeria, committed in arouting of statistics to express the interestgiven by her country in theAlgerian market."Algeria is a priority country in Spain'strade policy given its geographic density,its geographic importance and itsenergy position”. The speaker, whorevealed the imbalance in the balance oftrade with our country, spoke of thenecessity to “compensate the costs ofthe energy bill, particularly gas”, a billwhich was 96% comprised of Spanishimports in 2004, she specified.On another level, she indicated that hercountry intends to "reinforce its presenceon the Algerian market, confirmingthat high level meetings areexpected in this perspective”.On the other hand, she revealed that anew export support programme infavour of Algerian companies for theyear 2006-2007 worth an amount of105 million euros will be imminentlyconcluded. This programme is brokendown as follows: 80 million euros forthe acquisition of goods and services, 5million euros by virtue of support forfeasibility studies and 20 million for theacquisition of equipment designed forSME. With regards the debt reconversion,she indicated that an amount of40 million euros of commercial debtwill be converted into direct investment(FDI) and 30 million euros of thepublic debt should be reconverted intopublic investment. The project is in theprocess of being finalised, she confirmed,recalling that 54 Spanish companiesare currently operating in Algeria.Energie & Mines157November 2006

PartnershipPARTNERSHIPAlgeria-FranceCoface seminar on the methodsof setting up French companiesin AlgeriaThe French export credit insurer,Coface, has announced the holding of aseminar, in Paris, on the methods ofsetting up French companies in Algeria.A comfortable financial base whichenables an “acceleration of publicinvestments within the framework of aGrowth Consolidation Plan over fiveyears which should support the activityof the non-oil sector” and “growthwhich, in 2006 and 2007, shouldremain clearly focussed” are the argumentspresented by the Coface consultingbranch for this seminar organisedon the theme of “Developing inAlgeria”. "The reality of the Algerianmarket”, its “banking environment,“the payment and guarantee methods”,the “large contracts”, and the “mediumand long term credit insurance andinvestment experience”, the “businessenvironment” and the “investmentopportunities to be seized and accesskeys” are also the themes selected forthis seminar which will be led byexperts from Coface, including MrsCatherine Monteil, a specialist in evaluatingcountry risk, Mr Jean-PierreCaussin, credit insurance and investmentmanager, and even Mr AlainTovar, deputy director of the marketingand international department.The head of the economic mission ofthe French Embassy in Algeria, MrPierre Mourlevat, as well as bankers,including the expert Mrs MurielChassing from the French bank BNPParibas, will also participate in thisseminar which will also deal with“Coface's development in Algeria”."In October 2006, Coface opened up aservices subsidiary in Algeria whichenables it to operate in domestic insuranceand exports with regards theAlgerian client”, indicated the insurer.During a recent seminar in Paris on thetheme of “Algeria: Investing in a boomingcountry", the Coface representativeemphasised the “satisfactory risk” ofthe Algerian market which has, for ayear now, been re-rated as A4, accordingto 7-level risk rating."We have received 500 new insuranceapplications for the Algerian market”,he indicated, emphasising the attractivenessof Algeria, “placed at the top ofthe African scale, in terms of hedging,in front of Morocco, Tunisia and SouthAfrica”.BanksSociété Générale is satisfied with itsinvestment in AlgeriaThe French bank Société Générale is satisfied with its investmenton the Algerian market, which "is developing well",indicated to the APS one of the members of the board ofdirectors, Mr Frédéric Genet."The Algerian market is developing well, but what is moreencouraging for us is that Algerians are enhancing in favourof good economic growth, which will push them to consumemore”, explained this banker on the fringes of the works ofthe FCE-Medef meeting.For Mr Genet, "there was a bet to play in Algeria and forSociété Générale, this bet has been won". Société Généralehas been set up in Algeria since 2000 and today operates 30branches employing 450 people compared to only 35employees when it set up. Its ambition for 2006 is to increasethe number of its branches to 40 throughout Algeria - aperformance which this banker feels “possible given thepotential market that exists in the country”.The banking sector was cited by the Medef among the “successful”French investment examples in Algeria, as well asagro-food and infrastructures.Energie & Mines158November 2006

PartnershipFrench entrepreneurs launch a pressing appeal to investin AlgeriaCoface to set up in AlgeriaIn Paris, some 350Algerian and French entrepreneursparticipated in aseminar on the theme“Algeria, investing in abooming country” markedby a pressing appeal not todelay in going there”.Agro-food, automotive and the newcommunication technologies were themain investment fields on the Algerianmarket selected for this seminar organisedby the Chamber of Commerceand Industry of Paris (CCIP).The managing director of investmentand foreign economic affairs at theMinistry of Participations and thePromotion of Investments, MrHamoud Benhamdine, reported on thecurrent macroeconomic stabilities ofthe country and explained the entireinvestment support system.He also reported on the privatisationprogramme, emphasised the State'swithdrawal "from the business sphere”and described the structuring dimensionof the complementary economicgrowth support plan. Faced with thisset of flexible technical and legal procedures,aiming to make the investmentaction more fluid and secure, “thestock of French direct investments(FDI) in Algeria far from reflects theopportunities which the Algerian marketoffers and the extent of the businessrelations”, emphasised, for his part, therepresentative of the Algerian Embassyin France, Mr Djamel EddineBennouam.He called upon his audience "to betterappreciate the appeal of the Algerianmarket", having previously recalled that"the exceptional partnership (2003)remains the road map between the twocountries”."The weakness of these French FDI"was then the subject of a large debate,particularly leading Mr Michel deCafferli, president of the FrenchChamber of Commerce and Industry inAlgeria (CFCIA) to launch an appeal toFrench investments to come here and“invest now”. "We have to occupy theland”, he emphasised, mentioning the“extremely stiff” international competitionon the Algerian market."To better understand the opportunitiesoffered by this friend country, we haveto move", he continued."Algeria will give you a very warm welcome”,he said to the French entrepreneurs.This encouragement to come toinvest in Algeria was also developed bya representative of the French Embassyto Algiers, Mr Sebastien Andrieux, whorevealed “the very favourable context ofthe business climate in Algeria which,currently, is one of the least indebtedcountries in the world”, noting that theAlgerian market is marked by noninflationistgrowth. "Our investmentsare certainly weak in Algeria but theywill only increase”, emphasised, for hispart, a representative of the FrenchMinistry of Finance, Mr Raphaël Bello,who mentioned the structuring investmentprogrammes of the Algerian Statewhose financial package is makingforeigners “shake with envy”."Today's context is favourable to dialogue”to boost French FDI, he continued.The representative of the Frenchcredit insurer Coface, an export supportorganisation, also participated inthis seminar to emphasise the satisfactoryrisk of the Algerian market, reratedsince a year ago as A4, accordingto a 7-level risk rating. "We have received500 new insurance applications forthe Algerian market”, he indicated,emphasising the attractiveness ofAlgeria, “placed at the top of theAfrican scale, in terms of hedging, infront of Morocco, Tunisia and SouthAfrica”.Coface “will probably set up in Algerianin the coming days", he added, toextend its activity in partnership withthe Algerian insurance company Sagex.Energie & Mines159November 2006

PartnershipPARTNERSHIPEnergie & Mines160November 2006MedefFrench companies will have morepresence in AlgeriaThe Mouvement desentrepreneurs de France(Medef) expressed, inAlgiers, through its firstrepresentatives, thedesire of French entrepreneurs,particularlythose of the SME, to bemore present on theAlgerian investment andbusiness market."There is undoubtedly a real desireto work together between theFrench and Algerian business communities”,emphasised, during apress conference, Mrs LaurenceParisot, president of theMouvement des entrepreneurs deFrance (Medef), leading a delegationof 70 company heads to reinforceprospecting of the Algerianmarket. Among the assertions madeduring these two days of works betweenthe FCE and the Medef, MrsParisot cited Algeria's macroeconomicindicators which reveal “a hugepotential for future development”.In her opinion, the French entrepreneurspresent in Algeria havealso appreciated the “modernity"which is starting to characterise theAlgerian economy. Today, "we haveto think of things in a new way”,she stated, emphasising that theFrench investments in Algeria haveincreased by 75% in one year, that200 French companies operate hereand that 6,000 jobs had been createdby these companies. To a questionon "the possible repercussionsof political relations on the economy”,Mrs Parisot indicated thatduring these two days “there wasno discussion on politics”. For hispart, the president of the Algeriancommittee of Medef, Mr Yves deSilguy, confirmed that at no timehad the political relations betweenthe two countries influenced theeconomic relations which remain“vigorous, structural and representativeof a climate of trust”. "We willshortly welcome the FCE to Paris tomake a report and see what hasworked and what hasn't worked”,said Mr de Silguy.To a question on the competitionwhich is increasingly being establishedin Algeria between foreigncompanies, particularly in thedomain of energy, where theFrench companies are “barelyrepresented”, Mr de Silguy felt thatit would be “dangerous” for theforeign investors to focus investmentson a single sector. In his opinion,"it is preferable to invest in thelong term in various sectors (agrofood,transportation, pharmaceutics,etc.) than be solely present inthe hydrocarbons sector”."Excluding hydrocarbons, theFrench companies remain the topinvestors in Algeria”, he summarised,thus boasting that, in his opinion,these are investments will“contribute to increasing knowhowand creating jobs”. The FrenchSME and SMI intend to invest innew sectors such as tobacco, accordingto the Medef executives. "Forthis reason, I do not think that therehas been any coldness from Frenchentrepreneurs”, said Mr de Silguy,arguing the presence in Algeria of“large French companies” as“examples of successful investmentin Algeria”, he said.Mrs Laurence Parisot,president of the Medef"French companieswant to work moreand better inAlgeria”The works of the third round of regular meetings betweenthe Algerian Forum des chefs d'entreprise (FCE) and theMouvement des entreprises de France (Medef) took place ina closed session in Algiers to continue the investigations intothe partnership possibilities between the Algerian andFrench economic operators.The French delegate, made up of some 80 company headsrepresenting a large range of business sectors (banks, energy,construction, environment, services, agro-food industry),was led by the president of the Medef, Mrs Laurence Parisot.The morning's programme scheduled a meeting betweenFrench operators particularly on the development of the politicalsituation and Franco-Algerian bilateral relations, thedevelopment of the French investment in Algeria, vocationaltraining as well as the business environment and its operatingconditions in Algeria under the heading: "How to investin Algeria in 2006”The Algerian party spoke in the afternoon for a closed sessionmeeting also with a speech by the Minister of FinancialReform, Mr Karim Djoudi, and the presentation of an investmentsupport scheme which will be illustrated by practicalcases of foreign investments in Algeria (the case of Henkeland Schneider Electric, as well as the relocation of a factoryfrom China to Algeria).This visit's programme, which finishes today, includes directmeetings between the companies of both countries, discussionsin plenary sessions on bilateral cooperation and theopportunities offered to companies for them to be able tocommit to the construction of "solid partnerships", heemphasised.In a recent statement to the APS, the president of theAlgerian committee of international Medef, Mr Yves-Thibaultde Silguy, indicated that this meeting aimed to “encourageFrench companies to be more present and more audacious"on the Algerian market.For its part, the Forum des chefs d'entreprise (FCE) wantedthis meeting to be able to help to "promote the developmentof more solid and more balanced business partnership relationsbetween the Algerian and French companies".The FCE, along with the Medef, was the initiator of this meeting,which follows on from those of 8 February 2005 inAlgiers and 15 November 2005 in Paris.

PartnershipAlgeria-Great BritainTowards a multiform, “fruitfuland consistent" political dialogueAlgerian-British relationsare likely to be given newimpetus further to the officialannouncement of thefounding of the "bilateralrelations commission" betweenAlgeria and GreatBritain during the visit ofthe President of theRepublic to the UnitedKingdom, it was revealedin London.This commission "will manage bilateralrelations and lay down the legal basis fora multiform, fruitful and consistent politicaldialogue” particularly noted the twoparties during the signature, last monthin Algiers, of the memorandum of thecreation of the commission and of thecooperation mechanism between the twocountries when the Algeria-British forumwas held. This document comprises twosections: political cooperation and economicrelations."This memorandum will enable the economicrelations to be intensified andencourage British companies, likely tohave a determining role adapted to theirmeans and the capital experience, tocontribute to the realisation of importantdevelopment programmes planned by theeconomic recovery programme for thedevelopment of the Hauts Plateaux andthe South”, according to the joint statementmade public during the visit toAlgiers of the British Secretary of Statefor the Middle East, Mr Kim Howells.The committee is the culmination of asupported development process of bilateralrelations with, as its focal point, theentry in force, in June 2005, of the agreementrelated to the importing by theUnited Kingdom of Algerian gas. Thisagreement reinforces the partnershiprelations which Algeria intends to enlarge,particularly in the economic domain,in view of increasing the volume ofBritish investments and establishingcooperation in the cultural and scientificdomains, especially given that, since thesecond half of 2005, trade has reachedimportant growth levels after the entry inforce of the gas contract betweenSonatrach and British Petroleum (BP) inJune 2005. The volume of Algerianexports to the United Kingdom has gonefrom 44.6 million in 2005 to 497.385million delivered in 2006 (1 pound = 0.7euros).Algeria has thus become the no. 3 Arabexporter to Great Britain after SaudiArabia and Egypt whereas it had been inlast place, according to the statistics ofthe British Department of Trade.The gas agreement has marked the startof a fundamental change in the Britishpolicy towards Algeria, with the labourgovernment led by Prime Minister TonyBlair having shared its desire to revampand restart Algerian-British relations inthe aftermath of the revaluation of theBritish political orientations with regardsthe Middle East and North Africa. Thisrevaluation has led to the necessity torebalance these relations in favour of theArab Maghreb region and Algeria, particularly,has become an essential energysupplier of the United Kingdom whichhas gone from a producer status to animporter status after the depletion of theNorth Sea fields.Other than Norway, Algeria is an energysupply alternative for Great Britain,which is working on reducing its dependencyon Russia.According to a study drawn up on behalfof the British Department of ForeignAffairs, Algeria is ranked at the top ofArab candidate countries for a strategicpartnership with Great Britain, not onlybecause the energy needs of the latterrequire it in the framework of the diversificationof supply resources, but alsobecause Algeria responds to the criteriaopening up the doors to this partnership.These five criteria authorising a countryto enjoy the quality of the strategic partnershipof Great Britain are related to theenergy resources, to the development andtrade means, to the security cooperation,to the fight against illegal immigrationand to the relations with the EuropeanUnion.According to the speakers, the year 2006should mark a decisive turning point inthe bilateral relations, given that theBritish business milieus have becomeaware, thanks to several meetings, of theinvestment opportunities in Algeria andof the strong potential of the Algerianmarket boosted by the 2005-2006 economicrecovery programme.The reduction of Algeria's risk to level 2,by the official British export credit guaranteedepartment, supports this forecastand opens up the path to credits, confinedbeforehand to hydrocarbons, toencompass all investment sectors.Furthermore, the expected structuringimpact of the entry in force, in June2005, of the gas importing contract hasencouraged the British party to worktowards finding formulas which enable abalance of the trade relations between thetwo countries and an enhancement of thepartnership. Hence, the Algerian-Britishrelations have extended to the cooperationin the fight against terrorism andillegal immigration; two points whichhave always been the source of divergencesas Great Britain was a refuge for theterrorist groups and a tribune of propagandafor the extremists.Also the signature of a judicial cooperationagreement thanks to the visit of thePresident of the Republic is of particularimportance for the future of the relationsbetween the two countries in all domains,particularly in the penal, judicial andconsular matters.In this context, we should very shortlyarrive at the signature of agreements andconventions related to guaranteeinginvestments, non-double taxation and thecultural, scientific and technical cooperationwhich will boost bilateral relationsand consolidate them by a legal framework.Energie & Mines161November 2006

PartnershipPARTNERSHIPAlgeria-United KingdomOfficial Visit of PresidentBouteflikaEnergie & Mines162Algeria and Great Britainhave agreed to breathenew life into the relationsbetween the two countries,by favouring theemergence of a real politicaldialogue and puttingin place mechanismscapable of providing newimpetus to the bilateralcooperation.November 2006The joint press release, made public atthe end of the meeting between thePresident of the Republic, MrAdbdelaziz Bouteflika, and the BritishPrime Minister, Mr Tony Blair, reportsthe signature by Algiers and London ofan agreement to put in place a jointcommission, at the ministerial level, toenhance the political and economicdialogue. This commission is to meetup once a year.President Bouteflika and the BritishPrime Minister, in this framework,expressed satisfaction at the inauguralround held in Algiers, last June, with afollow-up round held in London, inOctober 2005 – a round which particularlyenabled the economic relationsand the investment opportunities inLondon to be examined, emphasisedthe press release. Dealing with theinter-parliament relations, the pressrelease indicated that PresidentBouteflika and the British PrimeMinister welcomed the formation ofthe UK All Party Parliamentary Groupon Algeria and looked forward to futurecooperation between the twoParliaments in support of democracy,reform processes, business developmentand mutual understanding, notedthe press release. With regards investmentand taxation, the President of theRepublic and the British PrimeMinister looked forward to the conclusionof negotiations on an InvestmentPromotion and Protection Agreement(IPPA) which will facilitate the continuedstrong commercial links betweenthe two countries. Furthermore,Algeria and Great Britain will also examinethe possibility of negotiating abilateral Double Taxation Convention.With regards debt prepayment, bothparties welcomed the recent agreementand completion of payment of Algeriandebt to the UK within the Paris Clubframework and looked forward to asuccessful round of negotiations regardingthe Algerian debt to the UK withinthe London Club framework. Withregards judicial cooperation, Algeriaand Great Britain, continues the pressrelease, have signed four legal treatieson extradition, mutual legal assistancein criminal matters, judicial cooperatingin civil and commercial mattersand the readmission and circulation ofpersons.The press release further adds thatPresident Bouteflika and PrimeMinister Blair exchanged letters on theframework for nationals who present athreat to national security. Withregards security and defence cooperation,the press release noted that bothparties have noted with satisfaction thejoint intention to conclude a formalbilateral Memorandum of understandingon Defence and Security inconformity with constitutional requirements.This cooperation will reflect theongoing and expanding lines of practicalcooperation between the defence,security and law enforcement authoritiesof the two countries in combatingterrorism and its causes.Algeria and Britain furthermoreemphasised their commitment to includejoint military exercises, training,visits and defence equipment procurementdiscussions. With regards business,the President of the Republic andthe British Prime Minister agreed toencourage an increase in two-way businessand investment, whilst noting withsatisfaction the strong presence of UKcompanies in the hydrocarbons' sector,particularly British Petroleum. Theyfurthermore expressed their desire forgreater UK participation in projectsfinanced by Algeria's sizeable publicinvestment programme.With regards visa services, the BritishPrime Minister expressed the UK'sdetermination to extend the capacity ofthe British Embassy in Algiers to offer afull range of consular and visa serviceswhen, as is planned, a new BritishEmbassy is built which is foreseen toopen in 2008. Finally, in terms ofscientific cooperation, the press releaseindicated that Algeria and Great Britainwelcomed with satisfaction the intentionto sign a Memorandum ofUnderstanding between the BritishNational Space Centre and theAlgerian Space Agency ASAL and welcomethe restart of cultural cooperation,particularly after the decision toreopen, in Algerian, the UK culturalcentre, the British Council.

PartnershipPresident Bouteflika“I am certain that our two countries will takeinspiration from this immense tradition of cooperationthat was put in place in the 16th centuryby Elizabeth I and the Regency of Algiers”The President of the Republic, Mr Abdelaziz Bouteflika,gave a speech in London to the British parliamentarygroup on friendship with Algeria.Here is the full text of the speech: "Ladies and Gentlemen,it is with great pleasure that I welcome the emergence ofthe UK All-Party Parliamentary Group on Algeria at thesame time as I am making an official visit to the UnitedKingdom upon the invitation of his Excellency the PrimeMinister, Mr Tony Blair.I would like to give my warmest congratulations and ferventwishes of full success in the accomplishment of thisparliamentary diplomacy which guides your accomplishmentsand your initiatives. There is no doubt that yourAlgerian colleagues, soon to be comprised in a similargroup, will find with you the paths of a fruitful and creativedialogue. We are living in a period of phenomenal andrapid change and the action of parliamentarians translatesthe aspirations of citizens and has an impact on theirlives.In this dialogue the responsibility of the parliamentarian iscomplex: how to organise the understanding between thepeople around usual and unanimously recognisedvalues? How to celebrate human fraternity by defining themarks of solidarity and the necessary well-being to bepromoted for everyone?With you all assembled here, there will be no escape thatthese questions result in the sense of our orientations andthe definition of our expectations. Here even, in this prestigiouscentre, still resonate the voices of pioneers, whowere ardent defenders of freedoms and human rights,that were also certain to offer the world legal State andgood governance models. It is not necessary to go backas far as the signing of the Magna Carta and theRunnymede stakes which have contributed to the buildingof our society and provided the foundations of our State.Your Algerian colleagues and yourselves will undoubtedlyfind in your imminent contacts the paths and means to stimulateour relations and specify the guidelines for our parliamentarydiplomacy in the current international context.A Mediterranean country, Algeria is at the crossroads ofthe European, African and Arab worlds and its culturalsubstrata reveals the wealth of contributions of each ofthese cultures in a symbiosis which highlights the possibilityand the value of dialogue between them. I am certainthat our two countries will take inspiration from thisimmense tradition of cooperation that was put in place inthe 16th century by Elizabeth I and the Regency ofAlgiers.The discussions I have just had with the Prime Ministerhave shown just how much we share the same analyseswith regards how the world is changing. These discussionsenable us to set down the bases of an ambitiouspartnership that is open to all business areas. In theMediterranean region, we have made the commitment towork to set up a co-development and shared solidarityregion between its north and south banks. In a world thatis now shaped by globalisation, our action will be complementaryand coordinated for universal integration infavour of peace, cooperation and concord between allpeoples and to carry out together a merciless fight againstterrorism which, yesterday, struck Algeria, and which youexperienced last year, through our mutual agreement todefend the right to live. By congratulating your group onceagain, I would like to say that this will, for me, be quite aspecial pleasure to see you soon in Algiers and to thenmeasure the progress we have made in a friendly andfruitful cooperation between our two peoples and our twocountries.Thank you."Energie & Mines163November 2006

PartnershipPARTNERSHIPAlgeria-AlbaniaEnergy cooperation agreementThe Algerian-Albaniancooperation agreementin the energy and minedomains was signed inAlgiers between theMinister of Energy andMines, Mr Chakib Khelil,and the AlbanianMinister of Energy,Finance, Trade andEnergy, Mr Grunc Ruli.This agreement, which gives officialrecognition to the first visit toAlgeria of an Albanian Minister ofEnergy, particularly relates to a projectto supply Algerian oil productsto Albania and the possibilities ofdeveloping other cooperation projectsin other domains such as electricityand the transportation ofhydrocarbons, indicated Mr Khelilto journalists.Both parties also supported theprinciple of sustainable developmentfor exploring hydrocarbons as wellas cooperation in the mining domainwhich offers, it was emphasised,interesting and complementaryopportunities for both countries."This short visit has been fruitfulsince it has enabled us to developsolid projects and consider others”,revealed Mr Khelil.The Albanian Minister said he wassatisfied with his stay which shouldenable, in the unanimous opinion ofthose present, the economic relationsbetween the two countries tobe increased, particularly in theEnergy and Mines sector. "We havebeen able to explore the cooperationopportunities”, which today arenon-existent in the differentdomains such as the supply ofAlgerian oil products and the developmentof the mining industry.Chakib Khelil :“Both countries wishto develop relationsin the energy domain”The Albanian Minister confirmed that “thetime has come to increase our economicrelations”.Algeria and Albania wish to develop energyrelations together which, today, are nonexistent,indicated the Minister of Energyand Mines, Mr Chakib Khelil, at the end ofa meeting with the Albanian Minister ofEnergy, Finance and Trade, Mr Grunc Ruli,during his first visit to Algeria. The meetingsparticularly dealt with the cooperationpossibilities in the domains of exploringand producing hydrocarbons, the sale of oilproducts and potentially supplying Albaniawith Algerian gas through the Europeangas pipelines, as well as the domains ofelectricity and mines, specified Mr Khelil tojournalists.“We have studied the trade opportunitiesbetween both countries and identified thepossibilities of cooperation, particularly inthe domains of supplying Albania with oilproducts, especially LPG and LGN, evennatural gas through the European gaspipelines, and Albania is geographicallywell placed for the interconnections”, saidthe Minister.Both parties also dealt with the possibilityof cooperation in the domains of LPG storage,electricity and mines. This last sectoroffers a complementarity between the twoparties given that Albania has large wealthin terms of nickel, copper and chrome whereasAlgeria has none. "We have discovereda complementarity between Albania,which produces chrome, nickel and copper,and Algeria which produces other metals”,revealed the Minister. He indicated thatboth parties have agreed to exchangedelegations to study the possibilities ofdeveloping projects in these domains.For his part, the Albanian Minister said hewas “honoured” by this visit to Algeria withwhich, he said “we have always have goodpolitical and diplomatic relations”, but that“we now need to extend the economic relations”.“I think that the time has come to increaseour economic relations” especially giventhat the two countries are located in thesame Mediterranean region and are both inthe process of transformation to integratethe world economy.He added that his country wished to reinforcethe direct bilateral cooperation withAlgeria, particularly in the domains of energy,electricity and mines.“We have discussed cooperation opportunitiesbetween the two countries in thehydrocarbons and electricity sectors andsupplying Albania with Algerian gas, aswell as other sectors”, he said.Algeria's host, who finished his visit, shouldstill meet other Ministers, particularly theMinister of Finance.This visit, which marks, he emphasised,the beginning of “intense development” incooperation in economic and particularlyenergy terms with this country, whoseneeds for these products are important, willbe officially recognised by the signature ofa report on the discussions held betweenMr Khelil and his Albanian counterpart.Energie & Mines164November 2006

PartnershipAlgeria-NorwayTowards Sonatrach taking sharesin Norwegian deposits“The Algerian nationaloil company wishes totake shares in theNorwegian deposits inexchange for increasedNorwegian presencein Algeria.We discussed taking shares in theKristin deposit. The Tyrihans deposit, anew deposit currently being constructedin the Norwegian Sea, was also apossible shareholding for the Algeriancompany Sonatrach. Over the last sixmonths, Statoil and the Algerian oilcompany Sonatrach have had an agreementon joint investments. But thework has also been stopped. Algeriaworked hard to introduce new legislationand reorganise its oil and gas sector,amongst others, to facilitate theentry of foreigners (on the Algerianmarket). But they are now ready tospeed things up.We wish to balance the relationship andtrade together in the world, perhaps inAfrica, and we are discussing if we cantake shares in the deposits throughoutNorway.• The Kristin deposit is one of thenames, and several other deposits, saidthe Chairman and CEO of Sonatrach,Mr Mohamed Meziane.Up to present, Sonatrach has only operatedon the ground, in the desert sand,but it might then obtain a concession inthe sea along the Norwegian coast. MrMeziane is in charge of the public giantwhich dominates the Algerian oil andgas industry. Whereas Algeria suppliesthe clients of the European gas marketthrough the South, Norway is the mainsupplier from the North. Now, the twolarge players in the European gas markethave found each other. Sonatrach'sdirector almost does not know how tosufficiently pay tribute to the relationshipwith Statoil.• We are both national oil companies,we have the same origins. We both sellgas to Europe. We have a lot in commonand are able to find good synergies,said Mr Meziane.Statoil has a great presence in Algeria'soil and gas industry and is the secondlargest foreign investor in the country.- We have had a great start. Algeria isalready one of the most importantcountries in Statoil's portfolio. Statoiland Algeria go extremely well togetherand the relations are particularly good,said Statoil's Head of North Africa, MrOttar Rekdal.The cooperation with Sonatrach is anexample of Statoil's active strategy tolook for cooperation with other nationaloil companies. The continuousgrowth in Algeria may therefore beaccomplished through Statoil offeringSonatrach shareholdings in theNorwegian deposits in exchange forincreased Norwegian presence inAlgeria.• I hope that Sonatrach can procureshareholdings in the Norwegian deposits,said the country's Minister of Oil,Mr Chakib Khelil.• There is enough oil in the world. Oilreserves are high. Up to now, the oilprice has not hindered the world economyand growth. The world is experiencingneither a crisis nor inflation. Icannot see the oil price fall below 50dollars in the next three months, orbelow 50 dollars on an annual basis,said the influential Algerian Minister ofOil, Mr Chakib Khelil.Mr Khelil had previously been presidentof the Organisation of PetroleumExporting Countries (OPEC) and peoplelisten to him when he talks aboutthe price of oil. He emphasised howproblems in several oil producingcountries have contributed to increasingthe oil price: Nigeria, Venezuela,Iran and Iraq. In Saudi Arabia, also,there have been attacks against the oilfacilities”.Energie & Mines165November 2006

PartnershipPARTNERSHIPAlgeria-TurkeyAlgiers and Ankara signa friendship and cooperation treatyAlgiers and Ankara have committed to promote bilateral cooperation in the political,economic and cultural domains as part of the friendship and cooperation treaty whichwas signed in the presence of the President of the Republic, Adelaziz Bouteflika, andthe Turkish Prime Minister, Mr Recep Tayyip Erdogan.Energie & Mines166In this perspective, Algeria and Turkeyplan to develop the political dialoguethrough the institutionalisation of ahigh-level annual meeting betweenboth countries' heads of governmentsas well as ministerial meetings whichwill be held in Algiers and Ankara.The two countries also agreed to boosteconomic cooperation and increaseinvestment, particularly in the developmentof small and medium-sized enterprises(SME), whilst stepping up bilateralcultural exchanges and know-howin this domain.By virtue of this treaty, both countriesalso plan to encourage mutual culturalactions, by granting specific importanceto promoting culture and Arabic andTurkish language teaching in Algeriaand in Turkey.The Turkish Prime Minister indicated,in a press statement at the end of thesigning ceremony, that Algeria andTurkey are “two brother countries, profoundlyconnected to each otherthrough historic links”.He added that the signing of thisfriendship treaty is a “revealing sign”that “starts a better and prosperousfuture” for both countries. "This is atreaty which will enable us to betterconsolidate our cooperation in the political,economic, military and culturaldomains”, further stated Mr RecepTayyip Erdogan.By virtue of this treaty, Algeria andTurkey have committed to develop andpromote bilateral cooperation in thepolitical, economic and culturaldomains.At the political level, both parties haveplanned the institutionalisation of a“high level” annual meeting betweenthe two countries' heads of governmentas well as ministerial meetings to beheld alternatively in the two capitals.November 2006The two countries also agreed to boosteconomic cooperation and increaseinvestment, particularly in the developmentof small and medium-sized enterprises(SME), whilst stepping up bilateralcultural exchanges and know-howin this domain. The treaty also plans to“encourage” mutual cultural actions,by granting “specific importance” topromoting culture and Arabic andTurkish language teaching in bothcountries.Talking at the end of the signing ceremony,the Turkish Prime Ministerconfirmed that this friendship treatywas a “revealing sign" that "starts a betterand prosperous future" for bothcountries. During this visit, the firstone made by a Turkish Prime Ministerin 21 years, the businessmen from bothcountries met in a forum in Algiers.On this occasion, the Minister ofParticipations and the Promotion ofInvestments, Mr Abdelhamid Temmar,expressed his desire to see Turkishinvestors "more present" in Algeriaeither through direct investments, orthrough the company privatisation processinitiated by the country”, recallingthat “900 companies from all businesssectors are being proposed for privatisation”.In front of the two countries'businessmen, Mr Temmar described anumber of structuring advantages ofthe national economy, particularly agrowth rate which “today, is 5%, andwhich should reach between 7 and 8%in the next three years and an unemploymentrate reduced to 14% at theend of 2004 which should reach 12% in2007”."We have put in place a strategy aimingto restore the country's political andeconomic stability, thus enablingAlgeria to record 8.5 billion dollars offoreign investment in 2005”, he said.Mr Temmar also reported "the stableinvestment environment which Algeriais currently enjoying”, specifying thatthe “pharmaceutical products, chemistry,buildings and public works, shipbuilding sectors and the agro-foodindustry are all sectors which are offeredto Turkish economic operators”.He also stated the three large developmentschemes launched by the country,namely the growth support programmeand the complementary developmentprogrammes for the wilayas of theSouth and the Hauts Plateaux, mobilisinga financial package of 80 billiondollars. For his part, Mr Erdogan, whosupported the "very serious" transformationprocess initiated by Algeriasince 1999, “illustrated by favourableeconomic parameters”, added that “ithas launched an ambitious programmefor building a million houses”.In this respect, he invited his country'spromoters to monitor this programme“very closely”, feeling that the Turkishexperience in the construction domain“may be transferred to Algeria”.Mr Erdogan also confirmed that theconstruction of dams, inter-city roadsand the distribution of water are,amongst others, domains where Turkeyhas recorded “remarkable evolution”.

PartnershipAlgerian-Turkish businessmen forumGood business on the horizonOther than the directinvestments proposed tothe Turkish businessmenin different economicdomains, Mr Temmar alsoinsisted on the privatisationprogramme of publiccompanies which “certainly,he said, have financialproblems but they alsohave good markets”.About fifty Turkish businessmen whoaccompanied the Turkish PrimeMinister, Mr Recep Tayyip Erdogan,on an official visit to Algiers, met up atthe El Mithaq residence with theirAlgerian counterparts from theMinister of Participations and thePromotion of Investments, MrAbdelhamid Temmar, the president ofthe Caci, Mr Ali Djabbour and Turkishpresidents of the Foreign EconomicCommission and the Stock Exchangeas well as members of the government.Mr Temmar initially emphasised in hisspeech the importance of the effortsmade by Turkey in terms of development,speaking of the “Turkish miracle”.He invited the businessmen to comecloser together to do business in themutual interest of both countries whosepolitical relations are at the highestlevel and particularly between the twoHeads of State.After reviewing the efforts made byAlgeria at the macroeconomic level, MrTemmar indicated that our country willachieve economic growth of around 7%in the next three years.Other than the direct investments proposedto the Turkish businessmen indifferent economic fields, he also insistedon the privatisation programme ofpublic companies which “certainly, hesaid, have financial problems but theyhave good markets”.The Turkish Prime Minister also spokein the same perspective of reinforcingthe Algerian-Turkish cooperation andin all economic domains given, headded, the major investment opportunitieswhich Algeria offers. He waskeen to emphasise Turkey's andAlgeria's interest to go beyond the frameworkof trade to move towards reciprocalinvestments. This means takingadvantage of these favourable economicand political conditions to do"good business" between Algerians andTurks. After presenting two reports onthe regulatory framework on investments,the businessmen from bothcountries sat around tables to speakface-to-face on paths and means enablingdirect investments to be made.Energie & Mines167November 2006

PartnershipPARTNERSHIPThe Minister of Industry in Iran1 st Symposium of Algerianand Iranian businessmenThe Minister of Industry,Mr Mahmoud Khedri, copresidedwith the IranianMinister of Trade, Mr MirKhademie, over the opening,in Tehran, of the 1stAlgerian-IranianBusinessmen Symposiumorganised by both nationalChambers ofCommerce and Industry.After recalling the excellent relationsbetween the two ministries, thanks tothe desire of the President of theRepublic, Mr Abdelaziz Bouteflika, andthe Iranian President, Mr MahmoudAhmadinedjad, the Minister ofIndustry suggested creating an evaluationand monitoring committee plannedby the master industrial cooperationagreement signed in 2003.Targeted actions in the standardisation,the quality system, metrology andindustrial property will be major areasof cooperation through exchangingexperience between the organisationsand technical centres of both countries.The Minister of Industry also recalledthe major infrastructure works initiatedin our country and explained the promisingareas of Algerian industry withregards the increasing needs of thedomestic market. He launched anappeal to Iranian industrialists to investin Algeria, which grants many advantages,incentive measures and otherexemptions following the general andexemption investment schemes, inaddition to the additional facilities andarrangements provided by the texts ofJuly and August 2006. Mr Khedri alsohighlighted the guarantees offered byAlgeria to investments, in accordancewith the bilateral and multilateralinvestment protection agreements(Cidri) and the Multilateral InvestmentGuarantee Agency (Miga).This has led to the opening up of aEnergie & Mines168November 2006large area in our country intended forour partners and to encourage allinitiatives.The Minister of Industry dealt with, atlength, the opportunities and comparativeadvantages, particularly the evergrowinglocal market, the skilledlabour, the competitive natural gas andelectricity prices, the abundance ofnatural resources and the proximity ofthe markets of the European Union towhich Algeria is bound by an associationagreement stipulating specific provisionsfor exporting the productsmanufactured in our country.Mr Khedri proposed giving theAlgerian-Iranian cooperation objectivedimensions on the basis of a rationalvision guaranteeing sustainable partnership,free-trade and useful investment.The Minister of Industry reconfirmedthe right of developing countries andtransition economy countries to developtechnological scientific research asa legitimate demand recognised by theinternational agreements, includingresearch in the domain of nuclear energyfor peaceful purposes dealing withmedicine and economic development,in the respect of the internationalagreements, particularly the treaties onthe non-proliferation of nuclear weaponsby all countries, without distinction.International cooperation, on bases ofjustice and legitimacy, is the best routefor maintaining international securityand peace, in favour of people and thefight against poverty, famine, pandemics,illiteracy and plagues, concludedthe Minister of Industry.The setting up of the Evaluation andMonitoring Committee was, furthermore,at the centre of the preliminarydiscussions between Mr MahmoudKhedri and Mr Moufidi, IranianDeputy Minister of Industry, the presidentof the public holding company ofIranian industries (Idro). An agreementwas concluded between the twoparties in view of creating this mechanismthat is able to enable the identificationof determined bilateral cooperationactions. The Minister of Industryproposed holding this committee's firstmeeting in Algiers.Furthermore, the discussions onexports continued, leading to an agreementbetween the two standardisationorganisations.

PartnershipAlgeria-Saudi ArabiaMeeting of the Algerian-SaudiBusinessmen Council in AlgiersThe Algerian-SaudiBusinessmen Council met forthe 3rd time in Algiers to examinemeans of reinforcingthe domains of cooperationbetween the two countries.The meeting was inaugurated by the presidentof the Algerian Chamber ofCommerce and Industry, Mr BrahimBendjaber, in the presence of about fifteenAlgerian operators representingseveral industries and their Saudi counterparts.In his opening speech, Mr Bendjaber statedthat the holding of this meeting inAlgiers is an opportunity to boost thetrade and economic activity between bothcountries.He further specified that this meeting“will enable the Algerian and Saudi businessmento reinforce their relations andget closer together”, emphasising that thecreation of this council, which groupstogether the parties interested by theAlgerian and Saudi markets, aims toremove the obstacles hindering the developmentof economic relations betweenthe businessmen in both countries.The head of the Saudi businessmen delegation,Mr Mohamed Ben Abdallah BenAdouan, for his part indicated that this3rd meeting of the council is an opportunityto look at the investment opportunitiesin Algeria whilst removing all obstacleswith which the economic operatorsare confronted. He added that Algeria is apromising market and has enormouspotentials whilst emphasising the interestof Saudi operators for numerous cooperationand investment domains in Algeriaand for increasing the volume of tradebetween the two countries. The representativeof the Ministry of Participations andthe Promotion of Investments, MrHorcine Bendhif, presented the facilitiesand legal guarantees and procedures forinvesting in Algeria.In a press statement, he specified that allthe economic public companies can beprivatised, which is an opportunity forSaudis and other foreigners from Arabcountries to invest in Algeria. He quotedSaudi Arabia's current projects in Algeriasuch as the Sider group in the domain ofconstruction which has over 12 partners,including Jordan and Palestine as well asother giant projects in the tourism sectorcurrently being drawn up and thePharaon group in partnership with theBéni Saf cement plant. He recalled thatseveral other projects are being studiedwith the Saudi businessmen.Saudi industrialistswant to speed uptheir investments inAlgeriaThe Saudi industrialists want tospeed up their investments in Algeria,confirmed, in Algiers, the co-presidentof the Saudi part of the Algerian-Saudi Business Council, MrMohamed Ben Abdellah BenOudouane, during an audience grantedby the Minister of Trade, Mr ElHachemi Djaâboub. The meetings,which took place in the presence ofthe board of the SGP Développementagricole and co-president of theAlgerian part of the council, MrBelhouadjeb Bayzid, have enabledus “to take a large look at the futureof trade and business relations betweenAlgeria and Saudi Arabia”, indicateda press release from theMinistry. Stating that the current levelof trade and business exchanges “isbelow the potentials offered by theeconomies of both countries”, bothparties “committed to work further tointensify the contacts between theeconomic operators of both countriesin view of exploring and identifyingsolid outlooks for economic cooperationand the development of trade”,continues the press release.Furthermore, both parties "welcomedthe holding of the 3rd session of thecombined Business Council whichwas the opportunity for several meetingsbetween the Algerian and Saudieconomic operators which open uppromising perspectives of partnershipsand concrete achievements ofinvestment projects in both countries”.Finally, both parties dealt withthe issue of the Arab free trade areaand the need to set it up, adds thesame source.Energie & Mines169November 2006

PartnershipPARTNERSHIPAlgeria-OmanCreation of a jointbusiness councilThe 4th session of the Algerian-Omanijoint commission was officially recognisedby the signature of two agreementsrelated to the “creation of a jointbusiness council” and to “scientific andtechnical cooperation". The session'sclosing ceremony and the signing ceremonyof the two agreements was copresidedby the Minister of State,Minister of Foreign Affairs, MrMohamed Bedjaoui, and his counterpart,Mr Youssef Ben Aloui BenAbdellah. Mr Bedjaoui, on this occasion,welcomed the "good results reachedby the two parties during this session'sworks", which, he emphasised,have contributed to the "reinforcementof the legal framework between the twocountries through the signature of theagreement to create a Business Counciland that of the scientific and technicalcooperation". This meeting, added MrBedjaoui, has also enabled "the twoparties to lay down solid foundationsfor the future of the relations betweenthe two parties" and to "define the prioritiesof bilateral cooperation, particularlyin terms of investment through thepartnership and privatisation system,especially in the domain of hydrocarbons,production industries, tourismand services”. The Omani Minister alsocongratulated the "positive” results ofthis session, emphasising that theagreement to create a joint BusinessCouncil between the two countries“will enable the basis of bilateral cooperationto be enlarged”. Mr Youssef BenAloui Ben Abdellah specified that thiscouncil, which has six businessmenfrom the Sultanate of Oman and sixothers from Algeria, “should meet up atthe end of 2006 on the fringes of theArab businessmen forum, planned totake place in November in Algiers”.This council intends to be a means of“exchanging information on the economicprojects” and aims to “agree on anaction plan for establishing cooperationin fruitful projects”, added Mr YoussefAloui Ben Abdellah. The OmaniMinister further specified that “otheragreements being examined and drawnup will be signed in the future in thedomain of economic and culturalcooperation”. The Ministers of ForeignAffairs from both countries signed theminutes of the session before the signatureof the agreement related to thecreation of a Business Council by theAlgerian Vice President of the Chamberof Commerce and Industry and hisOmani counterpart. The agreement onscientific and technical cooperation, forits part, was signed by the secretarygeneral of the Ministry of HigherEducation and Scientific Research andthe Ambassador of the Sultanate ofOman to Algiers.These last few years, Algerian-Omanirelations have undergone a developmentwhich has resulted in visits betweenheads of the two countries andthe holding of three sessions of thejoint Algerian-Omani commission, thelast of which was held in April 2002 inMuscat.Energie & Mines170November 2006

Partnership30 th ordinary session in Algiers of the Council of Arab CentralBank Governors and Financial InstitutionsTo reinforce banking supervisionThe governors of the ArabCentral Banks appealed, inAlgiers, for a reinforcementof banking supervisionand an improvementof the payment systems topreserve the financial andmonetary stability of theregion's countries further.The governors of the Arab CentralBanks appealed, in Algiers, for a reinforcementof banking supervision andan improvement of the payment systemsto preserve the financial andmonetary stability of the region's countriesfurther.Speaking before the 30th ordinary sessionof the Council of Arab CentralBank Governors and FinancialInstitutions, in the presence of thePresident of the Republic, MrAbdelaziz Bouteflika, members of thegovernment, the governor of the Bankof Algeria and the Chairmen and CEOof Algerian and foreign banks operatingin Algeria, the chairman of theboard of the Arab Monetary Fund(AMF), Mr Djassem El-Mennai,appealed for larger cooperation betweenthe Arab monetary institutions towork towards the implementation ofthe Basel II criteria.The new Basel II system was finalisedin 2004 by the Bank for InternationalSettlements (BIS) and aims to improvethe bank risk management capacitiesby the central banks. After Basel I,introduced in 1988, shake-ups occurredon the international financial marketswhich led the BIS to revise thissystem which had become inappropriate.Among the reasons which madesuch a revision necessary are the liberalisationand the deregulation of thefinancial markets, the financial innovationsnot taken into account by Basel I,the growing importance of risk managementtechniques and the increasedvolatility on the financial markets suchas the Asian crisis in 1997.Describing the background to the holdingof this session in Algiers, MrMennai reported the current favourablesituation of the economies of Arabcountries which are characterised bythe continuous achievement of “encouraging"growth rates and by the“consolidation of internal and externalfinancial balances”, in the region.In this perspective, he considered that,certainly, these positive results aremainly generated by the increase in theworld oil prices, but are also due to the"prudent" economic policies adopted bythe Arab countries as well as the “diligentcontinuation of economic andfinancial reforms”.Reporting on the action initiated by theAMF in terms of banking supervision,the Chairman of this monetary institutionindicated that the ArabCommission, particularly responsiblefor this matter, has worked for greatercooperation and coordination betweenthe Arab monetary authorities, particularlywith regards the application of theBasel II criteria.As for the payment systems, MrMennai emphasised that the AMF hasestablished cooperation with theInternational Monetary Fund (IMF),the World Bank and the Bank forInternational Settlements to evaluatethe Arab payment systems with the aimof ensuring that it is more efficient.Mentioning the economic, financialand monetary shake-ups currentlytaking place throughout the world andtheir impact on the Arab economies,Mr Mennai reported on the “draft unitedstatement” drawn up by the councilsof governments of the Arab centralbanks. This draft statement, he confirmed,which expresses the position ofArab countries on economic, regionaland global issues, must be presented infront of the next general assembly ofthe IMF and the World Bank which willbe held at the end of September inSingapore.On this matter, he indicated that thedraft statement must also deal with theissue of the losses recorded after thewar led by Israel against Lebanon (thedirect physical losses estimated at 3.6billion dollars) and called upon theinternational community and worldfinancial institutions to present sufficientaid for the reconstruction of thiscountry.According to the Chairman of the AMF,Algeria has been entrusted by the Arabcountries with presenting the “unitedArab statement” in front of the nextmeetings of the Bretton Woods institutionsin Singapore.For his part, the president of this 30thsession, Mr Adib Miyal focussed hisspeech on the role which the CentralBanks must play in the reforms undertakenin the Arab region.With regards the current situation ofthe oil markets, Mr Miyal, who is alsogovernor of the Central Bank of Syria,considered that if the upsurge in theprices of black gold is one of the maingrowth factors in the economies of theArab countries, it may, however, havethe opposite effect.In this respect, he indicated that thefinancial and monetary surpluses inducedby the increase in oil prices wouldentail a strong increase in liquiditywhich might cause, in their aftermath,strong inflation.According to Mr Miyal, other than theimpact of the increase in oil prices onthe foreign exchange rates of the nationalcurrencies of Arab countries, thesurplus oil export income also results inan increase in public expenditure,hence reinforcing the public sector."Which goes against the flow of theeconomic reforms initiated by the Arabcountries, a large majority of whichhave opted for the market economy”,he said.Furthermore, My Miyal also focussedon the importance of modernising thepayment systems. "This will lead tofinancial and monetary stability" in thenational economies of the Arab countries,he noted.Energie & Mines171November 2006

PartnershipPARTNERSHIPEnergie & Mines172Meeting in Algiers of the 1st Africa-Europe conference of organisedcivil societiesPresident Bouteflika : “Africancountries have a lot to learn fromEuropean construction”In a speech given at the1st Africa-EuropeConference of organisedcivil societies, PresidentBouteflika stated that"African countries have alot to learn from Europeanconstruction from thesignature of the Treaty ofRome up to the currentenlargement process”."In view of continuous marginalisation,added the Head of State, Africa's developmentdoes not lend itself to optimismwith regards the stakes of globalisation”."But, he observed, the commitmentsmade by the international communitywith regards Africa have been disappointing,particularly with regards themeans of fighting against poverty”,emphasising that “Europe's contributionwas particularly disappointing withregards partnership practices and themeans mobilised in favour of Africa”.The President of the Republic also feltthat “the participation of civil society,intellectuals, political parties, associations,employee organisations and unionsis required for the reconstructionof African economies, taking accountof the modern trends of the world economy”.Held under the presidency of Cnes(Algeria), this meeting was organisedjointly by the European Economic andSocial Committee (EESC) and theUnion of African Economic and SocialCouncils (UAESC).The institutional objective was to developa cooperation mechanism betweenthe UAESC and the EESC. A memorandumof understanding was alsosigned for this purpose at the end of theconference.November 2006Mrs Anne-Marie Sigmund, presidentof the EESC, signed this document, forthe European side, with Mr MohamedSegheir Babès, current president of theUcesa. In parallel to this event, a resolutionadopted on the eve of the conferenceselected Algiers for the head officeof the UAESC.Mrs Anne-Marie Sigmund emphasisedthat this conference is part of the prioritieswhich the European Union wantsto set up in the cooperation with Africa.She felt that the creation of the AfricanUnion and the setting up of Nepadwhich highlight the principles of goodgovernance favour Africa's development.The works were mainly focussed onthree themes: migrations and development;regional integration; good governance.The question of migrations was developedon the eve of the conference in theUAESC. Mr Abdelkader Messaheldeveloped the objective causes of theseAfrican migrations towards the developedcountries. He indicated that thenumber of these migrations, which was67 million in 2005, had reached 180million in the last few years. Algeria is atransiting country concerning thedepartures from 42 countries. "Algeriaintends to deploy the necessary effortsto collectively take in charge this subject”.The conference's recommendations onthe two other themes are summarisedby the “Memorandum ofUnderstanding” between the UAESCand the EESC. It particularly recommendedinvolving the consultativeassemblies in the perspective of goodgovernance and to favour the inter-African integration process and on theworld market. Democracy is recommended"as the appropriate frameworkfor a large participation of civil societyin terms of good governance”. All theseactions include the “preservation of elites”and “the construction of Rules ofLaw in Africa”.

PartnershipNigeria-Algeria gas pipeline projectIn line with Africa's ambitionsThe feasibility study hasshown the profitability andthe technical-economicviability of this mega-projectwhose cost is estimatedat 10 million dollarsand which will be completedas of 2015."This initiative is considered as one ofthe best up to present to succeed in theregional economic integration". This iswhat, in substance, was indicated bythe Minister of Energy and Minesduring the presentation of the finalreport of the study into the feasibility ofthe Trans-Saharan Gas Pipeline(TSGP) project, carried out by theBritish company Pespen/IPA. An intercontinental,world-wide scale project,the Trans-Saharan Gas Pipeline is designedto transport natural gas fromNigerian deposits to the Europeancontinent via Niger and Algeria. Of alength of 4,128km, 1,037km of whichon the Nigerian territory, and 841kmthrough Niger, this pipeline will crossAlgeria over 2,310km, up to theMediterranean coast, in two differentplaces, one in Béni Saf (west) and theother in El Kala, in the east. This pipeline,whose feasibility studies anticipatethe start of its construction in 2015,has a planned width of 48 to 56 inchesand will transport the equivalent of 20to 30 billion cubic metres a year, mostlythrough the European market.The cost of this construction, whosestudy has already cost 2 million dollars,is commensurate with its ambition,since it is estimated at 10 billion dollars,in addition to 3 more billion dollarsfor the exploration and productionof the gas it has to route; a colossalsum which the three countries concernedare not giving up hope to find inthe large international banking institutions,in view of the importance of theeconomic and financial impacts whichshould result from it.However, the gas producing andconsuming countries will be calledupon to contribute to the financing ofthis pipeline, and this is what was thereforeexplained by Mr Chakib Khelilduring a press conference organised atthe Hilton Hotel and run together withthe Niger Minister of Mines andEnergy, Mr Mohamed Abdullahi, andthe Nigerian Minister of Oil Resources,Mr Edmund Dokuru.Indeed, our Minister of Energy confirmedthat this study has shown the profitabilityand the technical-economicviability of this mega-project, whereashis Nigerian counterpart emphasisedits importance on the supply of theEuropean market where the demandcontinues to increase. This will alsohave “very positive” repercussions onthe population of the three countriesthrough the creation of some 5 to 6million jobs in total "which will contributeto the establishment of total stabilityin the region”, confirmed MrDokuru.Furthermore, the Minister indicatedthat his country counted on the experienceof Algeria in the construction ofgas pipelines and the sale of gas in thehope of attracting the largest financingpossible in favour of the future pipeline.These investments are, according toMr Chakib Khelil, almost assured inview of the prices imposed per cubicmetre of gas, decreed at 4 dollars, whereasit is already currently around 7 to8 dollars. For his part, Niger's Ministerof Energy was delighted with theresults of this study which will enablethe project to go into the realisationphase; a realisation which will see theofficial participation of Niger, announcedin the coming weeks in Niamey, herevealed.Mr Abdullahi, for his part, revealed theimportance of the consequences of thisproject on the economy and the populationof his country which, he added“will, in the next few years, join the oiland gas producing countries' club” aslong as, in his opinion, importantreserves of hydrocarbons have beenpointed out, “this is an invaluable assetfor Niger's economy. Hence, we willparticipate responsibly in this project".One thing to be pointed out is that thisenormous project will certainly giveserious impetus and will ensure solidoutlooks for the economic activity andsocial progress, for all regions of thethree countries through which thepipeline will cross, according to thepress release from the Algerian oilcompany, Sonatrach, which specified,furthermore, that this will also supplynatural gas not only to the countriesalong its route, but also the neighbouringcountries. This will thus givenrenewed impetus to the orientationscontained in the Nepad framework andwhich, up to now, have not been able totake on their full scale!A third explorationblock for Sonatrachin NigerThe negotiations between the nationalhydrocarbons company Sonatrach andNiger's oil company on the hydrocarbonsblock Eldjado, in Niger, are complete,confirmed, in Algiers, Niger's Minister ofMines and Energy, Mr MohamedAbdullahi. He specified that the signatureof the agreement on the exploitation ofthis block could not however take placebefore the publication of the applicationdecree of Niger's new oil code. "Thenegotiations (with Sonatrach) are completebut we are waiting for the finalisation ofour oil code. All we need is the applicationdecree to finalise the agreement onthe Eldjado block”, he said on the fringesof a ceremony presenting the feasibilitystudy of the Nigeria-Algeria gas pipelineproject. Without further details, theMinister stated that other hydrocarbonsexploitation and even productioncontracts in Niger would soon come tolight between the two companies andwith partners from other countries. InNiger, Sonatrach has already been awardedtwo exploration blocks, namely theKafra block for a period of 12 years andthe Tamsna block for 9 years.Energie & Mines173November 2006

PartnershipPARTNERSHIPEnergie & Mines174African Energy Commission (Afrec)The ratification problem still persists insidethe AU CommissionThe President of theAU Commission,Prof. Alpha Oumar Konaré,expressed his deep disappointmentas to the negligenceof numerous Africanmember states in ratifyingthe treaties, charters,protocols and agreementsof the AU Commission, inhis speech to the AfricanHeads of State and governmentduring the 7th conferenceheld in Banjul.The president blamed the slowness andthe reticence shown in terms of ratification,which has significantly sloweddown the operational implementationof several AU bodies; he gave theimpression that the ratification issuehas become one of the largest problemswith which the AU Commission isfaced. His speech on this issue is givenbelow:"I have no doubt that you will ensurethat our organisation becomes a legalarena: too many adopted protocols andagreements have not yet been ratifiedand signed. Thus:1- The non-aggression and commondefence pact, adopted in Abuja, 31January 2005, has been ratified, todate, by two countries.2- The additional Protocol to theAgreement for the prevention of andfight against terrorism, adopted inAddis Ababa, on 2 July 2004, has beenratified by one country only.3- The Protocol amending the articlesof association of the African Union,adopted in Maputo, on 11 July 2003,has been ratified by 11 countries.4- The African agreement for the preventionof and fight against corruption,adopted in Maputo, on 11 July 2003,has been ratified by 14 countries.5- The additional Protocol to theHuman Rights Charter, on women'srights in Africa, adopted in Maputo on11 July 2003, entered into force on 25November 2006November 2005. To date only 15 countrieshave signed it.6- The agreement creating the AfricanEnergy Commission, adopted on 11July 2001, in Lusaka in Zambia, hasbeen ratified by 12 countries.7- The Pelindaba Treaty, proclaimingthe Africa Region free of any atomicweapons, adopted in July 2005, inCairo, Egypt, has been ratified by 20countries. 28 countries need to ratify itbefore it can enter into force.8- The Protocol on the Pan-AfricanParliament, adopted in Syrte, Libya, on2 March 2001, entered in force on 14December 2003. Seven countries havenot yet ratified it.9- The Protocol on the establishmentof the Council for Peace and Securityof the African Union, adopted on 9 July2002, in Durban, South Africa, enteredinto force on 26 December. To date, 12countries have not yet ratified it.10- The OAU Convention on thePrevention and Combating ofTerrorism, adopted in Algiers on 4 July1999, entered in force on 16 December2002. To date, 17 countries have notyet ratified it.11- The Convention for the establishmentof the African Centre forFertiliser Development, adopted inFebruary 1981, has been ratified byonly 3 countries and signed by only 27countries.Evolution of the ratificationof the Afrec ConventionCountries which have ratifiedthe conventionCountry Ratification date(1) Libya 20/02/2002(2) Algeria 03/06/2003(3) Rwanda 20/11/2003(4) Niger 26/11/2003(5) Mozambique 04/02/2004(6) Comoros 16/04/2004(7) Egypt 28/08/2004(8) Senegal 14/02/2004(9) Sudan 09/02/2005(10) Sah. Rep. 14/02/2005(11) Tanzania 03/06/2005(12) Mali 20/04/2005(13) Angola 03/03/2005(14) Ghana 19/03/2005(15) Tunisia 26/12/2005(16) Gambia 12/06/2006(17) Zambia 12/07/2006Niger, the Sahraouie Republic, Angolaand Gambia have not yet filed their ratificationinstruments. To date, Afrec hasfocal points in the member countries.Progress of Afrec's national focalpointsCountry1. Algeria 2. Egypt3. Kenya 4. Ethiopia5. Sudan 6. Senegal7. Mali 8. Niger9. Malawi 10. Libya11. Gui. Bis. 12. Cape Verde13. Sao Tomé 14. Angola15. Rwanda 16. Lesotho17. Ivory Coast 18. Ghana19. Zambia 20. Gambia21. Liberia 22. Sahraouie Rep.23. Tunisia 24. Namibia25. Botswana 26. Tanzania27. Gabon 28. Cameroon29. Central Africa 30. South Africa31. Mozambique 32. Mauritania33. Chad 34. Equ. Guinea35. Zimbabwe 36. Guinea37. Congo 38. UgandaThe Afrec continues to establish nationalfocal points within the AfricanMinistries of Energy of the MemberCountries. For the time being, we havefinalised the focal points of 38 countries,recruited more than 68 managersand directors to assist us in putting inplace the information system projectand in coordinating the relations betweentheir respective Ministries andthe Afrec. Furthermore, we have put inplace focal points within 15 CERs andRPPs.The AFREC intends to organise aworkshop with the Focal Points inparallel with the meeting of theCAMEN on the launch of the AFREC.

Progress of the Afrec Programmeon the sustainable developmentof electricityPartnershipAs recommended by its convention,the Afrec has prepared a series of draftenergy programmes, including oil, gas,electricity, renewable energies, coal,nuclear power, training and strengtheningof capacities and the informationsystem. Below is a summary of theAfrec Programme on the sustainabledevelopment of electricity.• Resources- Vast hydro-energy programmes- Micro and small hydro-energy projects- Solar power resources (photovoltaicand thermal)- Wind energy convention systems- Geothermal electric production- Energy efficiency• Means- Afrec's Programme for the sustainabledevelopment of energy- Sponsoring of continental strategiesand policies (renewal energy and sustainabledevelopment managers)- Mobilising the African organisationsdealing with energy- Mobilising the African regulatory andlegislative instructions- Popularising energy management- Creating the African RenewableEnergies company (ARES)- Boosting the regional power pools(RPPs)- Popularising energy management• Objectives- Encouraging the use and acceptanceof the renewable energy technology.- Putting in place a continental communityof industry, people and institutionsto support the renewable energy.- Creating an African network to facilitatethe cooperation and exchanges.- Creating and circulating publicationsto the different target groups in view ofsupporting the diffusion of the renewableenergy technologies.- Bringing together the industry, scienceand politics in workshops, conferencesand summits on renewableenergy.- Advising the governments and organisationson the policy, the implementationand the sustainability of renewableenergy activities in the world.• GoalsThe popular companies will contributeto the following:For a Sustainable Africa- Encouraging the use of the renewableenergies throughout the continent,through the appropriate technology,scientific excellence, social responsibilityand continental communication.Establishing African communities:- Bringing together the industries, individualsand institutions to support therenewable energy technologies,through communication, cooperation,support and exchanges.Development support:- Applying practical projects, transferringtechnology, education, trainingand supporting issues of African energydevelopment.- Supporting the renewable energytechnology sciences: stimulating andencouraging fundamental and appliedresearch into the renewable energytechnologies.Contributing to growth:- Ensuring individual and communitygrowth by supporting the private companyand providing training in thedomain of renewable energies.Information and communication:- Quick access to information throughcommunication and exchange platformsdesigned on the basis ofmodern technologies.Stakeholders:- Afrec- Continental energy organisations- Local communities- Futuristic non-governmental organisations(NGOs)- National and local governments- Specialised United Nations institutions- International organisations concerned- International bilateral donators affiliatedto the countriesGlobal partners:- The International Solar EnergySociety (ISES)- The World Bank and associated partnerorganisations- Development Banks- Specialised United Nations (UN)institutions- the International Energy Agency(IEA)- The European Union (EU)- the Eurec Agency- The World Wind Energy Association(WWEA)- Governments- Industrial and services' organisations- Non-governmental organisations- Research institutes- Universities- Public servicesFunctions and activities:The continental people's sustainableenergy society will include a largerange of services, activities, networksand support mechanisms.A group of custom-made professionalservices will be reinforced by a continentaland global interaction, quickaccess to information, concerted projectsand a community of individualssharing the same opinions. Affectingall domains of energy supply and sustainability,membership to such asociety may contribute to sustainabledevelopment, to a healthier environment,to scientific responsibility and toeconomic prosperity.It may:- promote extended short and longterm use of renewable energies;- organise popular scientific and awarenessconferences;- publish reviews, books, informationon-line and policy statements;- sponsor round tables and organisedebate platforms;- distribute brochures and publicationson renewable energies, and organisethe regional and continental networksof the renewable energy societies.Energie & Mines175November 2006

PartnershipPARTNERSHIPAfrican Energy Commission (Afrec)Working towards putting in placea coordination mechanism in termsof developing energy infrastructures in AfricaA document related to the creation of acoordination mechanism for developingenergy infrastructures in Africawas discussed in Tunis during a meetingconvened by the Commissioner ofthe African Union responsible forinfrastructures and energy and whichwas held under the aegis of the AfricanDevelopment Bank (ADB).In this meeting, which included theparticipation of Dr Hussein El-Hag,executive director of the AfricanEnergy Commission, whose headquartersare in Algiers, it was a question ofworking towards speeding up the developingof infrastructures on the continentin exchange for better coordination.It is very important for the AfricanEnergy Commission and for theAfrican Union to clarify the roles of theplayers involved in these programmes,to speak with the same voice in theinternational forums and to betterexploit the synergies to avoid theredundancies and the overlapping observedto date. The document presentedat this meeting essentially aims to putin place an efficient coordinationmechanism and particularly to establisha common agenda with regards foreignpartners in relation to the developmentof continental infrastructures. In thisrespect, the African Action Plan in thisdomain which includes the short termNepad action plan must be used as aplatform for drawing up this agenda.Cooperation programme project betweenAfrica and Latin AmericaThe cooperation programme in terms of energy betweenAfrica and Latin America was discussed in Mexico betweenMr Alvaro Rios Roca, Executive Secretary of the LatinAmerican Energy Development Organisation (Olade) andMr Hussein El-Hag, Executive Director of the AfricanEnergy Commission (Afrec). This cooperation programmewhich is part of the Afrolac framework - the Afro-LatinAmerican Association for Energy Development - identifiesfour main areas of action. This means the putting in place ofan information system and drawing up a database on energyas well as drawing up a technology transfer plan related tothe development of bio-fuels where Brazil is the world's leader.It also provided for the publication of a joint review under theaegis of Afrolac, as well as exchanging information andpublications.Afrec develops its relations with OPECand the IAEAEnergie & Mines176The recent meeting in Vienna of the3rd international OPEC Seminar providedDr Hussein El-Hag, ExecutiveDirector of the African EnergyCommission, whose headquarters arein Algiers, with the opportunity of meetingthe senior executives of large internationalenergy organisations.To the OPEC executives, the ExecutiveDirector of Afrec proposed participatingin the internal management structureof the African Energy Commissionthrough the permanent representationNovember 2006of the Organisation of PetroleumExporting Countries in the ExecutiveCommittee of the Afrec and in itsTechnical Consultative Body. It isexpected that OPEC will shortlyappoint its representatives inside theAfrec structures. As for the executivesof the International Atomic EnergyAgency, who Dr El-Hag met on thisoccasion, they have, for their part,expressed their approval of the invitationto associate the IAEA to theTechnical Consultative Body of theAfrec and the representative of theagency in this body will be appointed inthe next few days.With Mr Edmond Daukorou, Nigeria'sMinister of State for Oil Resources, itwas a question of having this countryratify the Afrec Convention. MrDaukorou committed to give his supportand his assistance to ensure thatNigeria finalises the ratification processas quickly as possible.

PartnershipAlgeria-Mauritania15 th session of the Algerian-Mauritanianjoint cooperation commissionThe works of the 15thsession of the Algerian-Mauritanian joint cooperationcommission wereofficially recognised, inNouakchott, by thesignature of nine agreements,in the presenceof the Head of theGovernment, Mr AhmedOuyahia, and theMauritanian PrimeMinister, Mr SidiMohamed OuldBoubakeur.In the domain of energy, both partiessigned a master agreement betweenSonatrach and the Mauritanian hydrocarbonscompany defining the generalprinciples governing the bilateralcooperation in the domain of oil activitiesand the foundations of a futurepartnership in the domain of exploration,research and development, inaddition to expertise and training.The agreement also provides for thepossibility of creating a joint venture.Both parties also agreed to put an endto the application of the master agreementrelated to the financing of therenovation works of the Nouadhibourefinery, its operating and its management,through the signature of a masteragreement inherent to this domain.A bilateral cooperation agreement wasalso signed in the domain of publicworks, particularly with regards theorganisation, the regulations and theexchange of experiences and studies.The agreement also provides for theopening up of partnership prospectsbetween the two countries in thisdomain.Furthermore, the parties reached aconsular agreement, which is animportant legal instrument for regulatingthe circulation and residence ofnationals from both countries in viewof guaranteeing them better protectionand ensuring better reconciliation betweenthe two peoples. The session wasalso marked by the signature of acooperation agreement on women,family and children providing forcooperation between the institutionsconcerned through the protection ofwomen's and children's rights in thetwo countries and the development oftraining programmes in favour of specialistsin this domain.With regards the vocational trainingsector, both parties decided, thanks toan executive programme for the period2006-2007, to reinforce and reorganisethe vocational training sector inMauritania, through the training ofsupervisors and the awarding of annualstudy grants in favour of Mauritaniantrainees. With regards illiteracy andeducation for adults, both partiesagreed to put in place an executive educationalcooperation programme forthe year 2006-2007 and to share experiences.Both parties signed an executiveprogramme, for the same year, inthe domain of youth and sports, providingfor different visits by managersfrom the sector and youth groups inorder to build bridges of continuity betweenthe youth of the two countriesand encourage the promotion of sportin Mauritania. With regards the fishingsector, both countries agreed to twinthe two countries' aquaculture centresand institutes. Hence they will proceedto the twinning of the NationalHalieutic documentation and researchcentre in Algeria and the MauritanianInstitute of Oceanographic research, aswell as the Algerian Halieutic andaquaculture technology institute andthe Nouadhibou Halieutic School inMauritania. With regards health, theAlgerian and Mauritanian partiesagreed to register the Saïdal productsfor their export to Mauritania, as wellas to update the agreement signed in1996 in view of boosting the bilateralcooperation in this vital domain.Before closing this session's works, theMinisters of both parties held sectoralmeetings, it was stated.Energie & Mines177November 2006

PartnershipPARTNERSHIP■ Possibility ofSonatrach taking astake in the ChadcompanyThe Minister of Energy and Mines, MrChakib Khelil, and the Chad Ministerof Oil, Mr Emmanuel Nadingar, in theEl Mithak residence (Algiers), signed acooperation agreement in the domainof hydrocarbons, in the presence ofChad's Ambassador to Algiers andrepresentatives of the two delegations.This agreement, which officially recognisesthe three-day visit made by theChad Minister to Algeria, focuses onthe need to reinforce the cooperationbetween the two countries in thedomain of hydrocarbons particularly interms of technical support, training andexploration.Algeria-ChadSignature of an energycooperation agreement"This visit, which has achieved itsobjectives, aimed at sharing and collaboratingbetween the two countries aswell as cooperation, particularly, betweenSonatrach and the new Chadnational oil company”, indicated MrChakib Khelil at the end of the signingceremony.The Minister, who wished every successto this new company, assured hisChad counterpart of Algeria's “availability”to provide everything needed todevelop this company” and to reinforcethe partnership through the establishmentof projects in the hydrocarbons'sector, as long as the opportunitiesexist.For his part, the Chad Minister expressedhis “satisfaction” on this visit whichhas been a “response to our request -that of having your assistance andSonatrach's assistance for the puttingin place of our oil company”.“We have come to gain inspirationfrom Sonatrach's organisation and weare going back with very useful andnecessary information which shouldenable us to set up our company”, saidMr Nadingar, who emphasised thatthis visit is “one further step towardsconsolidating our relations in thedomain of hydrocarbons”.The Chad Minister took this opportunityto invite the Algerian Minister tovisit Chad so as to “further deepen ourcooperation” and make more progresstowards turning it into a reality. Thisinvitation was accepted by Mr ChakibKhelil, who emphasised that the datewill be fixed at a later date.As for the date on which the new Chadcompany will be put in place, MrNadingar specified to the APS that thiscompany would be created before theend of this year. "The law creating thisentity has been published and we are atthe stage of putting in place the articlesof association to finalise it”, he added.With regards the negotiations betweenSonatrach and Chad on the explorationof certain blocks in this country, whichhas been an oil producer since 2003,the Minister emphasised that thesenegotiations will be resumed after thecreation of this company.“We will have to talk about the possibilityof Sonatrach taking a stake in theChad company and also about its participationin the existing or futureblocks”.Energie & Mines178November 2006

PartnershipAlgeria-KoreaOfficial visit to Algeriaof President Roh Moo-HyunThe official visit to Algeriaof the President of theRepublic of Korea, Mr RohMoo-Hyun, was particularlyofficially recognised bythe signature of aStrategic PartnershipStatement designed to“reinforce the multi-sectoralcooperation” betweenthe two countries and“raise their multiform relationsto a higher level”.During this visit, Presidents Bouteflikaand Roh Moo-Hyun discussed severalbilateral, regional and internationalissues of mutual interest. On this occasion,they had head-to-head discussions,extended to the members of bothdelegations, which particularly enabledthem to finalise the outlines of theStrategic Partnership Statementencompassing several domains of bilateralcooperation. In this statement,based on “mutual trust and understanding”,and co-signed by PresidentsBouteflika and Roh Moo-Hyun, bothparties committed to reinforce theirpartnership in the political, economic,commercial, financial, cultural, scientificand technological domains, but alsoin all domains of "mutual interest" andon the international scene.“The Statement which we have justmade public establishes an impetus forAlgerian-Korean cooperation relyingon our respective capacities and on theconditions offered by our respectiveregional belongings” stated the Headof State on this matter to his host,during a lunch given in his honour.The fruit of about fifteen years of tradeand cooperation, which have placedAlgeria in first place with its Koreanpartners in Africa, the document is perceivedalso as an instrument for promotingbilateral relations to a qualitativelyhigh level.It is finally the fruit of a series of bilateralagreements concluded in differentdomains between the two countries,particularly thanks to the State visit toKorea of President Bouteflika inDecember 2003 which then gave“significant impetus” to the bilateralrelations.During Mr Roh Moo-Hyun's visit, bothparties concluded a memorandum ofunderstanding in the domain of energyand mines, another in the domain ofsmall and medium-sized enterprises(SME), and a Legal CooperationConvention.The energy agreement in question,which relates to the storage of crude oilin Korea, the exporting of LPG gas andrenewable energy, “will consolidate thepartnership between the two countries,already enhanced by a very fruitfulcooperation”, confirmed the Ministerof Energy and Mines, Mr ChakibKhelil, at the end of the signing ceremony.Furthermore the memorandum ofunderstanding in the SME domaindefines the framework for the cooperationand partnership in terms of supportingand developing SME, as well asthe mechanisms and programmesrequired for their realisation.More specifically, this means exchanginginformation and experiences inthe domain of promoting SME, transferringtechnologies and experienceand promoting partnership through theorganisation of study visits in bothcountries and the training of managersresponsible for implementing the sector'sdevelopment programme. Withregards the Legal CooperationConvention, this enhances “the majorityof the bilateral legal frameworkrequired to ensure the continuous andharmonious development of our relations”,specified President Bouteflika,thus enabling both countries to preparethe “road for establishing multiformand sustainable links by strictly respectingthe rules and uses of Rules ofLaw”.Furthermore, in the housing sector,both parties planned to conclude amaster agreement on a draft memorandumwhich will define the “partnershipformulas” between Algeria and the ☞Energie & Mines179November 2006

PartnershipPARTNERSHIP☞Republic of Korea in view of "exchangingexperiences and visits, as well asdocuments, meetings of experts, inaddition to the organisation of scientificstudy days”.In terms of the new information andcommunication technologies (NICT),Algeria and Korea, which signed inSeptember 2004 a memorandum forthe realisation of a million ADSL lines,examined the possibilities for resumingthe joint-venture project.Within this framework, the president ofthe Korean group DaewooInternational indicated to the APS thatboth countries “were currently discussinginvesting” in the domain of theNICT in Algeria.The presence, in Algeria, of a strongdelegation of Korean economic operatorsaccompanying the Korean Head ofState was also taken advantage of bythe Algerian executives to explain thepotentials offered by the national economyto foreign and, more specifically,Korean investors."Today, Algeria's economy offersKorean companies many opportunitiesto participate in a mutually beneficialway in the development of Algeria andin the reinforcement of our bilateralrelations”, explained the Head of State,adding that the presence in Algeria ofhis Korean counterpart “will encouragethe Korean companies to get interestedin the Algerian market and doublethe initiatives and dynamics toovercome the difficulties, particularlythose caused by the geographic distancebetween the two countries and thehuman barriers”.In this context, the Head of theGovernment, Mr Ahmed Ouyahia,explained in detail to the Korean economicoperators “the structuringadvantages” of the national economy,assuring that Algeria, “today, offers aparticularly favourable economic situationfor the investor”.Energy cooperationSignature of a partnershipagreementA partnership agreement on energycooperation between Algeria andthe Republic of Korea was signed inAlgiers by Mr Mohamed Meziane,Chairman of the companySonatrach, and Mr Huan Do-Yool,Managing Director of the Koreancompany Korean Oil Corporation.The signing ceremony took place inthe presence of Mr Chakib Khelil,Minister of Energy and Mines, andMr Chung Sye-Kyun, KoreanMinister of Industry, Energy andTrade.The first part of this agreementconcerns the storage of crude oil inKorea, and the second part relatesto the exporting of LPG gas, whereasthe third relates to renewableenergy.“This is an agreement which willconsolidate the partnership betweenthe two countries, which hasalready been enhanced by a veryIt should also be pointed out theAlgerian State has, for the period2005-2009, mobilised a budget of“over 100 billion dollars” for the developmentin the socio-cultural sectorsand infrastructures", which, he said"also supports growth".As an example, he indicated that thispublic expenditure represents the constructionof over 1 million houses, over10,000km of roads and motorways,almost 2,000km of railway tracks,dozens of dams, hundreds of schoolsand colleges, medical infrastructuresand others.Talking during a ceremony organisedby the University of Algiers, where hereceived the award making him doctorhonoris causa, the Korean Head offruitful cooperation”, confirmed MrChakib Khelil in a statement to thepress at the end of the signing ceremony.He added that Algeria has enteredinto a phase where is it called upon“to develop a strategic partnership,not only with the Republic of Korea,but also with all countries in theworld”.For his part, Mr Meziane indicatedthat this agreement should enableSonatrach “to increase the supplycapacities of the Algerian market forthe needs of its Korean partner”.Recalling the agreement which wasalready signed, in 2005, betweenthe two countries in the domainof energy, the Chairman ofSonatrach explained that the objectivesought after through this agreementis “to develop the upstreamand downstream partnership agreementsand to enhance the cooperationpossibilities”.State shared his desire to see thefriendship and cooperation between hiscountry and Algeria strengthen further.He indicated that, in spite of a newrelationship, the progress accomplishedby the two parties in view of reinforcingthe cooperation lends itself tooptimism with regards the longevity ofthis relationship, adding that his country“is putting its experience into thedifferent domains in favour of Algeria”and hopes “to reinforce the bilateralstrategic partnership”.Energie & Mines180November 2006

PartnershipAlgeria-KoreaA “considerable” partnershippotentialA seminar on investing in Algeria wasrecently held in the Korean capital, Seoul,where the “desire” of both countries to“resolutely commit to a diversified andmutually beneficial partnership” wasconfirmed, indicated a press release fromthe Ministry of Foreign Affairs.On this occasion, the Minister ofFinancial Reform, Mr Karim Djoudi, on aworking visit to the Korean capital, presenteda report where he particularlyemphasised Algeria and its “natural, geographicand human assets”.Mr Djoudi also emphasised the "importance"of the “expanding” Algeriandomestic market and its aim “to becomean export platform towards Europe,Africa and the Arab world”, and illustrated“the solidity of the macroeconomicbalances maintained by Algeria for severalyears and the sustainability of its externalposition”, added the press release. Afteralso mentioning the impact which thecomplementary growth support plan willhave on the acceleration of the rate ofworld growth, the Minister explained thescope of the reforms already made andthe progress made in the reforms underwayand described the elements of theincentive framework put in place toencourage the investments, indicated theMinister.Mr Djoudi furthermore emphasisedAlgeria's and Korea's “mutual desire” toboost the bilateral relations in accordancewith the strategic partnership statementsigned by Presidents Abdelaziz Bouteflikaand Roo Moo-Hyun. For his part, thedirector of the inter-sectoral workinggroup, put in place by Korea in the aftermathof the State visit of the KoreanPresident to Algiers, made a detailed presentationof the “extremely positive”results of the discussions betweenPresidents Bouteflika and Moo-Hyun. Inthis respect, he emphasised that, at theend of the visit, the Korean delegation"reached the conviction that Algeria is themost promising partner in Africa andencouraged the Korean companies to getinterested from close up and that thegovernment has put in place appropriatemonitoring mechanisms to support theirefforts".The executive director of Space Grouppresented the experience of her companyin Algeria and emphasised the “considerable”Algerian-Korean business andpartnership potential, adds the pressrelease. Organised under the aegis ofSouth Korea's Ministry of Trade, Industryand Energy, the South-Korean associationfor foreign trade (Kita) and Algeria'sAmbassador to Korea, the seminarbrought together over a hundred importantKorean companies, concludes thesame source.Press conference with the KoreanDeputy Minister of Trade, Industryand Energy in AlgiersDuring a press conference held at the Hilton hotel, the KoreanDeputy Minister of Trade, Industry and Energy, Mr Joug-GapKim, spoke about the cooperation prospects between Algeria andKorea at the end of the visit he had just made to Algeria (21-25May 2006) leading a large delegation of businessmen.Mr Joug-Gap Kim indicated that he had been welcomed byPresident Bouteflika as well as by Mr Hamid Temmar, Ministerof Participations and the Promotion of Investments.This visit, deemed highly beneficial, will have enabled them toexplore future cooperation domains. With regards trade, theamount is 500 million dollars in 2005 and this amount shoulddouble in 2006, i.e. 1 billion dollars.This is a somewhat high figure given the potentials of the twocountries, felt Mr Joug-Gap Kim.We therefore need to explore the possibilities which the complementarityof both economies enables. The Koreans expressedtheir desire to benefit from the advantages that the EuropeanUnion benefits from.Currently, Korean exports to Algeria are comprised of cars andhousehold electricals.Algeria, for its part, exports petrochemical and gas products toKorea. Korea wishes to contribute to the development ofAlgerian exports to Europe, said the Korean Deputy Minister ofTrade. Korean investments in Algeria will continue to increase.The figure concerning the Korean investments currently is 150million dollars approximately - an amount that is not high."We are capable of producing an amount of 8 to 10 billion dollars."This visit to Algeria will enable us, perhaps, to invest moreactively since our investment capacities have increased. Algeria'sdemand, according to a study which identifies the cooperationsectors, concerns the sectors of the habitat, port infrastructures,roads and consumer goods. We would like to participate in theupstream and downstream of the oil and gas sectors as well as inmining resources".Korea totally depends on overseas for its hydrocarbons andmining products. Korea's desire is to implement a cooperation,according to a global approach. Algeria will be the first countryto test out this relationship founded on complementarity.Questioned on the interest in privatisations, Mr Joug-Gap Kimindicated that the Koreans are expressing very strong interest inthe privatisations. “We have become aware of the privatisationmethods”. Discussions are very advanced between Korean companiesand their Algerian counterparts, but it is still too soon totalk about them. Algeria's policy in terms of privatisation andpromoting investments is very judicious. "I think that this is avery wise choice”, indicated Mr Jong-Gap Kim.Energie & Mines181November 2006

OverseasOVERSEASThe President of the Republic inaugurates the 39 thThe Head of State hasinaugurated the 39thAlgiers International TradeFair. The President of theRepublic, who was accompaniedby Mr AbdelazizBelkhadem, Head of theGovernment, as well asmembers of the Executive,who had gone around themain foreign pavilions, lingeredon different stands.AlgiersInternational Trade FairCooperation with China citedas an exampleHence, he was interested in the productsand services proposed by the differentcompanies operating in Algeriaand those who are prospecting it.The President of the Republic, in eachdiscussion with the foreign representatives,invited them to take advantage ofthe highly incentive and promisinginvestment framework, whether tosatisfy the needs of the domestic marketor “exporting prospects on theEuropean market” by virtue of freetrade agreements.For the Head of State, this is “the onlypath for a beneficial and sustainablepartnership”, he said to the businessmen.Furthermore, Mr Abdelaziz Bouteflikasaid he was satisfied with the Chinesecooperation with Algeria which, hesaid, is “sincere” and “is done in atransparent framework”. In thisrespect, he called upon the domesticoperators to “overcome the influenceof intermediaries” which domicilethemselves in a “bank in Luxembourg”to back triangular transactions.The Head of State thus congratulatedcertain dealers which offer “equipment50% cheaper than the European partners”.Furthermore, this is the case ofthis importer of trucks and tractorsfrom China which is doing this verysame thing from the loan granted toyoung promoters from the Ansej (atotal of “22,000 applications processed”with attractive financing). Thisinvestor will go as far as to build theChinese truck in April 2007, the OuledNaïl 1 in the region of Aïn Oussera tothen consider the assembly of tractorsalso.This type of partnership can only arousethe satisfaction of the Head of Statewho, a few metres further on, and atthe German stand, stated the depth ofhis thinking: "Western partners do nottransfer the technology to us” whichthe domestic economy needs…to theEuropean partners (with, however, afree trade agreement, including theMaghreb countries) which, at all times,do not fail to express their concerns onthe “threat of Chinese dynamics” toreact therefore by "a real partnership”.In any event, the Head of State whoreserved his first stop for the Frenchpavilion had a long discussion with theFrench Ambassador when he left afterdoing a tour of the different standards.This discussion was shorter than theone accorded to our country's traditionalpartners and neighbouring Arabic-African countries; countries whichnevertheless participate in the developmentof the country through a series oftrades of different products and servicesor through an investment in thecement plants, the milling industries,the chemical and energy products likethis group from the Gulf region supportedby the Saudi Investment Fundand which intends to target the Africanmarket through our country, accordingto a Saudi gentleman.In any event, the foreigners who arethere through their local representativesor via their representative officehope to set upon a market whoseadvantages they are aware of. Someknow the advantages. Others havealready set up, after an initial serviceprovision. Here we are thinking aboutthe Japanese company JGC whichknows our country as it equipped theArzew refinery in 1969 and created acompany of Algerian law recently; thisis also the case of a Swiss company infinancial engineering or the companywhich took control of the public companySonatmag.Energie & Mines182November 2006

OverseasThis is also the case, once again, ofCanadian companies - a country whichwe know a lot more than just throughLavallin and Petro Canada who are everfaithfulto Algeria - whereas others didnot ask so much. We cite this year thearrival of representatives from the aeronauticscompany Bombardier andBusiness Jet. The Canadians, who wanta share of the transportation and railmarket in particular, “regret that theywere not able to win the equipmentcontracts for the Algiers's metro and thetram project designed for the capital”they admitted.However, according to an operator fromthis country, his firm is able to providethe equipment requested “cheaper andin a record timeframe of 17 months" asit is the world leader with a presence in20 countries, including China. As achallenge, they do not exclude a "jointventure with the Algerians for assemblinglocomotives”.In any case, "we will not miss any futureproject", promised the Canadianrepresentative to the Head of State.In the meantime, appetite will certainlycome from eating, said the global foodGroup McCain, which will offerAlgerians frozen chips.After a study of the market, which lastedfour years, according to its director, theCanadian, which has a presence inMorocco and Tunisia, cannot ignore theAlgerian consumer. He proposed awaitinga partnership with our “specialseed” agricultures for his product.And this is only the start…A factory of this type will cost between50 and 100 million dollars. We have toensure “the operation's profitability” heexplained.Good to know● The total number of exhibitors at this event was 1,635.● The number of foreign countries represented is 45, 34 of which officially.● Out of the 1,113 foreign companies participating, 1,063 exhibited inside official pavilionsand 51 individually.● At the national level, 522 Algerian companies participated this time, 84 public, and431 private.● The exhibition surface area was around 75,500m2. Almost 29,000m2 were reservedfor foreign exhibitors whereas the national exhibition takes the lion's share with some46,550m2.● The French pavilion is the largest of this 39th Algiers International Trade Fair withalmost 330 exhibitors occupying almost 10% of the total exhibition surface area.● The United States which has been Algeria's no. 1 economic partner since 2004 isgreatly represented in pavilion C.● Canada doubled its participation this year with 39 exhibiting companies, comparedto 25 in 2005.● Numerous events will be held daily at the Safex level.● Professional mornings will be organised on 3, 4, 5, and 6 June from 11.00am to2.00pm.● The general public times are from 2.00pm to 7.00pm.● An exhibitor's guide is made available to participants to make it easier for them tofind things during the fair.● A nearby support system designed to respond to exhibitors' concerns is set up thisyear.● A major control and security system has been used by the Safec.Energie & Mines183November 2006

OverseasOVERSEASAccording to a report by the UNCTADNew record for foreign directinvestments (FDI) in AfricaAlgeria is ranked in 8th place and occupies 1st place in terms of foreign investmentsin the domain of hydrocarbons.Energie & Mines184Africa received record high foreigndirect investment (FDI) inflows in2005 of USD31 billion, but this wasmostly concentrated in a few countriesand industries, says UNCTAD's WorldInvestment Report 2006 - FDI fromDeveloping and Transition Economies.A sharp rise in corporate profitabilityand high commodity prices over thepast two years helped produce a growthrate of 78% in FDI inflows to theregion. Prospects are good for anotherincrease in 2006 given high projectcommitments, a large number of investorseager to gain access to resources,and a generally favourable policy stancefor FDI in the region.FDI continued to be a major source ofinvestment for Africa as its share ingross fixed capital formation increasedto 19% in 2005. However, the region'sshare of global FDI remained low atabout 3% in 2005. In the manufacturingsector, a number of trans-nationalcorporations (TNCs) in the textileindustry pulled out of Africa becausequota advantages for African countriesdeclined after the end of the Multi-fibreArrangement (MFA) in 2005South Africa was the largest FDI recipientin the region in 2005, experiencinga sharp jump in inflows to US$6.4billion from only US$0.8 billion in2004. South Africa accounted forabout 21% of the region's total. Thiswas mainly due to the acquisition ofAmalgamated Bank of South Africa byBarclays Bank (United Kingdom) forUS$5.5 billion.Africa's top ten recipient countries– South Africa, Egypt, Nigeria, Morocco,Sudan, Equatorial Guinea, theDemocratic Republic of Congo, Algeria,Tunisia and Chad, in that order –November 2006accounted for close to 86% of the regionalFDI total. Eight of these countries,FDI inflows exceeded US$1 billion(more than US$3 billion for Egypt,Nigeria and South Africa in particular).Inflows to South Africa were also themost diversified: investment was channelledinto energy, machinery andmining, as well as into banking, whichreceived the largest share.At the other extreme, FDI inflowsremained below US$100 million in 34African countries. are mostly leastdeveloped countries (LDCs), includingoil-producing Angola, which witnesseda drastic decline in FDI receipts in2005. Many of the low FDI recipientsin the region have limited naturalresources; lack the capacity to engagein significant manufacturing, and, as aresult, are among the least integratedinto the global production system.Some countries have also experiencedpolitical instability or civil war inthe recent past, which destroyed muchof their already limited productioncapacity.FDI inflows to the region were concentratedin a few industries, such as oil,gas, and mining. Six oil producingcountries (Algeria, Chad, Egypt,Equatorial Guinea, Nigeria and Sudan,in descending order of the value ofFDI) accounted for about 48% ofinflows to the region. Although countriessuch as Kenya, Mauritius,Lesotho, Swaziland and Uganda hadbegun to receive FDI for their textileand apparel industries due to theAfrican Growth and Opportunity Act(AGOA), the trend changed followingthe end of the MFA in 2005. InMauritius there was a 30% contractionin the volume of garments manufacturedin 2005 following the departure ofHong Kong (China)-owned companies.In Lesotho, six textile TNCs closed,with a loss of 6,650 jobs. The setbackdemonstrates that the impact oftrade-related initiatives can be shortlivedin Africa, where domestic capabilitiesare inadequate for quickly absorbingand continuing production processes.It also underscores the fact thatAfrica's industrial progress requirescompetitive production capacity, inaddition to better market access andmore welcoming regulatory frameworks.The persistence of the criticalcapacity problem may continue tohamper the region's ability to attractand retain FDI in the manufacturingsector.FDI outflows from Africa in 2005remained small and originated from afew countries. Six home countries:Egypt, Liberia, Libyan Arab Jamahiriya,Morocco, Nigeria and South Africa --accounted for over 80% of total outflows.The largest African TNCs arealso from a small number of countries.In 2004, nine of the top 10 non-financialAfrican TNCs ranked by foreignassets were South African, althoughOrascom Construction (Egypt) alsomade it onto the list.

OverseasChinese, South Korean, Turkish and Mexican voting rightsThe IMF half-opens upto emerging countriesThe InternationalMonetary Fund (IMF)reform entered in force onTuesday 19 September:China, Mexico, SouthKorea and Turkey will seetheir voting rights increaseto 3.65%, 1.43%, 1.33%and 0.55% respectivelyonce they have paid theincreased capital required,i.e. for the four countriesthe equivalent of 5.66billion dollars in specialdrawing rights (+1.8%of equity).The qualified majority required of 85%of the votes expressed by 184 membercountries was achieved on Monday 18September in Singapore for this capitalincrease which marks the first act ofthe reform. This is designed to conferbetter representativeness in the IMF,for a long time accused of defendingthe interests of the United States, Japanand Europe which have preponderantweighting in it. In the future, the institutionshould better reflect the importanceof the emerging economies. Thefirst four countries to benefit from thisare those whose voting rights correspondedthe least to their actualimportance.The second stage should not exceedtwo years. It will consist of developinga new capital sharing formula (the“quotas” in the Fund's jargon) whichmight take account of the gross domesticproduct (GDP), the economicopenness, the financial flows and theforeign exchange reserves of eachnation. According to this formula,other countries whose economy todayis undervalued will improve their representativeness.But this new system might marginalisethe poorest countries. Upon the initiativeof France and Great Britain, it wastherefore decided to “at least” doublethe “basic” votes allocated to all countries,free and independent of thewealth of these countries.Furthermore the IMF has been entrustedwith a "multilateral supervision"role so as to prevent crises. RodrigoRato, its managing director, will, inspring 2007, present the conclusions ofan initial report on the major imbalancesin terms of foreign exchange,savings and consumption, with theassistance of the United States,Europe, Japan, China and SaudiArabia. Gordon Brown, the BritishChancellor of the Exchequer and presidentof the supreme body of the IMF,the International Monetary andFinancial Committee, felt that thisreform was “the most important forsixty years” and that it announced the“IMF of the future”.Perceptible breakdownThe NGOs replied to him by denouncinga “farce” (Christian Aid) andinsisted on the perpetuation of a systemin which 43 African countries only hold4.4% of the voting rights, when the G7members control 45% (Oxfam)."However, this is not a small reform”,commented, for his part, PierreDuquesne, administrator for France atthe IMF. If the UN had achieved atenth of what was proposed inSingapore, this would have made thefront pages of the world's press.”For the interested parties, the breakdownis perceptible. Within the G24,where we find a number of emergingcountries, a majority was pronouncedfor the reform in spite of their fear thatthe second phase lasts over two years,as it will require a modification of thearticles of association of the IMF andits ratification by 184 nationalParliaments."We ask that the new formula for calculatingthe quotas takes account of aGDP calculated at purchasing powerand of the vulnerability of our countriesto commodity price fluctuations andother exogenous shocks", statedMargarito Teves, Philippine Minister ofFinance, on behalf of the G24.However, Felisa Miceli, his Argentinecolleague, counts on a categorical refusalin the company of Brazil, India andEgypt, “because this reform does notguarantee that our countries will notsee their representation eroded at theend of the process”."This reform is a great success” exclaimedJohn Benjamin, Minister ofFinance of Sierra Leone. Indeed,Africans are seduced by a doubling ofthe "basic" votes by the promise ofbeing able to expand the number oftheir advisors and hence see two newreplacement African administratorsappointed.Inevitably, the new breakdown will disadvantagethe “old” economies, startingwith the Americans (about 17% ofthe votes) and the Europe of 25 (32%).This is why, well before the Autumnassembly of the IMF in Singapore, weheard Belgium, the Netherlands andGermany confirm that their quotasshould not be reduced… As a generalopinion, it is not a monetary crisiswhich Mr Rato is expecting, in the nexttwo years, but rather the establishmentof the ideal equation which would enableeach country to increase somewhattheir ranking in the IMF.NumbersThe countries with the most voting rights:United States, 17.08%; Japan, 6.13%;Germany, 5.99 %; France, 4.95 %; GreatBritain, 4.95%; Italy, 3.25%; Canada,2.94%; Russia, 2.74%; Netherlands,2.38%; Belgium, 2.13%; India, 1.92% ;Brazil, 1.14%; South Africa, 0.87 %. Thecountries whose voting rights will increase:China from 2.94% to 3.65%; Mexico,from 1.20% to 1.43%; South Korea, from0.76% to 1.33% and Turkey, from 0.45%to 0.55%.Energie & Mines185November 2006

OverseasOVERSEASFlared gasesMajor lossesfor the producing countries■ 150 billion cubic metre are emitted and flared each year.Energie & Mines186The gas flaring associated with theextraction of crude oil makes the producingcountries lose major incomeand is increasingly concerning thesecountries, according to the WorldBank, which sees here not only aserious threat for the environment, butalso a waste of a very valuable energyresource. According to recent statisticsfrom the World Bank, some 150 billioncubic metres of natural gas are beingflared and vented annually.This is the equivalent a quarter of theannual gas consumption of the UnitedStates, 30% of the European Union'sand 75% of Russia's gas exports. If wetake the gas that is flared in Africa,which only represents 40 billion cubicmetres annually, and we used it to createthe electricity produced by modernand efficient plants, we could doubleSub-Saharan Africa's electric production.With the exclusion of SouthAfrica, feels Mr Ben Svenson, the WB'sdirector of the GGFR (Global GasFlaring Reduction partnership) initiated,in August 2002, by the internationalfinancial institution.The GGFR, whose objective is to helpthe efforts of member oil companiesand governments in view of reducingthe volumes of gas flared each year inthe world, is preparing, for this purpose,an international forum, planned forDecember 2006, in Paris (France), inassociation with the WB and theInternational Association of Oil andGas Producers (OGP) to examine theresults obtained up to now and thestages to be overcome to improve andupgrade this resource.“Reducing gas flaring requires a globaland concerted effort by governmentsand industry, as well as financial institutionsand local communities”, says amanager of the GGFR.Whilst, for specialists, stopping gas flaringwould also help to reduce by 13%the carbon dioxide emissions to whichthe developed countries are committedNovember 2006by virtue of the Kyoto Protocol for theperiod 2008-2012, we still need to helpthe producing countries to overcomethe problems they are encountering intheir efforts in exploiting, developingand making these resources profitable.The main obstacles to reducing gas flaringare mostly linked to difficulties ofaccessing the international gas markets,the tightness of domestic markets,the lack of financing to put in place thenecessary infrastructures, the littlecommitment from consumer countriesto grant investments and the lack of anappropriate legal framework. TheWorld Bank's report recalls that over95% of the evacuation of flaring of theassociated gases, at the world scale,concerns less than fifteen countries,namely Algeria, Nigeria, Iran, Iraq,Angola, Qatar, Venezuela, EquatorialGuinea, Indonesia, Brazil, Mexico,Kazakhstan and Cameroon.It should however be recalled that innumerous producing countries, projectshave been developed in the lastfew years to retreat the associatedgases, such as in Algeria where severalre-injection and exploitation programmeshave been put in place.Within the framework of Nepad,Algeria is a stakeholder in the constructionof the Nigeria-Algeria gas pipeline,to export the gas produced from theNigerian oil fields to the Europeanmarkets - gas which has been flared upto now. Some 17 demonstration projectsare currently operating in theGGFR partner countries, it is noted.The GGFR partnership, managed andfacilitated by the World Bank, includesAlgeria (Sonatrach), Angola,Cameroon, Canada, (Cida), Chad,Ecuador, Equatorial Guinea,Indonesia, Kazakhstan, Russia (KhantyMansijsysk), Nigeria, Norway, Qatar,United Kingdom (ForeignCommonwealth Office), the UnitedStates, BP, Chevron, Exxon Mobil, ENI(Italy), Marathon, Norsk Hydro, Shell,Statoil, OPEC and the World Bank,whereas the European Union will becomea member in 2007.

ChronicleThe return of industrialpoliciesBy Alice Sindzingre *The developmenttheories are not so exoticafter all: as in Francetoday, one of the questionsrequires industrialpoliciespolitiques industrielles.After their independence, anumber of developing Stateshave started their acceleratedindustrialisation. This wasslowed down by the crises of the 1980sand by the structural adjustment programmesrecommended by the internationalfinancial institutions.The latter felt that the industrial policiesand the public companies were inefficient,favoured benefits and harmed thebudgets. The commercial opening upsimultaneously carried out exposed theindustrial sectors to global competition.In the poorest countries, these sectorswere often found reduced to exploitinga small number of natural resources. Asnoted in the latest annual report by theUnited Nations Industrial DevelopmentOrganisation (UNIDO), the addedvalue per capita of the manufacturingsector, in dollars in 1995, in the lowincome countries was, in 2002, 33 dollars,compared to 5,839 in the industrialisedcountries.Unequal resultThe international institutions arguedthat the growth might come from otherthings than the industrialisation forwhich the poorest countries do not havea "comparative advantage". Foreigninvestments, in particular, are, in theory,beneficial due to their domino effecton the rest of the economy and theircapacity to change its structure. A lot ofcountries therefore opened up toforeign direct investments (FDI) in the1990s.The result was, however, unequal.Unsurprisingly, the investors generallywent to low income countries wheretheir investments would be the mostprofitable: in natural resources.According to the latest report from theUNIDO on FDI, in 2004, Angola,Equatorial Guinea and the Sudan,alone, received almost half the FDIflows to the low income countries,obviously due to the increase in the pricesof oil rather than these countries'good governance and developmentstrategies.In any case, the percentage of the poorestcountries in the world's FDI flowsstagnated in 2004 at 2%.In most of them, over the decade 1990-2000, the aid flows exceeded the FDIflows…The FDI have not therefore changed theeconomic structure of these countries.On the contrary, their concentration inthe natural resources' sector has increaseddependency, with the price volatilitycausing repeated budgetary deficits,aggravated by the tax gifts that are oftengiven to the multinationals in a contextof global competition to attract them.Industrialisation is returning to thedebates: haven't the strong growthcountries (such as the Asian countries)taken off with industrial policies, even ifthese were targeted on exporting? FDIand industrialisation separately havehad mitigated results: why not link themby guiding the FDI towards industrialisation?This is the suggestion made byMr Ricardo Hausmann, director of theCentre for International Developmentat Harvard University, in a recent analysisof South Africa.This is even truer given that technologicalinnovation is one of the driving forcesof world growth. The poorest countriesare handicapped by their low levelof savings, their small number of graduatesin scientific and technical disciplinesand the tiny percentage of theirresources devoted to research and development(R&D).This has even decreased in Sub-Saharan Africa where, according to theUNIDO, R&D has gone from 2.2% ofall R&D of developing countries in1996, to 1.9% in 2002. As recentlyshown by Mr Philippe Aghion, economistat Harvard, with Diego Comin andPeter Howitt, technological progress inthe poorest countries cannot only comefrom foreign investors, as these betterknow the innovations developed at theworld level, but it must be deployedwith the local banks (which assumeslocal saving), as these are better placedto adapt the technology to the receivingcountry. These considerations shouldinspire the future programmes of internationalinstitutions.A. S.(*) Researcher at the Centre national dela recherche scientifique (CNRS),UMR EconomiX, university Paris-XIn Le MondeEnergie & Mines187November 2006

Analysis ANALYSISMiddle East and North AfricaGas investments are triplingto 27 billion dollars/yearThe investments requiredfor gas projects inthe Arab countries areestimated at102.7 billion dollars inthe period 2006-2010,i.e. an annual averageof 20.5 billion dollars.The figures represent almosttriple the 36.5 billion dollars,or an annual average of7.3 billion/year, estimated forthe period 2002-2006.According to the details provided by theArab Petroleum Investments corporation(Apicorp), the majority of the newinvestments (64.1 billion dollars, or62.4% of the total) will be allocated toprojects in the production downstream:LNG, GTL and petrochemical industriesbased on natural gas.The same expansion is observed in Iranwhere the investment needs of the gassector should increase to 5.7 billion dollarsa year by 2016, according to thenew estimates which have just been putforward by Mr Resa Kasaizadeh,Minister of Oil and executive director ofthe National Iranian Gas Company(NIGC). This brings the total amountof gas investments in the Middle Eastand North Africa to almost 27 billiondollars a year over the coming years.This phenomenal increase in investmentsis the result of exceptionallyquick development of the gas exportsand production in this part of the world,as well as the strong increase in provenreserves. The latter have surged by33.7% in five years, going from 60,380billion cubic metres (37.9% of the world'stotal) at the start of 2000 to80,720Gm3 (45.1% of the world'stotal) at the start of 2005.Over the same period, the productionsold from these countries has gone from301.4Gm3 (12.1% of the world's total)in 2000 to 433.5Gm3 (15.4% of theworld's total) in 2005, i.e. a 44%increase in the space of five years.The priority granted by the countries ofthe Middle East and North Africa to thegas sector is motivated both by domesticneeds which are increasing at a rateof 3.5 to 4% a year, which would take itfrom 311Gm3 in 2005 to 630Gm3 by2020, and by a large export potential,particularly in Qatar, Algeria, Iran,Egypt and Libya.In total, and given their reserves, thelow production cost and their geographiclocation, this region's countriesmight, according to the estimates of theInternational Energy Agency (IEA),almost quadruple their exports in thenext 25 years, bringing them from132Gm3 in 2005 to some 440-406Gm3 by 2030.In any event, these countries have gotoff to a great start to contest Russia'sdominant role in the world's gas supply,especially given that, on the one hand,the proven Russian reserves have practicallynot moved for ten years or so,whereas those of the Arab countries andIran are quickly increasing and, on theother hand, Russia must grant enormousinvestments to ensure the slack istaken up in a good number of ageingdeposits that have been mined for decades.This is particularly the case of theOurengoy and Yambourg depositswhich currently supply Europe.Whatever the fact, the rivalry betweenRussia and the exporting countries ofthe Middle East and North Africa is ablessing for the western countries thatare increasingly preoccupied by theGazprom monopoly over the Russiangas exports and concerned about ensuringthe geographic diversificationof their imports which will rapidlyincrease.N. S.In PGAEnergie & Mines188November 2006

OverseasLNG producers and consumers meet in WashingtonChakib Khelil : “We want to talkdirectly with the distributors”A meeting betweenLNG producing countriesand Americanconsumers was organisedin Washingtonwith the participationof several ministers,including Mr ChakibKhelil, with the purposeof putting the twomain players from thegas industry incontact with eachother, listing the difficultiesand examiningthe possibilities of afruitful dialogue capableof helping to overcomethe obstaclesand tensions thatexist on a segmentedmarket subject to therules decreed by theconsumer countries.Organised by the Abraham Group, aninternational strategic consulting firmin the energy sector, directed by theformer American secretary (George W.Bush administration), Mr AbrahamSpencer, this seminar, entitled“Producer-consumer summit onLNG”, brought together, other thanthe Algerian Minister of Energy andMines, the current president of OPECand Nigeria's Minister of OilResources, Mr Edmund Dokouro, theQatari Deputy Prime Minister andMinister of Energy and Industry, MrAbdellah Ben Hammad Al Attiyah, theunder-secretary for Gas Matters at theEgyptian Ministry of Oil, Mr HanySoliman, with the participation of themain managers of American associationsand companies operating in thegas industry chain.The American gas market is in fullexpansion, but it is still faced with tensionswhich have a negative impact onits organisation, its efficiency and itsstability. Out of a total gas purchasingvolume, which is around 300 billioncubic metres a year, we import over25% of our needs and the volumes willincrease by 2030, stated Mr AbrahamSpencer, adding that his country needsmore visibility in the near future andalso needs to bring the legal frameworkin line with what is happening in otherparts of the world. In his openingspeech, he defended the idea of a fruitfuldialogue between producers andconsumers, without intermediaries,because, he stated, this is the best wayto control the current contingents ofthe fragmented gas market and bring inline the expectations of producers andconsumers.We want to establish a dialogue directlywith the consumers, i.e. the gas distributorsand no longer, as has beendone up to now, with the administrationswhich, often, do not consider thepoints of view and concerns of consumers,explained Mr Khelil.Without a market and long termcontracts which guarantee significantrevenues, the gas producing countriescannot alone finance the projectswithout satisfying the additional expecteddemands. The security of suppliesand the guarantee of satisfying thedemands cannot be the sole businessand sole responsibility of producers,explained Mr Khelil.We have to move towards the creationof a world gas market that is more opento producers and consumers that sharethe risks and the profits, further defendedMr Khelil, who, citing the effortsmade by Algeria, through the series ofreforms put in place and the largeinvestments granted, indicated that it isalso the responsibility of the consumercountries to get involved in the developmentof the gas chain.Mentioning the different transparenciesin the hydrocarbons, energy andmines sectors and the different opensectors to reinforce, particularly, thenational gas industry, he emphasisedthat the message given in Washingtonwas to say that Algeria is a reliablecountry which has always honoured itscommitments.To a question on the importance of theAlgerian-American cooperation, hereplied that out of a volume of annualgas imports of over 200 billion cubicmetres, Algeria only holds 5%.The American market is in full expansion.We want to increase our gas sales,but also sales of other products. We arelooking to establish long-lasting relationsand get involved more in thetransportation, distribution, transformationor selling activities, which aremore cash-generating, said theMinister.Questioned on the possibility of anopening up of a representative office ofthe sector in the United States, as thereis in Europe and Asia, and as was thecase in Houston (Texas) in the firstyears of Sonatrach's activities, he feltthat currently such a representativeoffice was not considered as it is notfinancially justified.The United States is still a major outletfor the gas industry, but the producingcountries present in Washington, aswell as certain consumer representatives,remarked that what is most urgentis to move towards a more open andmore competitive world market.Energie & Mines189November 2006

OverseasOVERSEASInternational Energy ForumAlgeria elected to theExecutive CommitteeAlgeria was recently elected to theExecutive Committee of the InternationalEnergy Forum (IEF), whose headquartersare in Riyadh (Saudi Arabia), welearn from a source from the Ministry ofEnergy and Mines in Algiers. Algeria'selection has enabled it, for the first time,to take part in the deliberations of theExecutive Committee in its 11th sessionheld last September, specified the samesource. This session was particularlydedicated to questions related to theinternal operating and the forum's workprogramme for the year 2007. The forumis a body which brings together theMinisters of the producing countries' andenergy consumers from industrialisedcountries and developing countries for a“global dialogue” on energy. In this form,the Ministers deal with questions relatedto energy security and links betweenenergy, the environment and economicdevelopment. Created in December 2003,the Secretariat of the IEF is an internationalentity to promote and ensure a continuityof this unique ministerial dialogueon energy in which over 60 countries participate.The Secretariat also plays therole of coordinator in the energy databank (Joint Oil Data Initiative, JODI) inwhich several world organisations participatesuch as the Apec (Asia-Pacific), theIEA, the Olade (Latin America), OPEC,Eurostat and the Union Nations' statisticsdepartment. The 10th Forum whichbrought together Ministers from 59countries, including the Minister ofEnergy and Mines, Mr Chakib Khelil, metin Doha (Qatar) from 22 to 24 April. Thenext meeting will be held in the Italiancapital, Rome, in 2008.Despite the upsurge in oil prices and interest ratesWorld growth is not flaggingThe world's economy continues to grow at a sustained rate ofapproximately 4%, demonstrating a surprising resistance to theincrease in oil prices and interest rates.Growth benefits everyone, but the geographic distribution ofthis creation of wealth is changing. Initially we see the increasingpercentage taken in the world's Gross Domestic Productby countries such as China, India and the USSR which havegrowth rates of between 6% and 11%.In second place, the hierarchies tend to move inside the groupof the largest industrialised countries itself. American GDP hasincreased by 2.5% annually in the 2nd quarter of this year comparedto 5.6% in the first quarter, as the upsurge in the priceof oil made its effects felt on consumption.The United States is turning over slower than Europe, which isrecovering, whereas Japan is picking up speed. On the OldContinent, the economy is getting back into shape, unemploymentis falling and citizens are in better moods. Japan, finally,seems to have once and for all broken away from the long periodof stagnation and deflation in which the bursting of thestock market and property bubble precipitated from the start ofthe 1990s.If, however, the economic hegemony of the United Statesseems really contested, the threat would come less from aEurope which remains handicapped by its structural rigiditythan from the new couple made up of Japan and China, withthe first relying on a modernised industrial and financial system,and the other on an inexhaustible pool of cheap labourand, particularly, on the formidable energy of its people.Energie & Mines190November 2006

marketsProducer/Consumer Dialogue Conference Washinbgton, June 2006-10-16Long-terme Supply ContractsThe Backbone of a Secure MarketBy Dr Chakib KhelilMinister of Energy and Mines of AlgeriaSource : ShellSource : IEO 2005Source : BP "transforming our fossil energy future 2005"Source : CEDIGAZ 2006Source : International groupof LNG importers (GIIGNL) : "The LNG industry in 2005"Source : Andy Flower, PFC, CVX☞Energie & Mines191November 2006

markets MARKETS☞Source : CEDIGAZ 2006Source : EIA 2006Source : EIAEnergie & Mines192November 2006

markets☞Energie & Mines193November 2006

markets MARKETS☞Energie & Mines194November 2006

Analysis ANALYSISAre they making the markets work or disrupting them ?Hedge Funds are at the centreof a lively controversyEnergie & Mines196What is a hedge fund ?Literally, these are funds which use riskhedging techniques, also used to speculateon the financial markets: short selling(of shares borrowed to be boughtback at a cheaper price), arbitratingbetween two assets, negotiating derivativesenabling an asset to be bought at aprice determined in advance: futures,options, etc. The use of these techniquesis called alternative management(compared to the traditional investmentin shares and bonds).There are several types of hedge funds:some are specialised in the simultaneousshort buying and selling of shares(long-short equity strategy), others ininvestment related to bets on the globalmacroeconomic evolution, others in thearbitrage of convertible bonds into shares,or looking for special situationssuch as the restructurings… The “alternativefunds of funds” invest in severalhedge funds to spread the risks.For the majority, they are only indirectlyregulated through the supervision ofbanks (of which they are creditors whenthey take on debt).In February, in the United States, theSecurities and Exchange Commission(SEC), the markets' watchdog, askedhedge funds with over 25 million dollarsand with at least fifteen investors toregister with it, but a legal decision cancelledthis obligation in June.In Brussels, the European Commissionasked professionals to look into thedevelopment of hedge funds; a reportwas published in July. Their regulationis the subject of concern for severalMember States, particularly Germanyand France, but a directive does notseem to be the best option. In London,hedge funds must be registered with themarkets' watchdog, the FSA (FinancialService Authority). In France, aboutthirty billion euros are invested in hedgefunds of French law (OPCVM withrelaxed investment rules, with orNovember 2006without leverage, contractual OPCVMsand alternative funds of funds), subjectto the specific rules of the FrenchFinancial Markets Authority (AMF).It is difficult to evaluate: a lot of themare closed funds where the investors'money is frozen for a contractual periodof at least one year. In two and a halfyears (July 2003 to December 2005),hedge funds earned over 25%, but theperformance of the open hedge fundsalone - in which the subscribers canregularly withdraw their money, forexample every month - is almost half,according to the calculations of theEuropean Central Bank taken from specialisedCrédit Suisse Tremont indicators.The International Organisation ofSecurities Commissions (IOSC), whichgoverns the market regulatory authorities,intends to define common rules forevaluating hedge funds' assets: "We willstrictly associate the hedge funds'industry to this work in order to definetogether the principles which the professionalsmust apply to themselves.Standards should be adopted by thesummer of 2007, but controlling theirapplication will depend on the regulationspecific to each country and theexistence of an obligation for the hedgefund's management company to register”,indicated Mr Hubert Reynier,director of international business andregulation to the AMF.

chronicleThe upsurge in commodity prices is in sympathy with the oil priceThe surprising returnof commoditiesBy Jean-Pierre RobinIt is unusual to calculatethe weight of the economicwealth produced ina country in tonnes. Weprefer to express it inbillions of dollars oreuros !owever, at the end of theH1990s, Mr Alan Greenspan,the chairman of theAmerican Federal Reserve(FED), loved to remark thatthe gross domestic product (GDP) tendedto weigh lighter, stricto sensu. The revolutionof the "new information economy"was then en route; we would only rely ongrey matter and the “virtual”. In thespring of 1999, the oil price remainedstuck to the bar of 10 dollars a barrel.Well-established experts thought that itmight drop to 5 dollars.All these forecasts turned out to be incorrect.If it is still as hazardous as ever toevaluate the American or global GDP on ascale, we are undoubtedly seeing thereturn of heavyweights in the economies.Since the start of the 21st century, worldsteel production has increased from 825to 1,129.4 million tonnes; a 37% increase,much higher than the planet's growth inGDP, which we agree is exceptional. Since2003, China has, each year, increased itsown steel production by a volume whichexceeds all the steel produced by Germanyand France combined!The new world growth, boosted by theneeds of emerging countries, with Chinaand India in the lead, is deemed a gluttonof energy and raw materials. The delays tobe made up for are, it is true, immense, asstated by Mr Patrick Artus, the chief economistat Ixis bank, whose calculationsmake people shiver : “If the Chinese hadas many cars per capita as the Europeansdo, they would have 33 times more (thanthey have today), and their oil consumptionwould be more than twice the currentglobal production. We see the impossibilityof obtaining the necessary raw materialresources." This is why the price of crudeoil multiplied by seven between 1999 and2006. Copper, which was 1,500 dollars atonne five years ago, traded at 8,800 dollarson 11 May in London.The upsurge in commodity prices is insympathy with the oil price, explains theInternational Monetary Fund (IMF) in itsstudy on the world economic outlooks2006: "Energy prices have contributed tohigher prices for many non-fuel commodities- for example, energy-intensive aluminiumand steel, some agricultural commodities(through higher fertiliser prices),sugar and edible oils (which are inputs inthe composition of ethanol, demand forwhich has increased)." Sugar prices havedoubled in a year and are now dependenton oil prices, since Brazil, the world's largestsugar cane producer, allocates half itsincome to manufacturing ethanol.Another phenomenon comes to the forefrontto favour this contagion of prices,states the IMF: "Investors are looking todiversify on the product markets, in parallelto their traditional investments in sharesand bonds, to protect against the risksof inflation or volatility of the dollar.” Thefundamental function of commodity futuresmarkets traditionally aims to ensuretheir producers and their users have visibilityon the future prices.With the entry in force of investors andhedge funds, 31% of the positions takenon Nymex (the New York MercantileExchange) are today due to speculators,three times more than five years ago.Hence the extreme volatility in priceswhich led the tonne of copper to lose over1,000 dollars in a day in mid-May. Hencethis alternating phase of heat waves andcold waves as brutal as seen in the lastthree months. Oil, precious metals, copper,nickel or maritime freight are affected.The prices of maritime transportationpractically tripled in 2003-2004, driven byChina's international trade needs. Theyhave seriously calmed down, partly forvery real reasons: it is estimated that theworld's fleet's capacities will increase from7% to 8% in 2006.Maritime freight is quoted on the Londonmarket, which offers an entire range ofdifferent indices, in accordance with theroads and types of transport. This, ofcourse, is indicated in the Cyclope guide,the real commodities bible, publishedunder the direction of Philippe Chalmin,whose twentieth annual edition (2006)has just been published. The list of commoditiespresented goes well beyond rawmaterials proper. It includes all the productsor services, including financial ones,whose price may be quoted on a futuresmarket, because they are fungible. Thisgoes from gold to semi-conductors to pollutionrights (CO 2 emissions). J.-P REnergie & Mines197November 2006

Markets MARKETSThe country is now the world's 3rd largest producerThese Canadian diamondsare to die forThe difficulties inherentin the rough climateof the GreatCanadian North arenot for nothing. It'sthe rush towards thediamond mines.Rich in diamonds, as well as gold, nickeland uranium, the sub-soil of these icy territoriesexcites the greedy and stirs up thefantasies as in the epic gold rush era.Born hardly 8 years ago, the Canadiandiamond industry is today blooming.Up to this year, Canada only had twomines, but these produced high qualityrough diamonds. Now, in 2005,Canadian diamond production exceeded12.3 million carats worth 1.7 billionCanadian dollars (i.e. 1.2 billion euros)and, all of a sudden, the maple leaf countryrose to third place globally of diamondproducers with 15% of the market.In 1998, the Ekati mine, owned by theAnglo-Australian BHP Billiton, openedhostilities: located in full tundra, some400km from Yellowknife, the capital ofthe North-West territories, the mine knewhow to arouse envy. Today, the Ekati siteproduces 3 million carats a day.In the same region, a second mine cameto light in 2003. This mine, which enclosed100 million carats, already ensures65% of Canadian production comparedto 21% for Ekati. And that's not all: athird mine started operating in July in theneighbouring territory of Nunavut, thedomain of the Inuit. The company TaheraDiamond invested 128 million dollars inthe project and the mine, now picking upspeed, has already produced 127,000carats with, as an additional bonus, a 59-carat diamond evaluated at over 400,000American dollars.Over a billion Canadian dollars have beeninvested in this sector over the last 10years: over 120 companies are in the runningwhich invest some 250 millionCanadian dollars a year, i.e. 30% of theworld's prospecting budget. And the discoveriesare multiplying both in the westand more in the east in the north ofOntario and Quebec.Three new projects are currently in maturationphase and Canada is now committedto sizeable downstream and polishingactivities where it has its own stamp.Energie & Mines198November 2006

Sustainable developmentDon't desert drylands !Algeria, the world's capitalfor the environmentAlgeria, designatedthe world's capitalfor the environment,hosted the officialfestivities of theWorld EnvironmentDay under the slogan“Don't desertdrylands”.Appointed by the United NationsDevelopment Programme (UNDP), as asign of recognition for the efforts it hasput into the environmental domain, ashost of this world event, Algeria seizedthe opportunity to launch an appeal to theinternational community to unite more inthe fight against desertification”, it wasindicated in Algiers. Algeria's appointmentis also an extension of resolution58-211 of the UN by which the GeneralAssembly had proclaimed 2006 as theinternational year of deserts and desertification.The desertification problem has become,in the last few years, one of the majorconcerns of the United Nations which hasdevoted a financial package of 42 billiondollars to face up to the challenges ofdesertification in the world. Hence, aninternational conference on desertificationwill be held in Algiers and will be anew opportunity to sound the alarm onthe deterioration of the soil in arid andsemi-arid regions which cover over 40%of the planet's land mass.In this respect, Mr Kofi Annan, SecretaryGeneral of the UN, indicated in a messageon this occasion that “more than 2billion people live on the ecological, socialand economic margins”. "Desertificationis hard to reverse, but it can be prevented”,he said, recalling the goals which“the world's governments have pledged toachieve by 2015” to ensure environmentalsustainability. In Algeria, colossalefforts have been put into the environmentaldomain, particularly in the protectionof the ecosystems in the stepperegions and improving the South so as torestore the ecological, economic andsocial equilibrium of these regions. Thesteppe regions suffer from major socioeconomicdelays which increase theirnatural ecologic fragility, indicated theMinistry of Land and the Environment.The steppe is threatened by the overloadof ovine herds with 10 million cows deemed“very much greater” than the region'sforage capacities, thus leading to thedeterioration of farming land, a destructionof the vegetal coverage and the alarmingdevelopment of the desertificationprocess, it was noted. As for the Southernregion, which is spread over a surfacearea of 2.07 million square kilometres, “itrequires greater efforts” to ensure it hassustainable development.This region, according to the sector'smanagers, “must benefit from a globaland multi-sectoral development programmewhose objective is to protect theecological balances, using all its potentialsand resources at the right time toimprove the living conditions of itspopulations”.It should be recalled that Algeria, throughthe United Nations DevelopmentProgramme (UNDP), has benefited froma financial package of some 16.5 milliondollars for the period 2002-2006 designedto support its commitments in termsof reducing poverty and improving theenvironment. In Algeria, the UNDP haslaunched 5 projects targeting the localand community development of theremote regions in an integrated environmentalapproach, it was pointed out.The first project targets the preservationand the sustainable use of the biodiversityin the national parks of Tassili andAhaggar for the period 2004-2007, whereasthe second project targets theconservation of the biodiversity and thesustainable management of naturalresources in the drylands in Taghit,Mergueb and Oglat Eddaïra to put an endto the deterioration of the soil. It alsoaims to assist Algeria in the putting inplace of a national biodiversity strategyand the biodiversity action plan.The UNDP, through the 3rd and 4th projects,is counting on the realisation of thequality of the communication and informationon climate changes as well as onthe reinforcement of the national capacitiesfor the integrated management ofmunicipal waste. The aim of the 5th projectis to support the integrated localdevelopment and promote sustainablecultural tourism in the regions of theSouth that is able to efficiently fightagainst poverty, by improving the livingconditions of the citizens at the locallevel. The United Nations Food andAgriculture Organisation (FAO) has, forits part, committed to help Algeria to preparea sustainable management strategyfor forest resources, enabling them to fulfiltheir social, ecological and economicfunctions and improve the training oftrainers from the General ForestryDepartment.The United Nations IndustrialDevelopment Organisation (UNIDO), asan execution body specialised in helpingthe transfer of technologies, has includedin its Algerian programme the improvementof the competitiveness and the promotionof a clean and sustainable ecologicalenvironment. The objective of thissupport consists of helping the governmentto upgrade its policy in the conservationof a clean environment, by ensuringthe rational use and leading actionsto combat pollution and also waste managementactions.Hence, Algeria, a signatory country of theMontreal Protocol, has benefited from anamount of 14 million dollars from themultilateral fund to finance 27 coolingfoam aerosol projects. The beneficiarycompanies have been given equipment toavoid the use of noxious gases during theproduction process.As support to putting in place and reinforcingthe national capacities in thedomain of the environment, this project,co-financed by the UNDP and Algeria,tends to reinforce the capacities to combatindustrial pollution and improve thecapacities in combating pollution.Energie & Mines199November 2006

Sustainable SUSTAINABLE developmentDEVELOPMENTWorld Environment DayCry of alarm from the UNDeserts are threatened "as never before” whereas they could be atreasure of resources for the planet through the production of solarenergy or medicinal plants, warned the UN in a report published onthe occasion of the World Environment Day.Energie & Mines200November 2006"Far from being barren wastelands,deserts emerge as biologically, economicallyand culturally dynamic, while beingincreasingly subject to the impacts andpressures of the modern world”, explained,on this occasion, Mr ShafqatKakakhel, executive director of theUnited Nations EnvironmentProgramme.Deserts also "emerge as places of neweconomic and livelihood possibilities,underlining yet again that the environmentis not a luxury, but a key element inthe fight against poverty and the deliveryof internationally-agreed developmentgoals”, he added.At least one quarter of the planet's landsurface - some 33.7 million square kilometres- is considered as desert land andis inhabited by 500 million people, accordingto the UNEP report.But without careful management in thefuture, the unique landscapes, ancientcultures, flora and fauna in these areasare at risk of disappearing, warned,during a press conference in London,one of the authors of the report, MrAndrew Warren, professor of geographyat University College London."What alarms me now is that they arethreatened as never before by climatechange, by the over-exploitation ofgroundwater, salinisation and the extinctionof wildlife”, he said. The overall temperatureincrease in desert regions of between0.5 and 2 degrees Celsius between1976 and 2000 has been much higherthan the average global rise of 0.45°C.Temperatures in the deserts mightincrease from 5 to 7 degrees by 2071-2100.Drying rivers, inefficient water use suchas irrigation and population growth willadd to water shortages. Saudi Arabia,Syria, Pakistan, the west of China, Chad,Iraq and Niger will be particularly affected,predicts the report.Road building, pollution, tourism andhunting are threatening flora and faunaand several desert species are disappearingor quickly reducing in numbers.Other threats comes from political instability,leading to increased use of desertareas for activities such as military training,prisons and refugee camps."These deserts are unique and dynamiceco-systems and, if sensitively treated,can provide the answers to many of thechallenges that we face today, whetherit's for energy, for food or for medicine,said Kaveh Zahedi, Deputy Director,UNEP's World Conservation MonitoringCentre, based in Cambridge.Deserts could become the carbon-freepowerhouses of the 21st century, harnessingthe wind and sun.A desert the size of the Sahara could captureenough solar energy to meet theentire world's electricity needs, accordingto Mr Zahedi."Animals and wild plants are new sourcesfor pharmaceutical research, industrialproducts and agriculture”, indicated theUNEP.The Nipa, a plant harvested by theCocopahs people in the north-west ofMexico produces large yields of a grainabout the size of wheat. "This vegetalspecies could make a major contributionto food security and thus become thegreatest gift offered by the desert to therest of the world”, indicated the UNEP.Plants discovered in the Neguev desertcan help to fight against cancer and malaria.Others, found in Morocco, Arizonaand Argentina, also have medicinal properties."The pharmaceutical potential ofdesert plants has yet to be tapped”,according to the report.Message from the DirectorGeneral of theOrganisation for theProhibition of ChemicalWeapons to Mr ChakibKhelil“Thank you verymuch for the supportyou have givento the Convention onthe Prohibition ofChemical Weapons”"Dear Minister,I am delighted with our recent bilateralmeeting held during the visit I made toAlgiers from 20 to 22 February 2006 andgreatly thank you for the support youhave given to the Convention on theProhibition of Chemical Weapons.Our bilateral meeting, particular the fruitfuldiscussions we had in Algiers, areproof of your commitment to work in closecollaboration with the TechnicalSecretariat of the Organisation for theProhibition of Chemical Weapons(OPCW) and the key role which yourMinistry plays in the national efforts forthe effective implementation of theconvention. In this perspective, I wouldlike to emphasise that the TechnicalSecretariat is ready to cooperate with theMinistry of Energy and Mines to achieveour common objectives.I hope that you will be able to visit us atthe OPCW headquarters, in The Hague,in the near future.”M. Rogelio Pfirter

ChronicleControlling the clean development mechanismsA major challenge of the century"The earth is blueas an orange”(Paul Eluard)BySliman Dakar *The planet is shrinking, space nolonger counts and the clock isticking. This is the reality ofglobalisation such as is happeningunder our eyes and whichacutely poses the question of dialogue,collaboration and cooperation at the entirehumanity's scale, of which the interdependenceof interests and the communityof fate have become a burning and pressingproof.Hence, mobilisation at an internationallevel is deemed imperative to protect, forexample, the planet from global warming -a major challenge for sustainable development.It is within this framework of globalinternational action, therefore, that fallsthe successive ratification by Algeria of theUnited Nations Framework Conventionon Climate Change in June 1993 and theKyoto Protocol, as of its entry in force in2005.The time has now come to recall all theefforts made, in these last few years, byAlgeria at the various institutional, legaland regulatory levels thanks to the reformsintroduced in the Energy and Mines sectorand which grant priority to the preoccupationof sustainable development.The law on energy savings, constantimprovement of energy efficiency, thepromotion of renewable energies and thereduction of our energy systems' negativeimpacts are all indissolubly related objectives.In the aftermath of this major law, a nationalenergy savings programme, up to2010, was drawn up, whose impacts willhave a catalysing effect in favour of thevoluntarist objectives which the sector hasset down within the framework of theKyoto Protocol.But that's not all : over these last fewyears, a whole series of laws have beenpromulgated which govern the electricityand gas sector, the domain of renewableenergies and the hydrocarbons sector:they have all been drawn up whilst beingmindful of ensuring that the reformsundertaken are fully consistent. All theselaws have, in common, a concern for establishingthe environmental dimension,which thus takes on, in each of them, anew priority within the framework of ourenergy policy.This is therefore a very obvious desire toset up a series of international institutionsand their prescriptions and recommendations.Algeria is, thus, determined to mobilise allthe potentials of the energy sector so as tocontribute efficiently to the internationalgreenhouse gas reduction programme,whilst respecting the timetable used by theKyoto Protocol.This includes the urgent putting in placeof the Designated National Authority - thecentre of the system which will be responsiblefor ruling on the projects eligible forthe financing mechanisms provided by theProtocol - the clean development mechanism- and for submitting these projectsfor validation to the international bodyconcerned.The objective is to finally put this institutionin place as quickly as possible. Thisauthority will definitely be an invaluablesupport and an irreplaceable tool of ouraction within the framework of the implementationof the protocol.Considerable effort has been put in by theEnergy and Mines sector in favour of promotingsustainable development: theLPG-fuel, compressed natural gas, unleadedpetrol promotion projects, for example,are thus part of the implementation ofa national energy consumption model.This model favours the priority use ofclean fossil fuels, such as natural gas,which we have in abundance, and LPG;but it also grants specific importance tothe development of the national potentialin terms of renewable energies: the promotionof solar energy is thus undergoingspectacular acceleration with, particularly,the launch of the important hybrid solargaspower plant in Hassi R'mel, amongmany others that are eligible for the cleandevelopment mechanism's financing.How can Algeria's pioneer role in theinternational action targeting the total eliminationof flared gases - somethingwhich will be done by our country in 2010- and in the action related to the impoundingof carbon gas fail to be noticed giventhe experience initiated by Sonatrach inassociation with BP and Statoil on the InSalah acreage, for example ?We can further mention the drawing upand implementation of an ambitious HSEpolicy including, particularly, large-scaleprojects in the domain of industrial safety,the action targeting better control of towndevelopment and territorial planning withthe Hassi Messaoud city relocation project,finally, the preoccupation of protectingthe coastline against the major risksof marine pollution through the creationof a specialised multinational company,whose vocation will be to interveneagainst accidental spills of hydrocarbonson the African coasts.We now need to draw up a systematicinventory of the projects eligible for theCDM financing in the domains and activitiesin relation to the development of theenergy sector, such as the renewable energies,energy savings, “clean” fuels, therecovery of flared gases and the recoveryof CO2. We must move fast.Algeria is therefore clearly showing itsdetermination to fully adhere to the internationalrecommendations and prescriptionswhich aim to promote clean development.It calls upon its partners in favour ofmobilisation around the investmentopportunities which the Energy sectoroffers in Algeria. We are greatly countingon their experience and their contributionto the identification of common projectseligible for the clean development mechanism.We have the right - or better still, we havethe duty - to launch such an appeal sincethis means protecting and saving the BluePlanet…S. D.(*) Expert consultantEnergie & Mines201November 2006

Sustainable SUSTAINABLE developmentDEVELOPMENTResolute action to promoteclean fuelsAlgeria very quickly adopted an approach favouring the protection ofthe environment and has resolutely committed, in this framework, infavour of the actions launched at the regional and international level.BySalim KorsaneEnergie & Mines202November 2006It has therefore ratified all internationalagreements related to the protection ofthe environment and the fight against pollution.It has therefore joined the nationswhich have ratified the Kyoto Protocoland, in March 2006, put in place itsDesignated National Authority (DNA).At the legislative level, as of 1983, Algeriadecreed a law on protecting the environmentwhich was then taken up again in2003 with the adoption of a new law onthe environment and sustainable development.As for the energy sector, the environmentis at the centre of its energy strategy andthe entire legislative system put in placeprovides for provisions favouring the protectionof the environment, prohibitingand penalising non-conformant practicesand actions.Hence, the three new laws decreed between2001 and 2005 by the Ministry ofEnergy and Mines - the mining law, theelectricity and gas distribution law and,finally, the hydrocarbons law - compriselarge chapters on the environment andput in place efficient and autonomousinstitutional instruments, whose mainmission is to ensure the application of thelaw and the regulations.The Hydrocarbons Regulation Authority(ARH), created within the framework ofthe hydrocarbons law, has the main missionof ensuring respect of the rules interms of health, safety and the environment(HSE).With regards clean fuels, Algeria has,since the 1980s, committed to improve itsimmense LPG resources, a vast LPG-fueldevelopment programme by putting inplace the regulatory and financial instrumentsto ensure the full development ofthis product and create the appropriateinfrastructures throughout the entirenational territory. The very complex andexpensive programme launched - a wholenetwork of plants had to be created, workingon the legislative and regulatoryaspect, the technical, industrial and safetyaspect and hence leading, without restriction,uses to adhere to this new product- is experiencing sustained growth,with a rate of 20% a year.The number of vehicles running on LPGfuelcurrently exceeds 150,000.Secondly, it is important to cite unleadedpetrol which is produced in the Skikdarefinery with a capacity of 1 million tonnesa year.This product is distributed throughoutthe national territory, mostly by the nationalcompany Naftal, a subsidiary ofSonatrach, and by other national rivaloperators. We should also mention thevast revamping programme for theAlgerian refineries (Skikda, Arzew,Algiers and Hassi Messaoud), since2004; a programme which will eventuallylead to the production of fuels thatrespect the most modern standards(European and American standards) soas, on the one hand, to be exported to thedeveloped countries and, on the otherhand, to contribute to improving the qualityof the environment in Algeria.With regards refineries, it would be usefulto point out the new Adrar refinery project.With a capacity of 12,000barrels/day, this new infrastructure willproduce clean fuels, respecting the stricteststandards.This refinery, built in association withforeign partners, will supply the south ofthe country but may also export its productsto Sub-Saharan Africa.Algeria is also planning the constructionof 2 other refineries - the Skikda 5-million tonne condensate refinery and theTiaret 15-million tonne refinery - modernprojects which will be commissioned inthe next few years.Neither has natural gas for vehicles beenleft out; an entire regulatory system isalready in place and numerous pilot testshave been carried out.The project is currently reaching launchstage at the local authorities and corporates'level. In a later stage, the generalpublic will be targeted by large-scale operations.Furthermore, we should mention theTinhert GTL project, of 34,000 barrels/dayfor which an appeal for tendershas already been launched. This projectwill produce products that respect thestrictest specifications.Finally, it would be interesting to mentionthe initiative of a private Algerian operatorwhich wishes to construct a bio-fuelproduction plant, from dates. This nationaloperator, which will work in associationwith a large public company, is at anadvanced stage in the maturation of itsproject which will benefit from the attentionof the public authorities.This project will enable Algeria, shortly,to make use of bio-fuels in the transportationactivities and to access the technologyrelated to this new method, whilstoffering new perspectives to date producers.S. D.

Sustainable developmentGhardaïaFirst bio-gasproduction testThe first manure-based bio-gas productiontest has been carried out in theAlgerian South in a farm located in ElAteuf (Ghardaïa).Initiated by the Ghardaïa renewable energies'research unit, this experiment, thefirst of its kinds in the South, accordingto the project manager, was carried out asan experiment into producing biologicalbasedgas produced from a fermentationof animal organic materials in an aridregion.This hydrocarbon, resulting from ananaerobic decomposition process and abovine waste fermentation process, maybe improved and used as a fuel for heating,explained the project managerduring the demonstration given in frontof numerous farmers and cattle breedersfrom the M'zab region.Obtained at the end of a long bovineorganic materials' fermentation process,stored in an open oxygen-free ditch, thisbio-gas is comprised of over 70% methane,he specified. This manure-based process,which has been wide-spread inEurope since the last century, was introducedin Algeria in the 1930s, emphasisedthe source, indicating that the originalfeature of this test which lasted over ayear is the adaptation of the fermentationprocess's system to the arid and dry weatherconditions of the Algerian South.The experiment aroused specific attentionfrom farmers concerned about reducingtheir electricity bills.Distribution of oil productsService stations and LPG-fuelcourted by the private sectorThe construction of service stations and their extension to LPGfuelare taking the lion's share in the amount of authorisationsgranted and accomplishments made in the oil products' distributionand storage infrastructures.According to the figures reported by the Ministry of Energy andMines, a strong increase is recorded with regards the projects toconstruct service stations, extend the services of these stations tothe distribution of LPG-fuel as well as sustained interest in thecreation of asphalt plants and butane gas distribution and storagecentres.Hence, with regards the construction of service stations, thenumber of authorisations issued went from 27 in the first half of2005, to 40 in the corresponding period in 2006. The increasein the retail margin granted to the service providers as well as thegains generated by the related activities of the stations mainlyexplain an unfailing trend. More interesting still is the interestwhich the consumer - in fact the car owner - has in LPG-fuel.The strong demand for this product is leading promoters toinvest in the construction of LPG-fuel distribution infrastructures,greatly encouraged by a now reasonable retail margin as wellas by the programme initiated by Naftal on giving service stationsfinancing means and finally a powerful promotion campaignto the general public.Hence, 23 authorisations related to the distribution of LPG-fuelwere issued in the first half of 2006 compared to 16 in the sameperiod of the previous year.Energie & Mines203November 2006

Sustainable SUSTAINABLE developmentDEVELOPMENTAfter sugar cane, gold,cotton and even coffee,Brazil has got bio-fuelfever. A law signed in2004 will make it compulsory,as of 2008, toadd 2% bio-fuel to a litreof diesel. By then, thecountry therefore has toquadruple its currentproduction of 200million litres.Renewable energiesBio-fuel - tomorrow’spetrol in Brazil ?Energie & Mines204Bio-diesel is a fuel produced with oilseeds. The main ones used, in theUnited States and Europe, are soyaand canola seeds. But Brazilians wishto make the most of their tropicalplants that are easy to grow by smallfarmers. The production of bio-dieselis now constantly increasing: 600petrol stations already sell the new mix.In a poor region of Brazil, the oil companyPetrobas has started an innovativeexperiment which mobilises 5,000 farmingfamilies. "We have the oil wellsthe entire world dreams of having in itsgarden and, what's more, it is inexhaustible!”,rejoices Livania Frizon,from the Canudos “agro-village”, a collectivefarm located in Ceera Mirim,100km from Natal, the capital of theState of Rio Grande do Norte.Alongside the rows of papayas, bananasand cassavas, farmers have plantedseveral hectares of “pinhao manso”(Jatropha curcas), a tree that originatesfrom this semi-arid region, whose fruitcontains 38% of an oil designed forproducing bio-diesel. Even in sandysoil, this plant produces three tonnes ofseeds per hectare and offers two annualharvests. "The sun, considered here asa punishment for agriculture, is now ablessing”, explains Livania. Petrobashas provided the cooperative with theseeds which became, in Canudos,1,200 feet of “pinhao manso”.To the 142 small farming families ofNovember 2006Palheiros III, another rural communitynear Upanema (250km from Natal),the oil company provided castor beanseeds. Assis Gama, the president ofPalheiros III, proudly visited the 300-hectare castor bean plantation. "Itrequires hardly any upkeep and, in twoyears of useful life, one foot providessix harvests, he explains. This enablesus to improve wild land, alongside ourvegetable and fruit crops.The castor bean, which grows on rawland, ensures additional income for thesmall farmers. The latter are encouragedby Brasilia to improve their landwhich was given back to them at thetime of the reform, thanks to the familyagriculture credits. "Our challenge isto organise the production of the rawmaterial, as we will soon have a largebio-diesel plant in Rio Grande deNorte, and certainly one in each Stateof Brazil”, says Ulisses Soares, a geologistat Petrobas.Intense researchThe site where the small farmers' harvestsconverge is only experimental forthe time being. It only takes up a fewhectares in the immense Guamaré refinery.The entirely innovative industrialisationprocess has required an investmentof 8 million euros by Petrobas."Nobody has ever succeeded in producingbio-diesel from the mamona seed,or others, but only from oil”, explainsMauro Silva, the engineer in charge ofthe tests. Started in July, they shouldlast eighteen months. A test on 100tonnes of different oil seeds will be carriedout each month, as the aim, inGuamaré, is to produce a cheap andreliable bio-diesel."There is intense research, with the castorbean and the pinhao manso adaptedunder the Equator, but also with palmoil, or even bovine sebum, in additionto the ethanol produced by canesugar”, emphasises the agriculturistPaulo Morelli, responsible for supervisingthe bio-diesel programmes at theMinistry of Agriculture, in Brasilia.With no ambition to become a “BiodieselEmirate”, Brazil wishes to shareits research with tropical countrieswhich might also benefit from bio-diesel,such as Angola, Thailand andIndia.

Sustainable developmentLarge oil importerChina, the new ethanolexporter countryChina is making the most of the upsurgein the prices of crude oil of which, today,it is a large consumer, to invest in “biofuel”,just like in a country such as Brazil.With the fever affecting the crude prices,American deficits have caused a realexplosion of investments in the substitutionenergies.Hence for the current year, China shouldexceed the 500,000 tonnes of exportedethanol produced from corn and cassavaseeds, which is equivalent to a productionof 11,000 barrels/day. Traders on theinternational markets are counting on aproduction of 900,000 tonnes (19,000barrels/day), whereas last year China didnot export ethanol and was thereforeunknown on this market. Subjected to adehydration treatment, in certain countriesof the Caribbean, Chinese ethanol isdelivered to the American market wherethe product is used as an additive to acleaner fuel. Today, China is the 3rd largestproducer of ethanol after Brazil andthe United States.Fight against the greenhouse effect1 st CO 2 capturing experimentin a coal-fired power plantin DenmarkDeveloped by the wind power plants, thechimney of the Elsam company's electricityplant, in Esbjerg (Denmark), plantedin the middle of coal hills, continuouslyspits out a clear smoke plume. In its organism,a derivation has been made todirect 0.5% of this smoke towards a small"gas plant”. Cascades of filters, absorbersand regenerators coated in stainless steelhave been assembled to trap most of thecarbon dioxide (CO2) produced from thecombustion of coal which powers this420 megawatt plant.Running for several weeks and inauguratedon 15 March, this pilot plant is thefirst enabling the capturing of CO2 - themain greenhouse gas - in the smoke fromthe coal-fired power plant. The objective?To ensure that this post-combustion procedurewill enable the cost of capturingCO2 to be divided by two, bringing it between20 and 30 euros a tonne (LeMonde, 16 September 2005).This prototype is part of the EuropeanCastor (for capturing/storing CO2) project,led by the French Petroleum Institute(IFP) which brings together about thirtypartners, industrialists and researchfirms, from eleven countries. Financedover four years (2004-2008) by 16million euros, 8.5 million of which arefinanced by the European Union, Castoraims to validate the technologies designedfor the large industrial plants - electricplants, steel plants, cement plants, etc. -whose activity produces 10% of Europe'sCO2 emissions.This means ensuring that these technologiesare competitive with the Europeanprice of CO2 emission permits (currently,27 euros/tonne). The industrialistssubject to emission quotas must, in fact,either pay in case these quotas are exceeded,at the price of the time, or haveinvested in the capturing and storage proceduresin order to reduce their emissions.Geological storageIn the Ejberg plant, this means finetuningthe technologies already developedby the oil companies. "The restricting factoris the energy needed to regenerate thesolvent which is used to trap the CO2”,indicates Pierre Le Thiez, IFP's Castormanager. Several amine-based formulations,that are already patented, will betested there.Castor also plans to study for CO2 geologicalstorage sites: the Casablanca oilreservoir (Spain), the Atzbach-Schwanenstadt natural oil deposit(Austria), the Snohvit aquifer (Norway)and the K12B natural gas deposit operatedby Gaz de France along the Dutchcoasts. It is imperative to ensure thatthese various reservoirs are watertight inthe long term.Similar projects are multiplying throughoutthe world. In 2030, fossil fuels willstill represent over 80% of the energyused. Those which are able to trap CO2at its source (22% of the emissions comefrom industry, 39% from electric production)will have powerful leverage over thefuture world market of the “rights topollute”.Energie & Mines205November 2006

Sustainable SUSTAINABLE developmentDEVELOPMENTContrasting balance in Europe for reducing greenhouse gasesKyoto thresholds exceededEmissions of greenhousegases increasedby 0.3% in 2004 inthe Union, particularlydue to theMediterranean countrieswhich are largelyexceeding the thresholdsfixed in Kyoto.Is the European Union becoming a badpupil in weather classes? Up until now ithas managed to stabilise its greenhousegas emissions, but the last report, publishedby the European EnvironmentAgency, on 22 June, shows a deteriorationin 2004: the emissions for the Unionof 15 increased by 0.4% between 2003and 2004, and by 0.3% for the Union of25, integrating the Eastern Europeancountries.Unless it acts a lot more strictly, it is likelythat Europe will not respect the Kyotoprotocol. Whereas it committed todecrease its emissions by 8% in 2010compared to 1990, the reduction wasonly 0.9% between 1990 and 2004.The main countries responsible for theseemissions are Germany, the UnitedKingdom, Italy, France and Spain. Butnot all of them are dunces. Hence,Germany has successfully greatly reducedits emissions by improving the efficiencyof its energy system and closing downnumerous plants in the former EastGermany. It is therefore close to itsobjective (to have reduced its emissionsby 21% in 2010).The United Kingdom should also achieveits objectives (-12%) since it has reducedits emissions by 14% by substituting gasfor coal in the power plants. But thismovement is now finished and Londonmight see its emissions increase.Indeed, the price of coal has increasedmuch less than the price of gas, whichmakes this fuel attractive for the electricityproducers.Bet taken up in FranceFrance, for its part, has achieved itsobjective, which is 0%. But effort muststill be put into it, since transport is continuallyincreasing its emissions and numerousfossil-fuel based electricity productionplants will be commissioned in thecoming years.Those who are having a negative effect onthe European scale are the Mediterraneancountries. Thus, Spain, in spite of a largeamount of wind power plants, in 2004saw its emissions increase by 48% comparedto 1990, whereas only a 15%increase was authorised. Italy is not doingmuch better (+12% compared to -6%authorised).In total, Europe must turn itself around ifit wants to respect the Kyoto objective.This is the condition of its credibility inthe international negotiations for extendingthe protocol beyond 2012.How can we convince China, India orBrazil to commit to it if the Europeans arenot keeping their promises?Furthermore, in March 2005, the Unionadopted an objective to reduce emissionsfor the developed countries from 15% to30% in 2030 compared to 1990. This willrequire a significant amount of effort.France and the United Kingdom haveeven published an objective to reduceemissions by four by 2050, i.e. a reductionof 3% a year.Whilst Europe is floundering, the UnitedStates are doing worse. According to theforecasts published on Tuesday 20 Juneby the Energy Information Agency, NorthAmerica, which already emitted, in 2003,16% carbonic gas more than in 1990,would achieve a figure of 54% in 2030.With the increase from emerging countries,the entire world would increasefrom 21 billion tonnes of carbonic gas to44 billion tonnes in 2030. If these forecastscome true, the planet will indeedexperience climate change in 2030.Hervé KempfEnergie & Mines206November 2006

Sustainable developmentThis is the objective of a governmental commissionEn route to an oil-freeSwedenRun by the PrimeMinister, Mr GöranPersson, a commissionresponsible fordeveloping a programmeof measuresaimed to reduceSweden's dependencyon oil has just publisheda report whosevisions seem to beparticularly audacious.The commission is counting on a reductionof 40 to 50% in the use of oil in roadtransport thanks to the use of bio-fuelsand improved technologies.This is the first challenge set down by thecommission - but it is not the only one.Hence household heating will no longeruse hydrocarbons and industry itself iscalled upon to reduce its consumption ofoil products by 25 to 40%.In the analysis produced by the Swedishcommission, the oil price's influence ongrowth and the creation of jobs and therole which this commodity ensures interms of peace and security in the worldare essential factors, but there is also, andabove all, the threat that the combustionof fossil fuels has an impact on the livingconditions of future generations, and particularlyits effects on climate changes.The recommended measures which counton the use of “green gold” and the newtechnologies in terms of renewable energiesshould not affect the conditions ofsustained growth, or those of the internationalcompetitiveness of the Swedisheconomy. The commission's experts havebeen greatly influenced by the analyseswhich stipulate a reduction in conventionalresources, particularly due to theincrease in the consumption of theEuropean Union's countries and theUnited States, but also the appearance onthe international oil and gas market ofemerging countries such as China andIndia.The discovery of new sources of oil willbe increasingly difficult, estimate theseexperts, whereas the security of supplieswill be increasingly threatened by politicalproblems.Energie & Mines207November 2006

Sustainable SUSTAINABLE developmentDEVELOPMENTAlgeria-NATO civil cooperationPreventing earthquake-relatedrisks in MaghrebWithin the framework of the Algeria-NATO civil cooperation and theMediterranean dialogue, an International Workshop on improving thesafety of buildings during an earthquake in the Maghreb region washeld in Algiers and brought together almost 220 participants, thirty ofwhich international experts particularly from NATO member countries(12 countries represented) and scientific experts from the Maghrebcountries (Algeria-Morocco-Tunisia) and from the Mediterranean basin.Energie & Mines208This workshop is part of the strategydrawn up by the Algerian public authoritiesto increase the effectiveness of itsactions, namely :• The overall reduction of the risksresulting from natural or technologicalcatastrophes on the characteristic economicinfrastructures of the mostexposed zone, i.e. the Tellian fringe.• The prevention of major risks with,on the one hand, the re-examination in2003 of the regulatory and legislativeframework concerning the constructionstandards and the para-seismicrules, institutional improvement, theemergency and specific provisions tobe decreed for the vulnerable areasand, on the other hand, in 2004, thepromulgation of the law on preventingmajor risks and managing catastropheswithin the framework of sustainabledevelopment.• The continuous improvement ofknowledge of major risks and accessibilityof the data and results of theactions undertaken and integration ofthe international experience, particularlythat of the countries of theMediterranean basin.The themes dealt with and developedduring this workshop are the following:1. Improvement of the safety of schoolsin the Maghreb region.2. Use of analytical and empirical techniquesin evaluating seismic damage inpublic buildings.3. Evaluation of the seismic risks inurban areas and the RISK-EU project(earthquake risk evaluation scenariosNovember 2006and its application in the cities of theEuropean Union).4. Para-seismic design of buildings.5. Estimate of the damage caused by anearthquake in Maghreb and informationon the building by satellite image.6. Seismic micro zoning of the city ofRabat.7. Catane earthquake study scenario,in Italy (high risk city in theMediterranean) and study into the vulnerabilityof public buildings.8. Compulsory insurance programmeagainst earthquakes in Turkey.9. Seismic evaluation and revision ofthe Turkish seismic code.10. Reduction of the seismic risk inFrance : Need for local action plans(Nice) and national action plans sothat the local policies and decisionmakerscan effectively deal with andmonitor earthquakes.11. Seismic risks and evaluation of thevulnerability of urban areas -Application to the city of Barcelona.It is in the perspective of preventing themajor risks and managing catastrophesthat the exchanges of experiences andtechnical and legal tools betweenthe countries and internationalbodies consolidate the cooperationprogramme.This workshop worked on identifyingthe bases of Algeria-NATO cooperationin the domain of preventing majorrisks and on creating a permanentcommunication network between thedifferent participants and making useof it to explore all the opportunitiesoffered by virtue of the civil emergencyplan, and to identify, in accordancewith the sectors concerned, the specificneeds of the country in view of progressivelyputting in place permanentemergency and response programmes

Industrial safetyfor the major risks. For an initial cooperation,the aid requested by Algeria from NATO isfocused in the domain of the consolidation ofpublic buildings, given that property in the largecities of our country is mainly old, and thatNATO has capitalised quite a lot of experiencein terms of intervening in the areas which havesuffered natural catastrophes, particularlythrough the drawing up of a programme againstnatural risks.At the end of the works of this workshop, theworking groups issued the following mainrecommendations :1. Evaluation of the seismic hazard throughcreating a project on the Iberian-Maghrebregion sponsored by NATO with adequatefinancing committing all teams interested byevaluating the seismic hazard at the regionalscale with the objective of :• Drawing up the seismicity balance with the tectonic,netotectonic and seismotectonic analysis.• Better knowledge of the attenuation laws(acceleration, speed, replacement).• Carrying out seismotectonic analyses (faultgeometry - breakage mechanisms).2. Para-seismic design of works with the introductionof the concept of interactivity of theregions and zone-based investigation of the surroundingsoil and studying old buildings withthe drawing up of a set of recommendations forthe renovation and reinforcement works on thebasis of a detailed expert study and surveys onthe materials, in view of reducing the seismicrisk.3. Evaluation of the resistance of the buildingsto seismic activities by making area maps in theMaghreb region.4. Para-seismic improvement to be dealt withtogether between the countries of theMediterranean basin with the support of NATOfor putting in place a technical regulation forimproving buildings in Algeria.5. Efficient development of prevention to enablethe damage caused by natural catastrophes to beattenuated, to improve the resistance and safetyof buildings during an earthquake.In this framework, in Algeria :• An initial measure consisted of adapting,thanks to the lessons learned from theBoumerdès earthquake, the para-seismic regulationin force.• The second measure consists of making itmandatory to draw up civil engineering studiesfor all buildings with the obtainment of the buildingpermit.Circular on preventing accidents inthe Energy and Mines sectorChakib Khelil :“Most accidents anddamage could havebeen prevented”The laxity and passivity of executivesof the Energy and Mines sectorhave been strongly denounced inthe circular which the head of thesector, Mr Chakib Khelil, has justsent them further to the accidentsthat have recently occurred in thesector's installations.The finding is harsh: human fault isthe cause of it and, in spite of theonerous actions undertaken, neithermen nor the installations aresaved.Mr Khelil required company managersto be always on the look out, asexperience has proven that a repetitionof accidents is often difficultand their surprise effect considerablyreduces the chances of thembeing overcome.He insisted on vigilance as a policy,and moreover on anticipation toprevent accidents recurring. Now,it should be noted that, in mostcases, the accidents and irreversibledamage which have resulted couldhave been prevented and, consequently,avoided.We are inclined to interpret thistype of behaviour as being a resultof laxity and passivity in which agood number of workers andmanagers wallow; otherwise, howcan we explain that the extrusion ofinflammable products coming fromold leaks are not eliminated and theplaces which have been the sourceof this have not been decontaminatedover time, with the requiredspeed?Everyone has been instructed tocarry out a systematic sweeping ofthe places under their responsibility,to draw up a situation report,enabling all the possible sources tobe identified and located and toimmediately start the appropriatemaintenance works.Mindful of preserving all assets anddetermined to put an end of thisworrying situation, sanctions willbe imposed on all those contraveningwho fail to execute this directive.Managers, as those initiallyresponsible, will be held responsiblein case of an event resulting fromthe non-observation of this instruction.Any other argument attemptingto dissimulate or unduly justifythe occurrence of an accident ofany kind whatsoever will not beaccepted.Energie & Mines209November 2006

Industrial INDUSTRIAL SAFETY safetySeminar in Algiers with the support of Comena and the IAEAGuarantees, nuclear safetyand security on the agendaThe Ministry of Energyand Mines, in collaborationwith Comena, hasorganised the guarantees,nuclear safety andsecurity. According tothe Ministry of Energyand Mines, this meanstaking advantage of theforeign experience torefine the nuclear bill.Representatives from the Ministries ofNational Defence, Agriculture, Justice,Health, Transport, Foreign Affairs,Water Resources and Higher Educationand State Institutions (police, DGSN,customs), as well as the chairmen ofSonatrach, Sonelgaz, Sarpi, Enac, GTP,BRC, the ORGM, Naftal, the SEC, theAppue, Alnaft, Crec, the ANPM and theANGCM also participated in this seminar.This meeting, which was also attendedby experts from the IAEA(International Atomic Energy Agency)and Comena (Atomic energy commission)was the opportunity to discuss thedifferent stakes and challenges ofnuclear energy and the practices andlegislations related to nuclear safety andsecurity. In these three days, Algerianexperts learnt about foreign experiencein these domains. "The standardcontract between Comena and the IAEAwill enable the Algerian nuclear bill to beenhanced - albeit well advanced - by themost recent data in terms of nuclearsafety and security", emphasised theMinister of Energy and Mines, MrChakib Khelil, during his openingspeech at the seminar.Mr Mohamed Derdour, the atomic energycommissioner, for his part, noted that“this meeting gave the opportunity toexpress our needs in terms of dealingwith nuclear activities and exchangingideas and experience in this domain”.Preventing nuclearterrorismDuring his speech, Mr Chakib Khelilspoke again on the threats of nuclearproliferation aggravated by terrorism."Nuclear terrorism is now recognisedas a potential threat. It is essential todemonstrate extreme vigilance in thephysical protection of nuclear materialsand facilities", he particularly emphasised,revealing that "Algeria has givenits commitment to participate in theinternational efforts designed to combatterrorism, as demonstrated by the ratificationof nuclear materials, which wasthe subject of a presidential decreepromulgated in 2003”. Furthermore, theMinister indicated that “just like the 186signatory countries of the non-nuclearproliferation treaty, Algeria respects thistreaty, scrupulously, and is ready tosign the additional protocol”.Finally, it should be pointed out that aseminar of this type was organised lastyear in Algiers during which Mr ChakibKhelil insisted on the importance ofprotecting persons and the environmentin the use of nuclear energy forpeaceful purposes.74 projects financedby the IAEAMr Merzak Remki, director of theComena Cooperation, presented areport on the cooperation with theUN Atomic Energy Agency. Hence,he announced that 74 bilateralcooperation projects have beenfinanced by the IAEA from 1980 topresent day at a cost of 10 milliondollars, some 79% of which hasbeen used to purchase equipment,11% designed for experts and 10%for training.It should be recalled that these projectsconcerned different businessdomains such as energy and mines(8 projects), human health (13 projects),water resources (4), agriculture(11), the environment (4) andtechnology (28 projects).For the 2007-2008 support programme,Algeria has submitted 14 projectsin the same sectors, revealedMr Remki.Energie & Mines210November 2006

Sonatrach/IHI-ItochuA contract to makethe GP2Z plant moresecure and reliableSonatrach and the Japanesecompany IHI-Itochu signed, inArzew, in the presence of MrMohamed Meziane, Chairmanand CEO of Sonatrach, theEPC contract to make theArzew GP2Z gas plant moresecure and reliable.As part of the vast programme to secureall Sonatrach plants against the risksinherent in the hydrocarbons industry,this project will enable the consolidationof the process to modernise and improvethe operating and performances of theplant.The project, whose accomplishment isguaranteed by the Sonatrach/Ihi Itochuagreement (clauses guaranteeing theworks once entirely renovated andbrought up to international standards)consists of :1- Replacing the worn equipment withothers that fulfil international standards2- Adding other equipment to ensureflexibility in the operating of the plant3 - Relocating certain equipment4- Reinforcing the foundations of theequipment5 - Improving the control system and thesafety systems of the facilities.During the agreement signing ceremony,the Chairman and CEO of the SonatrachGroup shared his peace of mind: "I amsure that we will be able to count on theskills and experience of Itochu and IHI tocomplete a GO2Z plant in the best timeframes,that is totally conformant tointernational safety standards with theguarantee of optimum reliable operating”,he stated. The engineers, technicians,executives and the Management ofthe GP2Z plant are all responsible fortheir own safety and for the safety of theirunit. Thanks to this renovation and securisationpoint, they have reliable facilitiesto produce more and better in the bestconditions. "It is up to them to scrupulouslyensure its preservation and theManagement of Sonatrach are alreadyensuring they are helped for their part",concluded the Chairman and CEO ofSonatrach."The GP2Z renovation is part of our LPGdevelopment strategy”.During the agreement signing ceremonybetween Sonatrach and Ihi Itochu, theChairman and CEO of the SonatrachGroup, Mr Mohamed Meziane, revealedthe importance of improving the Arzewplant (GP2Z) which, on the one hand, ispart of Sonatrach's LPG developmentstrategy, a business segment on which theGroup is a world leader, which it “intendsto conserve and enlarge to improve thisproduct as much as possible” and, on theother hand, the vast programme to secureall of the Company's infrastructuresand plants. Mr Mohamed Meziane initiallyemphasised the links betweenSonatrach and its Japanese partners, stating:“(…) welcome to this site, which is notforeign to them, the IHI-Itochu delegation,two of our oldest partners, whichhave supported us in the construction andrealisation of numerous industrial projectsfor over thirty years, particularly inthe Downstream. We have our Japanesefriends in engineering, procurement andconstruction and we congratulate themfor the quality of the work provided.”The Chairman and CEO of Sonatrachshared his satisfaction as to “the gooddesire of the Japanese companies to participatewith Sonatrach in investmentprojects, and not only in the EPC”.Recalling that Itochu is present in thedevelopment of the Ohanet deposit,Mr Meziane considered that “there arestill a great many investment opportunitiesin partnership both in the Upstreamand the Downstream, in Algeria andabroad, which we can take together in theform of the most diversified partnerships”.“For the time being, he concluded, I amsure that we will be able to count on theskills and experience of Itochu and IHI tocomplete a GO2Z plant in the best timeframesthat is totally conformant to internationalsafety standards with the guaranteeof optimum reliable operating”.The GP2Z renovation, anapplication of the SonatrachGroup's new approachThe Arzew GP2Z lifting, a historic gas technologyplant, complies with the new overall and systematisedapproach of safety and environmental issueswhich guides the Sonatrach Group. This is even itsfirst application in the gas sector. GP2Z was, infact, the subject of an audit carried out from 2004by an international group of experts on productionand safety facilities. The results of this radioscopyenabled the Group to determine the best ways toimprove and secure the operating conditions.These particularly include the actions entrusted tothe Japanese consortium Ihi Itochu to upgrade theplant's safety and control systems and equipmentto international standards.This, as emphasised by the Chairman and CEO ofSonatrach, during the signing ceremony, of theagreements between Sonatrach and its Japanesepartners, means “not remaining at standstill, i.e.continuing, as was still done up until recently, toexpect an accident to happen, to live the tragedyand intervene afterwards". Sonatrach's infrastructuresmust therefore strictly comply with the HSE policyand the provisions of the General Directive onthe safety of personnel and facilities. "This policy,further indicated the Chairman and CEO of theSonatrach Group, must be systematised and becomethe rule. It implies identifying the minor risks inthe analysis of almost-accidents and effectivelyimplementing preventative action plans to avoidincidents or major accidents recurring.The process was announcedin 2001 by the Ministerof Energy and MinesProtecting Sonatrach's assets from the risks inherentin its activities. On 28 February 2001, MrChakib Khelil, Minister of Energy and Mines, whenhe became the head of Sonatrach, announced theprocess of renovating the company's facilities andupgrading the company's facilities to protect itsgroups, its assets and the environment from therisks inherent in its activities. "I remind you that, forthis, you have contributed significant financingwhich will, in the period 2006-2010, reach over halfthe 1.2 billion dollar package which we are going todevote to the Sonatrach HSE plan. The health ofour colleagues does not, indeed, have a price andthe preservation of our working tool is a guaranteeof creation of wealth and the sustainability of ourGroup.... Sonatrach, with this in mind, is putting inconsiderable effort and making very large investmentsin the domain of HSE to improve the operatingsafety of our plants, protect the health of ourworkers and protect the environment."

Industrial INDUSTRIAL SAFETY safetyNuclear energy is a renewable,clean, sustainableand economic source,according to Mrs TaouesFerroukhi, Algeria's ambassadorto Austria and governorto the Council ofGovernors of theInternational AtomicEnergy Agency (IAEA), whospoke on national radio'swaves, stating that “Algeriais capable of facing up tothe stakes which existtoday for energy itself”.According to the Algerian governor to the IAEA“Algeria's programmeis totally transparent”Energie & Mines212These stakes consist, in the world, sheadded, of looking for alternative sourcesof oil and gas insofar as this meansprotecting the environment from theglobal warming phenomenon and frompollution. "Algeria fully complies withthis specific context”, confirmedAlgeria's governor to the Council ofGovernors of the IAEA."Furthermore, most industrialisedcountries, which have renounced thenuclear option, are today in the processof returning to the question to developresearch programmes", she stated toemphasise the importance of this energyas an alternative and renewablesource. Today, in the world, there iseven a “very significant renewed interest”in the nuclear option in the scientificsense, according to Mrs Ferroukhi,who insists on the socio-economicnature of nuclear power. She emphasisedin substance that Algeria, whosigned the treaties related to disarmament,non-proliferation of nuclearweapons and weapons of mass destruction,is carrying out research to developnuclear energy for peaceful and scientificpurposes, focussing on theAlgerian scientific programme auditedperiodically, she added, by the IAEAinspectors."Algeria is a member of the IAEA whereit is working to develop this source as aNovember 2006socio-economic development factorwhilst respecting the clauses of theagreement signed by each of its members",emphasised the governor ofAlgeria to this agency. The guaranteeagreement, signed by the membercountries, stipulates, according to her,obligations and responsibilities for eachof the member countries. "For thesecountries who are members of thisagency, this means committing to promotingnuclear energy for peaceful andscientific purposes, guaranteeing thesafety of the plant, according to theoptimal standards and submitting theirprogrammes for periodic inspection bythe IAEA inspectors”, she indicated,emphasising the commitments made byeach of the members of thisInternational Atomic Energy Agency.Hence, this nuclear technology, whichis causing controversy today, is deemednecessary for economic development.Algeria is currently looking into developingits research programme, accordingto Mrs Ferroukhi, in view of producingwater from seawater desalinationand electricity.Through this energy it is also attemptingto discover a process to fightagainst the phenomenon of desertlocusts. With regards the safety of itstwo research reactors, Algeria, sheadded, is complying with all the conditionsrequired by the IAEA in thisdomain. “Algeria's plants are up to datewith regards safety in relation to itslevel of development”, she added,whilst indicating that our country isopening wide its doors to auditing itsnuclear research programme.“Transparency is key”, she said, confirmingthat all activities are published inthe Official Journal. “The moretransparent we are, the more assurancewe give”, she concluded.

Industrial safetyFive Algerian companies, one of which is private,share Sonatrach riskSonatrach signs 12 insurancecontracts for the company's assets■ These policies' premiums have increased by 14% compared to the2005-2006 financial year, where 3.5 billion dinars were recorded.■ Five Algerian companies, one of which is private, share Sonatrachrisk, through 12 contracts.The national hydrocarbons companySonatrach and 5 Algerian insurance companieshave signed 12 insurancecontracts for the company's assets for theperiods 2006-2007 and 2006-2009 andfor a total amount of 4.65 billion dinars.These contracts, which entered in forceon 1 July, cover the oil and gas facilitiesof Sonatrach and its subsidiaries, theactivities as well as the furniture and buildingsof the company.These concern no less than 12 insurancecontracts, worth a total of 4.65 billiondinars, which the Sonatrach oil group hassigned, at its company's headquarters inHydra, with 5 large Algerian companiesfor the periods 2006-2007.The protection of these immense assetshas, indeed, been entrusted to nationalinsurance companies; it is their responsibilityto reassure on the internationalscale. This protection entered into forceat the start of the month of July and willconcern the Sonatrach oil and gas plants,those of all its subsidiaries, as well as itsmultiple activities, also including theupstream and downstream, transportationand even marketing.For the financial year 2006-2007, thisinsurance's premiums have in fact increasedby 14% compared to 2005-2006,which recorded 3.5 billion dinars. Thisprecision, made by the executive directorof the company Sonatrach, Mr MohamedRezaïguia, also told the latter thatSonatrach's risk on the national andinternational markets is considered as a“good risk”. Hence, the covering of theindustrial risks of the oil and hydrocarbon'streatment plants as well as the facilitiesof the deposits operated in associationhas been entrusted to the CAAR,which was also awarded the covering ofthe risks of the drilling equipment of thesubsidiaries of the ENTP Group andEnafor, the covering of the risks of theproperty and furniture assets, cars, etc.With a package estimated in total at over777 million dinars, this company hastaken the lion's share in the number ofcontracts awarded, i.e. 5 in total.It is, however, the reinsurance companyCash which is, in fact, a joint venturewhose capital is shared between theCAAR and Sonatrach, which won most ofthe most expensive contracts, i.e. over78.8% of the shares of this enormouscontract. An amount is devoted to coveringthe industrial risks of the LNG andLPG plants, the Enip subsidiary's plantsand the Naftec refineries for a totalamount of 2.65 billion dinars.Cash will also have to cover the risks ofthe operating, production and pipelinetransportation facilities and worksiteengines for a value estimated at 620million dinars.For its part, the company CAAT, with its4.3% of the shares given to it, won the“liability and fuelling” project, as well asthe “foreign travel” insurance contract,worth a total amount estimated at 181million dinars. Moving away from itsusual "car" insurance niche, the SAA wasable to obtain a specific contract - i.e.covering the risks of the towed tanks forsome 45 million dinars, which representsthe equivalent of 1.1% of the totalcontract.The only insurer for the private sector tohave won a place between these largecompanies from the public sector, whichare nevertheless leaders in large capitalinvestments, the CIAR, for its part, willinsure, for an amount estimated at 4.06million dinars, the covering of the wellsand transportation on bodies of theparent company and its subsidiaries,which is important given the contractamount acquired, i.e. 4.7%.Furthermore, it should be pointed outthat some of these contracts have alsoconcerned contractual periods fixed at 3years instead of one year (2006-2009),for the simple risks, such as automobile,transport, property and furniture, missionaries,etc.Speaking during this signing ceremony,the Chairman and CEO of Sonatrach didnot fail to point out that this event “bringsto the forefront the issues related to thevarious risks to which our industry maybe exposed"; risks on which it is importantto highlight, in his opinion, “theessential necessity which needs to beaccorded to the safety of our personneland those of our facilities".Also, for Mr Mohamed Meziane, theAlgerian oil group has put too mucheffort and means into “continuing toaccept that behaviour, neglect, a lack ofvigilance, and non-respect of the strictrules decreed can endanger the healthand life of our colleagues, as well as thisinvaluable industrial, commercial andcultural asset, this working tool and thissource of wealth for our country"; a referencemade to the tragic accidents thatoccurred last year and that of previously,warning those who contravene theserules and also endanger the reputation ofa company known for being a “good risk”on the world's insurance and reinsurancemarkets.Energie & Mines213November 2006

Human HUMAN resourcesRESOURCESM. Mohamed Chawki Rahal, Vice President of the Marketing activityMobility and capitalisationof potentialsMr Mohamed ChawkiRahal, who was bothhead of SPC BVI andthe SonatrachInternationalHolding Company(SIHC), is appointedVice-President ofthe Group'sMarketing activity.He was appointed as the replacementof Mr Ali Hached, who will continueto work at Sonatrach in other functions,on 17 June 2006, at the headquartersof Sonatrach's group divisionby the Chairman and CEO of theGroup, Mr Mohamed Meziane. Theceremony took place in the presence,particularly, of the members of theExecutive Committee and Sonatrach'scentral directors.On this occasion, Mr Meziane gave aspeech in which he outlined the backgroundof the new Vice-President,after thanking his predecessor.Mr Ali Hached is a former employeeof Sonatrach. As ProspectingDirector, then Vice-President of themarketing activity, he will have been“involved in all (our) Group's progressin the last twenty years and hascontributed to giving Sonatrach thedimension and positions it has todayon the international market”. It isunder his responsibility that the strategicsegment of Sonatrach's activities,i.e. marketing and internationaltrading, advanced towards its modernisation."Mr Hached has undeniablybeen greatly involved in the modernisationof the Marketing activity sincehe was given this role, some twelveyears ago, in constructing new basesand in assuring the management in hiscapacity as general deputy director,then Vice-President. This is a missionthat he has carried out successfully",emphasised Mr Mohamed Meziane.His successor, Mr Rahal, after workingin the gas transformation plants,had a brilliant career in the engineeringfunctions and in the developmentactivities, particularly in theDownstream, before becoming headof SPC BVI, and then also head of theSonatrach International HoldingCompany, SIHC. "Our hydrocarbonsmaritime transportation and tradingoperations have been given new impetusunder his management”, revealedMr Mohamed Meziane, who emphasisedthat the “fleet managed by SPChas been reinforced and modernisedand that the profits made by tradingand maritime transportation for theGroup have been growing steadilyover the last few years”.Mr Rahal is now in charge of the“operational Marketing activity which,just as all Group activities and functions,is entering into a new phase ofadapting, internally, to the institutionalframework defined by the hydrocarbonslaw and, externally, to thequick evolutions in the different configurationsof international markets”.These appointments, which resultfrom the principle of mobility andmaximum capitalisation ofSonatrach's human potential, contributeto optimising the objective of theoil and gas group which is the “optimalpromotion of our hydrocarbons,all products combined, the supply ofthe national market, and appropriatesupport to the development of ouractivities abroad".Chakib Khelil, in a circularaddressed to all managingexecutives of the sector :“We have to adopt ananticipation strategy interms of developingskills”"I feel it timely, even imperative, to make allmanagers of the Energy and Mines sectoraware that the works of the parliamentaryday, organised by the parties of the presidentialalliance on June 2006 at the seat of theNational Popular Assembly, in which representativesfrom companies in our sector participated,has led to a certain number ofrecommendations aiming mainly at the promotionof education, training and continualretraining, research and technological development,health and employment.This initiative, which I personally would describeas constructive, must support us in theneed to adopt an anticipation strategy interms of developing the skills of humanresources and preparing employees for futuresenior positions through training in particular.This is also a real opportunity for you toensure the mechanisms required for theeffective and efficient deployment of thehuman resources you have are reinforced.Furthermore, I reiterate my will to encouragethe development of female employment,whose productivity and dynamics no longerrequires apology.I call upon all managers to resolutely encouragethe redeployment of women with deemedskills in the areas where our sector isexperiencing brain drains and losses whichare being increasingly felt. This particularlyrelates to the areas of activities falling underexploration, drilling, IT and project management.”Energie & Mines214November 2006

Human resourcesSeminar on oil expertise“The API is a place for capitalisingon know-how”states Mr Chakib Khelil“We are delighted tohave trained (and wecontinue to do so) ourbrothers and sistersfrom other Africancountries in our hydrocarbonstrainingstructures”, stated theMinister of Energy andMines, Mr ChakibKhelil, during the inaugurationof the worksof the “Oil expertise”seminar, held at theMercure hotel, in thepresence of theChairmen ofSonatrach andSonelgaz.The Algerian oil institutes are open, headded, to all Africans, in general, andto people from members of the Appa(African Petroleum ProducersAssociation), in particular. He furtheremphasised that the Algerian PetroleumInstitute (API) is a “place for capitalisingon and transferring the know-howand experience required for the developmentand sustainability of the sector'scompanies".The API/SPA ensures, in fact, operationaltraining courses at an internationallevel which fulfil the needs of companies,particularly in the domains ofupstream, transportation and downstream,hydrocarbons, oil and gassavings, industrial safety and environmentalengineering. Mr Khelil, in thisrespect, emphasised that, in the last fewyears, Algeria has increased the capacitiesof its institutes to face up to the“expected growth in demand for accessBab Ezzouar Universityin these key establishments”. The meetingis part of the execution of APPA's6th action programme and respects itsobjectives and articles of associationwhich aim, he reminded the audience,to reinforce the cooperation andmutual support between the 14 membercountries of the APPA. This meetingmust enable, according to theorganisations, a progress report to bemade on everything which has beenundertaken in view of developing oilexpertise among the members of theAPPA which are “concerned aboutimproving their immense hydrocarbons'resources”.The participants will also debate on a"common approach" proposal aimed toovercome the large insufficienciesexperienced in some member countriesin this domain. Hence, in the programme,themes mainly refer to the “decision-makingsupport factor and leveragefor creating added value”. Theexperts will thus analyse the impact onthe processes and the optimisation ofthe creation of added value. Hence, anexchange of the experience gained bymember countries in the domain ofmanagement, marketing, research andcapitalisation, and human resourcesthrough up-to-date training coursestook place. This meeting must be officiallyrecognised by recommendationsthat aim to develop this expertise,particularly in the African oil producingcountries, Mauritania and Chad, in thiscase.Energie & Mines215November 2006

Human HUMAN resourcesRESOURCESAlgerian Petroleum InstituteFirst Master of Sciences’graduatesIn the 40 years' since itwas founded, the APIhas trained 4,000 engineers,14,500 seniortechnicians and techniciansin about twentyspecialities of thehydrocarbons industry.There are over 180 graduate engineersfrom different levels and specialisations inthe mines sector, no less than 28 of whichare majors who are part of the AlgerianPetroleum Institute's (API) 2006 graduation;engineers who received theirdiplomas and awards at the headquartersof this institute, in Boumerdès, in thepresence of the Minister of Energy andMines, Mr Chakib Khelil, the Chairmanof Sonatrach, Mr Mohamed Meziane,and numerous senior executives from thesector, and also from local authorities.These graduates include, inter alia, specialisedengineers from the ENTP andEnafor, those from the Sonatrach-devotedspecialised engineers' year, the PGSof Naftal, masters from the ENSP, thosefrom the 1st year of a Masters of Sciencein Asset Management, in partnership withthe Robert Gorden University ofAberdeen (Scotland) and finally thosefrom the 1st year of the Master of Sciencein Petroleum economics and managementin partnership with the French PetroleumInstitute.This institute, which has, to date, trainedover 4,000 engineers and 14,500 seniortechnicians. has been able to benefit fromhigh level technical cooperation, and aSouth-South cooperation also whichtrain engineers from some 24 countriesthroughout the world; engineers whichtoday occupy important positions.For this purpose, the Minister of Energyand Mines, who presided over this diplomaawarding ceremony, insisted on therole and importance of this institution inhis sector, given its significant contributionto training and retraining. Indeed, inhis opinion, a completely new system hasemerged, based on the definition of aEnergie & Mines216November 2006human resources policy which relies ondifferent principles and which is that ofsetting up the job exchange in all companiesof the sector. "This procedure, inaddition to guaranteeing more equalityand transparency in human resourcesmanagement, is a favoured means ofdetecting potentials and establishing professionalmobility”, he said, explainingthat this mobility has become vital withincompanies from the continental oilgroups, starting with the principle that byestablishing the diversification of professionalcareers, “we can have a sure way ofdeveloping skills and increasing theemployability of the personnel at thenational and international level”.Setting out the main focuses of the newstrategy imposed on his department,Mr Chakib Khelil pointed out the fact thatthe generalisation of the new recruits'integration programmes, particularly theexecutives, enable them to become operationalmore quickly, "it also enables themto immerse themselves in the culture ofthe company to which they belong”.And, it is in this perspective that theMinister announced the decision toimplement a medium terms process toprepare employees for taking on, in thefuture, key and strategic positions, particularlywith regards the positions of specialistsand experts “so as not to run therisk of a shortage of skills”.The same applies for the competent personnelloyalty option which will concernthe putting in place of performance-relatedpay mechanisms as well as related tothe level of contribution to achieving theperformance objectives of the SonatrachGroup’s companies.Training all personnel categories remainsa priority and, with regards the managersin place, high potential executives, techniciansand other execution officers, thetraining must be a major part of their professionalcareers.The last aspect of this human resourcespolicy, announced by Chakib Khelil,which is not a first in the sector, resides inthe promotion of female employment;employment which the Minister intendsto promote by all means, which includesputting in place an observatory for promotingfemale employment, for which hehas inaugurated a new agreement inBoumerdès.In fact, in his opinion, job desegregationis a source of financial efficiency, “withequal competence and without discrimination,the same career developmentopportunities are offered to our companies'female personnel. It is therefore anobvious desire on our part to placehuman resources at the centre of therestructuring project of the energyand mines sector, which is a strategicresource”.The Minister also inspected the operatingof the drilling simulation platform, a copyof which the IAP Corporate Universityacquired in 2005.This 3D drilling station, installed in theIAP premises, the only one of its kind inAfrica, as it costs an exorbitant amount,enables student engineers to study allpossibilities and technical parametersinherent in a real drilling rig, whether onland or off-shore. The software accompanyingit has already acquired a greatreputation, since several countries haveexpressed their desire to send their engineersto get to know how to use it.It is in this perspective that the Chairmanof Sonatrach did not forget to emphasisethe fact that the courses ensured by thisCorporate University have been carriedout in partnership with high level internationaltraining institutions, which clearlyimproves this institute's capitalisationpace.Finally, the director, Mr Salah Kebri, didnot fail to emphasise that in spite of thenew missions that have devolved upon it,“the IAP will not replace the academicuniversities, it will complement them!”

Human resourcesWith regards the Algerian Petroleum InstituteSonatrach, Statoil, Naftal and Naftecare the main partners of this newentityWhereas it was part of Sonatrach from 1999, the Algerian Petroleum Institute has been given a new structurewith the signature, in January 2006, of a shareholders agreement for its reconversion into the “AlgerianPetroleum Institute”.The purpose of the creation of this new training institution is to look after the needs of the Energy and Mine sectorin terms of training, improvement, retraining and applied research for all disciplines. Hence, as of this year,the API will become a joint stock company with capital of 1.5 billion dinars whose main shareholders are theAlgerian oil company Sonatrach (82%) and the Norwegian company Statoil (10%). The remaining 8% is equallyshared between Naftal and Naftec with 4% each. To date, there are 500 postgraduate engineers in this school,whereas almost 3,000 days' training have been given to almost 6,000 people, totalling a volume of activity of73,000 men-day, for the three schools, namely Arzew, Boumerdès and Skikda, through 37 different specialities.This is why the Minister of Energy and Mines felt, on the day of its creation, that the API must become the placeto capitalise on the transfer of the know-how and the experiences required for the development and sustainabilityof the companies of the Energy and Mines sector.

Human HUMAN resourcesRESOURCESMrs Leïla Berkane, chairwoman of the Women's EmploymentObservatory (OEF) of the Sonelgaz Group“We need to promote the principleof professional equality”In this interviewwhich Mrs LeïlaBerkane, chairwomanof the Women'sEmploymentObservatory (OEF) ofthe Sonatrach Group,kindly granted us, it isdeemed that the creationof the OEF, quiterecent if we compareit to the Sonelgaz one,is, in itself, a goodinitiative likely to settle,in the future, agreat number of problemswith whichfemale workers areconfronted, sometimesin silence, withinthe subsidiaries andunits of the SonelgazGroup. Let's listen towhat she has to say.Energie & Mines218November 2006Can you give a short presentationof the Sonelgaz Group'sWomen's employment observatory?M me Berkane : Mrs Berkane: TheWomen's Employment Observatory(OEF) was created on 1 February 2005in application of the directive of thesupervisory ministry on promotingfemale employment in the Energy andMines sector.The OEF plays a supervisory role andis a decision-making support instrumentin favour of establishing the principleof equal opportunities in terms ofrecruitment and the treatment at workof men and women. For this purpose, itis responsible for carrying out diagnosesand analyses on the situation offemale employment, to recommendand monitor the implementation of theactions to be carried out in order topromote it at all levels of the Group'sactivities.To fully ensure its mission, this bodydirectly reports to the Chairman andCEO of the Group; it is managed by achairman, appointed by the latter, andcomprised of 40 people representing allthe subsidiaries and departments of theparent company, with the exception ofthe works companies which have justbeen reintegrated in the SonelgazGroup.For its operating, the OEF has put inplace an executive office, comprised of19 people, appointed from among itsmembers, and whose mission is to prepareand implement the observatory'sworking programme.You have been appointed thehead of the OEF. Do you thinkthat your career has preparedyou for this role?It is true that the problem of femaleemployment essentially falls within thedomain of human resources managementand policies and, therefore, knowledgeof HRM along with know-howwith regards the project approach andleading teams are therefore assets forthis position. Personally, it is my experienceand my years' service in thecompany, and particularly my timespent in the Human ResourcesDepartment, in addition to the experienceand highly diversified skills ofother members of the OEF, which haveenabled us to succeed in the missiongiven to us.As a woman, how do youmanage to reconcile the workload at the head of the OEFand your family obligations ?Reconciling professional life and familylife is a real problem which affects allworking women throughout the world,and more so for us here in Algeria.Indeed, the lack or insufficiency ofchild-care services for children of ayoung age or school children very oftenforces women to temporarily stop workingto make up for the lack of availabilityof other options. This situationundoubtedly contributes to slowingdown their professional career.Personally, I am at a point in my lifewhere I am free of the constraint oflooking after young children (education,health, monitoring, etc.), whichenables me to free up a bit more time toinvest in my work with, sometimes, theundeniable support, help and assistancewhich my nearest and dearest havealways given me.To come back to the works carriedout by the OEF, could youtell us what it has done since itwas set up a year ago ?To accomplish one of its main missionswhich is to propose actions to be put inplace to encourage job desegregationand professional equality, the OEF has,in the absence of data on the situationof female employment in the Group,

Human resourceshad to draw up, initially, quite an indepthsituation report on the issue soas to be able to therefore implementsolid, precise actions that are particularlyadapted to the reality of the fieldto act more effectively on the ascertainedinequalities and therefore to progressivelyestablish the principle ofequal opportunities. For this reason,the works carried out by the OEF havebeen carried out in two essential stages:The first stage concerned the drawingup of a situation report which relies ontwo parts :• The study of the comparative situationof men and women on the basis ofstatistical data, with the aim of checkingand measuring the extent of theinequalities which exist between bothsexes in relation to access to the differentjobs and particularly to the technicalpositions and positions of responsibility,to recruitment, to training, tocareer development, to remuneration,representation in the decision-makingand corporate bodies, etc.• The study of the professional experienceof women through a surveywhich provides information on the problemsencountered by the latter withregards working relations and conditions,on the difficulties and obstaclespreventing them from progressing intheir career and on the way in whichthey reconcile their professional lifeand their family life.This survey was also an opportunity tocollect suggestions from women onhow to improve their socio-professionalsituation and their career development.This survey, the first of its kind in theGroup, was completely carried out bythe members of the OEF (from designingthe questionnaire to processingthe results) and has concerned almost athird (28%) of the female personnel,representing all socio-professionalcategories, job positions, subsidiariesand regional structures of the Group.It was carried out through organisingfocus groups (discussion groups comprisedof 8 to 12 people) and on thebasis of a questionnaire which wasgiven to the participants in these meetingsand a brainstorming session onthe recurring difficulties encounteredby women in their professional life andtheir suggestions to remedy this.The second stage of the works consistedof identifying and analysing, fromthis situation report, all the situationswhich present disparities, of using theanswers from the women interviewedand proposing solid actions which helpto progressively eliminate the ascertainedinequalities. The action plan isaccompanied by a communication andawareness programme to be carriedout by the observatory to ensure thecommitment and involvement of thedifferent players in the implementationof the recommended actions and, overtime, to change the mentalities andbehaviours in favour of equal opportunities.This initial report is a databasethat is full of information both for theOEF and for the managers of theGroup and the social partner. It hasenabled us to ascertain the actions tobe carried out immediately and will beused to define the actions to be carriedout in the future.What findings have you drawnfrom your diagnosis ?The results we have come to fully justifythe establishment of an observatory.In fact, the situation report reveals thatwomen are in a minority in the Group,they are almost absent in some unitsand some workstations. They are mainlyfound, but far from being the majority,in the support functions such asHR, finance/accounting, sales, etc.They are found in certain functionswhich offer no career developmentprospects (secretariat, socio-cultural,etc.). They are in a minority in thetechnical sections and the basic businesslines which offer the greatestcareer development prospects. Theyhave unequal access to promotions andto training which are a favoured meansof developing skills and hence of careerdevelopment. They develop slower thanmen and are under-represented in themanagement and top managementteams.The survey, for its part, enabled us toconfirm the setback experienced bywomen in terms of accessing training,promotions, career development and tolist the difficulties encountered withregards working relations and conditions.It also provided a few explanationsas to the case of the difficultiesencountered by women and which,in general, result from the non-applicationof the regulations andmethods and style of human resourcesmanagement.Can you summarise the mainexpectations of the SonelgazGroup's female workers ?The expectations formulated by womenwithin the framework of the survey aremultiple and concern searching formore equality between men andwomen at work, more recognition andconsideration and the development ofsupport services to enable them toreconcile their professional life andfamily life.1. Indeed, equality is demanded bywomen :• In working relations and conditions:by asking to benefit from the samechances and opportunities as men to beable to fully invest themselves in theirwork and be able to make progress(assignment to positions in line withtheir profile, fair assignment of tasksand projects, rational use of women'sskills, particularly the executives,making available working tools, dealingwith issue of transportation when travellingto work sites, etc.).• In promotions by proposing to onlytake account of the skills and performancecriteria without distinction ofsex or other social type considerationsor others.• In career development: by favouringaccess to the senior positions on thebasis of the “Equal opportunities withequal skills”.However, they would like the companyto carefully study the career of thosewho occupy positions mostly aimed atthe female population, that have a ceiling,and offer no career developmentprospect.• In access to training to all the socioprofessionalcategories and by puttingin place measures facilitating the participationof women in these courses(alternate courses, near the place ofwork, etc.).☞Energie & Mines219November 2006

Human HUMAN resourcesRESOURCES☞2. Women demand :• The putting in place of measures anddevices which enable women sufferingany form of harassment or being dealtwith disrespectfully to be protectedagainst such actions.• The application of the regulation forwomen in pre- and post-natal periodsand ask that they are not penalised intheir professional life due to theircondition (recognition and reward forthe effort put in, access to training, etc.and particularly respect and consideration).3. Supervision :Importance is given to supervision. Infact, women want their managers toplay the role of a good manager. i.e.:supervising, guiding, monitoring, evaluatingand listening to their personnel,but, above all, being fair to work betweenmen and women.4. They want services to be developedrelated to child-care, during and afterworking hours and during the summerperiod so as to release them of thisconstraint, and to be more available forwork, to be able to throw themselvesinto their activities, to be trained andconsequently, to develop.What are the priority actionsto be carried out ?Without going into details, the actionstarget three types of objectives :• The “catching up or re-balancing”actions, with regard to the differencesascertained between men and womenand with regards the structure of theworkforce (female minorities), andpromotions, access to certain job positions(technical jobs and positions ofresponsibility), and career development.• The actions that have to facilitate thereconciliation between professional lifeand family life; so that women do nothave to sacrifice one at the expense ofthe other, but are given the opportunityand the means to reconcile the both.• The awareness actions, designed toinvolve the different players in equalityand to change mentalities andbehaviours in favour of professionalequality.What is the expected role ofthe FNTIEG ?The social partner has been identified,by the OEF, as being one of thekey players in promoting equal opportunities.For this reason, we want it :• to place the principle of professionalequality at the centre of all the negotiationsit has to carry out and related tothe aspects concerning access to jobs,vocational training, promotions, workrelations and conditions and lookingafter the specificities of female workers.• to integrate, in the social report, thecriterion of gender (man/women) so asto be able to detect all cases of discriminationand negotiate the actions tobe carried out to reduce the differencesfound.• to actively participate in the implementationof the action plan proposedby the observatory and approved by themanagers of the Group and effectivelydeal with actions related to the socialpart, which would enable women toreconcile their professional life andtheir family life (child-care, transport,etc.).• to encourage the representativenessof women in the union structuresthrough an awareness campaign to becarried out aimed at the unions.Are the outlooks promising forthe female workers of theGroup ?From my point of view, yes, withregards :• The real commitment of the Group'sGeneral Management towards promotingfemale employment which is officiallyrecognised through:• The commitment of the ExecutiveCommittee of 7 June 2006, to examiningthe report on female employmentin the Group.• The putting in place by the Chairmanof the Group of a mixed working groupcomprised of managing directors andmembers of the OEF in view of identifying,from the action plan recommendedby the observatory, those which arethe most pertinent and can be quicklyaccomplished.This action plan, whose implementationis the responsibility of all theGroup's entities, will be the subject of adecision which will be circulated fromthe month of September 2006.• The putting in place of the call forapplications' scheme, as a tool forimplementing the principle of equality,will give the same chances to women tointegrate and be selected for positionsof responsibility of their choice.• The massive recruitment plan currentlybeing implemented is an opportunityto increase the percentage ofwomen in the group both quantitativelyand qualitatively.One word to conclude…The union's commitment to the programmeproposed by the OEF, whichwe are looking for, will only acceleratethe establishment of the culture of jobdesegregation and professional equality.This equality is a source of wealthfor the Group as it relies on the diversityand complementarity of the skills,know-how and knowledge of the menand women working it in. We are confidentin this with regards the effortsmade by the FNTIEG, namely :• The training of representatives of theworkers, including women, to enablethem to fully play the role expected ofthem both at the federation level andthe CP level.• The putting in place of a women'ssection responsible for listening to thesocio-professional problems of thefemale personnel and dealing withthem.In News FNTIEGEnergie & Mines220November 2006

« ºOb ®JOV îKOq° U m « ºd˸ Ë«ô± MUʱFU w Ë“¥d « DUÆWË« LMU§r« u“¥d, ©OV ´ U¸«‹« Ib¥d Ë«ô• d«Â.§LOFU LU Ot îOd Ë©MMU« Fe¥e. ¢I Ku«, ßOUœ…Ë« M U•U‹, œ´u « Lu v« FKw « Ib¥d Ê ¥ºbœ îDU U« u©Mw. Ë – ¢LMv Jr« Le¥b ±s «ù U“«‹« IDUŸ. ˱LU ¥e¥b ±s LOWc« « Fbœ u ¢DdÆt b˸LU ¥ LKt ±s ¸®Uœ«‹ ˱FKu±U‹ {d˸¥W HNr îBuÅOU‹c« ¥F d ËßOKW ô ±MU’ ±MNUKLNMOOs w c« « L U‰« LMU§r "« cÍ ¢HCK r°S¸ßU t w. Ê U“Ør¥ºd w Ø Od« «ß ö « Fbœ« ªU±f ±s ± KW " « DUÆW Ë« ºOb Ë“¥d « DUÆWË« LMU§rcommunication1 st communication brainstorming session of the Energy and Mines sectorCommunication, crucial stakesand ambitious objectivesThe first symposium oncommunication in thesector will be held inDecember 2006.Brainstorming on thecreation of a TV stationand a network of localradio stations in thesector's businessareas.Under the aegis of the Minister ofEnergy and Mines, a brainstorming sessionon communication has been organisedin the El Aurassi hotel in Algiers.Senior executives and managers fromthis area in the Ministry and in decentralisedagencies, companies, establishmentsand structures of the sector, aswell as the SG of the Ministry ofCommunication took part in this importantmeeting which precedes the holdingof a symposium - the first of its kind -on the same theme next December. Fivespecialised workshops dealt with the differentaspects and axes of communicationto reach conclusions which willenable the sector's approach to be guided,which aims to set up a communicationstrategy in synergy with its ambitionsand its economic and socialdimension. This need, but also thisnecessity to communicate is imposed ina world where information forms theevent, guides it, modulates it in line withthe interest and impact sought after.Communicating in total transparencyand in the appropriate time is a requirementwhich responds to a concern forcomplementarity with society, and thisis the challenge taken on by the managersof the energy and mines sector whoseem determined to refine their policy inthis sense. A note in this sense will furthermorebe sent on this subject to allexecutives and workers in the sector bythe Minister of Energy and Mines,asking them for suggestions on the subject.Mr Chakib Khelil, in his speech,emphasised the progress made in termsof communication by his sector in thelast four years and the persistent deficienciesat this level. The Minister indicatedthat communication must be establishedas a “managerial function initself” - and hence the urgency for puttingin place “new milestones for thefuture”. "Our sector wishes to presentitself as a laboratory and window of thecommunication landscape", the speakerfurther added. The speaker, who focussedon the role and importance of informationas being an essential issue", statedthe need for training in an objectiveof specialisation of communication executives.He also made reference to theexperiences of foreign groups from thesame domain and the revamping ofcommunication to support the expectedchanges in the sector. For his part, theChairman of Sonelgaz spoke on “therole of the managers and directors in theimplementation of the communicationstrategy”.Mr Noureddine Bouterfa talked aboutthe experience of his Group since 2001- the year which saw the inauguration oflarge structures in the electricity and gassector. In his opinion, a communicationplan must reconcile “objectives and stakeswhilst associating the executives andthe social partners in the decisionmakingprocess”. Mr Bouterfa alsoemphasised the importance of “regularcommunication”.In the same context, the Chairman ofSonatrach, Mr Mohamed Meziane, talkedabout the interest of communicationwhich is deemed “as sensitive as it isstrategic”, indicating that the majorconcern is “taking account of the necessarycombination between the Group'spolicy and the interests of the State". Inthe same perspective, the speaker askedfor conformity to the international standardsso as to be able to support thecurrent changes. The Energy and Minessector intends to set about this task bylaunching, subject to adaptations of thelegal and regulatory framework, a televisionstation combining the groups fromthe sector and their Algerian or foreignpartners and a network of local radiostations in the sector's business areas.AcknowledgementsMessages sent toMr Chakib Khelil by...Mrs Khalida Toumi,Minister of Culture“Dear Minister, thank you very much for kindlysending me the fifth edition of your publicationEnergy and Mines. I was delighted to find thatone page was devoted to information on thearchaeological and cultural heritage of ourcountry. I wish you every success with thisquality review. Yours faithfully.”Mr Boudjemma Haïchour,Minister of Post and Informationand CommunicationTechnologiesMr Noureddine Moussa,Minister of TourismEnergie & Mines221« Ld … w ¢Du¥d «ôÆ BUœNovember 2006

communicationCOMMUNICATIONRead in the daily newspaper “L'Authentique”"Communication, a managerialfunction in itself”according to Chakib KhelilEnergie & Mines222The Energy and Mines sectoris in the process ofpreparing a symposium on“communication” to makeit a modern instrument,not only for marketing, butalso for managing informationinternally, betweencompanies of the sectorand with regards thepublic.A working group run by Mr Sid AliHattabi, the adviser of the Ministerrepresenting all companies from thesector and their subsidiaries, organiseda brainstorming session to encouragethe participants to innovate by lookingdeep inside themselves to find newideas adaptable to the new circumstancesand reality of the sector.The Minister, Mr Chakib Khelil, participatedin this meeting which he set offby an austere, but educational speech,presenting the different intrinsicdimensions of communication.He specified that the managerial functionof communication serves “to circulateknowledge and lessons learnedin all domains either by the contributionto the development of the industryand trade, or by the improvement andthe promoting of the social relationsinside the company and between thecompany and society”. The challenge,he concluded, is to quickly adapt to thisstage of globalised modernity so as notto suffer it.Mr Chakib Khelil made a detour on theprogramme of reforms initiated by thePresident of the Republic and in whichhe specified that we need to free upenergies, skills and talents and promotefreedom in all domains, but also preservethe values of solidarity and justice.The brainstorming session may be heldNovember 2006next July and the symposiumin the month of Novemberwhich, according to the speaker,would leave enoughtime for the ideas to matureand for new proposals togerminate. With regardsthe human resources dedicatedto the communicationfunction, the companytraining centre run byMr Taleb Abdelazizwould have already preselected,outside thesector, some 100 candidatespotentially suitablefor receivingtraining leading to aqualification for thedifferent segmentsof the communicationactivity.In this perspective,Mr Chakib Khelilspoke to give acertain numberof clarificationsto position therole of communicationwhichhe considers tobe an expertise initself, just like all the other expertises,specifying that each personinvolved must pay attention, bydifferentiating, in the exercise of theirfunctions, public information andconfidential information. He addedthat another approach must be consideredin the sector's relations with allthe media and particularly the writtenpress.For the Minister, communication hasan operational role on the basis of amatrix-based organisation where theprogrammes and presentation, awareness,explanation, marketing andreconciliation programmes aredesigned betweenthe different structures, betweenthemselves and with their environment.Finally, he insisted on the fact that thematrix-based culture in the domainmust be prioritised to reunite, for eachother, the luggage needed for a betterunderstanding of the ins and outs ofthe sector.

ooksLes Nouveaux Investisseurs(The New Investors)A book by Mr Abdelatif BenachenhouThe new attractivenessof the Algerian economyAn economist of the stature of Mr AbdelatifBenachenhou, the former Minister of Finances,was needed to embrace in one go such a wide fieldand to happily cover a theme which, if not arduous,may be off-putting due to the complex realities ofan economy in the process of profound change.The author's educative qualities are renowned: heasks simple questions and gives them clear answers.This is why his last book should interest notonly specialists and the economic agents workingin Algeria, but also a very large public.The questions: who are the new investors? Whyare they here now? What strategies have they chosenon the Algerian market? What obstacles arethey coming up against? How do they see the futureof business in Algeria? What are they offering?Initially, a tangible reality, but paradoxically misunderstoodreality that is sometimes denied:thanks to the liberalisation, new players in growthare being deployed in Algeria. They are foreignersbut also Algerians. They invest, produce, recruit,train, make profits and transform the rules of theeconomic challenge. They bring hope to youngpeople and give reasons to think that the futuremay be less uncertain.The progressively more competitive markets procuregoods and services of better quality for consumersand users at prices which might be better stillin exchange for a more dynamic competition.What is undeniable, reveals Mr AbdelatifBenachenhou, is the current attractiveness of theAlgerian economy for new investors. This phenomenonnot only concerns the hydrocarbons' sectorwhose new impetus characterises it due to thebrave reforms it experienced 5 years ago and makeit a model and the driving force of the new Algerianeconomy.This new commitment toinvest in Algeria concernshighly diverse branches:banks, fertilisers, telephony, cement, drugs,steel, agro-food, electricity, seawater desalination,construction of hotels, port services, etc.After suffering far too long from the misdeeds ofterrorism, Algeria finally seems to have come outof the tunnel and this renaissance process has beeneven more palpable since the re-election ofPresident Bouteflika. The statistics thus show thatAlgeria, in 2004, was the number one country forattracting foreign investments in the south and eastof the Mediterranean. Our country is at the headof the Mediterranean regions in terms of investmentflows and this highly significant recovery islargely due to the energy sector.The author feels we need to go further: the pursuitof the economic opening up to attract performinginvestors as well as good economic regulation are,he feels, the sole means of fighting efficientlyagainst poverty through growth and employment.It is the State's responsibility to put in place judiciouspublic support policies to maximise the positiveeffects of the opening up and minimise itsnegative impact.It currently has the means to do so, observes theauthor, but it will not, perhaps, always have them.A stimulating book which should mark the editorialactivity of this year.Salim KorsaneEnergie & Mines223November 2006

ooks BOOKSLes Fondements théoriquesdu libéralisme(The theoretical foundations of liberalism)Un ouvrage de Hamid TemmarFrom “Globalisation”to “Glocalisation”Neophytes, abstain.The new work just published by MrHamid Temmar, our Minister of State Participations andthe Promotion of Investments, is an academic essay designedfor specialists, academics, doctors, professors andresearchers, and also “decision makers”.In this theoretical essay, the author initially faces a difficultyof definition.Hence, Mr Hamid Temmar considers the meaning of thewords "liberal” and “liberalism”; have we reached a stagewhere one liberal theory alone is now imposed on thenations making the latter physical frameworks for applyingdecisions which are made elsewhere and on governmentsmaking them spectators of an economic impetus that escapesthem"?In fact, our country's analyst often experiences difficultiesin understanding that the economic activity is done by selfishagents who are each looking to maximise their interestson a market which is neither ever balanced nor fair.Completely to the contrary, the market's trends, particularlythose of the international market, naturally inclinetowards a monopoly situation.In short, we are at the centre of a question as to what thetheory can contribute to the explanation of the real and onbringing the economic vision in line with the politicalvision.The profound geopolitical shake-ups which the world hasexperienced in the last 30 years, the shocks which they haveinduced, particularly economic ones, entailing brutal theoreticalconfrontations, are used as a thread for analysis bythe author who finally concludes in the words of a documentedargument that there is no one liberal theory, butliberal theories which thus confront each other virulently.A truth, however, is imposed: the economic liberty as amandatory system authorising excesses not only on thetheoretical plan and more largely ideas, but also in the practiceof public policies. This vision will have found its systematisationin the works of two theorists, Friedrich VonHayek and Milton Friedman who, more than economists,were formidable controversialists.Although today out of date, these extremists theses continueto be quoted and are used as references in the largecontroversial discussions.Hence, on the one hand, the supporters of economic efficiency,productivity and return on investment and, on theother hand, those who consider that efficiency is not theonly objective of the economic system and that theconcerns regarding safeguarding purchasing power, thedistribution of income, solidarity and fighting againstinequalities are other forms of combat.The new explanation results from the realistic theoreticaltext which upholds efficiency and national solidarity as theultimate economic goals, with the new policies movingtowards simultaneous dealing with this two-fold concern:economic liberty is, certainly, the driving force of efficiency,but the market remains an unstable place, a source ofimbalances and injustices which finally threaten the soughtafter efficiency, hence the essential role of the State as aninstitution monitoring everything from efficiency to socialbalance.As the nation's independence is precisely this capacity ofthe "local" to impose its presence and its dynamics, then wecan deduce from this that the term "globalisation" is out ofdate, as we now find ourselves in a situation of “glocalisation”- with the author wishing to mean by this that globalisationis initially done at the local level.This, concludes Mr Hamid Temmar, means putting the"local" in a position of receiving the world to the best of itsown interests. Herein resides the challenge.Sliman DakarEnergie & Mines224November 2006

HeritageSonatrach Tassili FoundationTo protect humanity’s heritageThe Sonatrach TassiliFoundation plays anessential role in protectingand preservinghumanity's heritage -that of the TassiliNational Park. Otherthan its own actions,the country's numberone company also commitsto approach itsforeign partners to getthem involved in protectingthis natural andcultural site - the onlyone of its kind in theworld and classed byUnesco.This is what emerges from a meetingfor the expression of interest for theprotection and preservation of thenatural and cultural heritage of theTassili National Park, organised on 8April 2006 in the O. Khouani auditoriumof Sonatrach's headquarters, inthe presence of Mr Chakib Khelil,Minister of Energy and Mines, in hiscapacity as president of the SonatrachTassili Foundation and Mrs KhalidaToumi, Minister of Culture, theSecretary General of the Ministry ofthe Environment, the director of theTassili National Park and accreditedambassadors in Algeria.This meeting, which follows on fromthe call for expressions of interest forprotecting and preserving the TassiliNational Park, launched by the presidentof the Sonatrach TassiliFoundation for its preservation andpromotion activities of the world's largestclassed natural site, should sign,on this day, a letter of intent to participatein the protection of Tassili. Aboutthirty companies and organisationsfrom the Energy and Mines sector,foreign partners of Sonatrach, as wellas companies from the public and privatesectors thus signed this letter ofintent and commit to work together topreserve and promote the TassiliNational Park.Furthermore, an agreement betweenthe Sonatrach airline company, TassiliAir Lines, and the Sonatrach TassiliFoundation, was initialled so as tomake a helicopter available to thefoundation, for the requirements ofthe National Office of the NationalTassili Park, dedicated to the protection,preservation and promotion tasksof the national park.The Chairman and CEO of theSonatrach Group, Mr MohamedMeziane, emphasised the growinginterest of the country's number onecompany in preserving the nationalheritage, in general, and in Tassili, inparticular, after paying tribute to DrChakib Khelil, Minister of Energy andMines, and president of the SonatrachTassili Foundation, who has made thiscommendable initiative to launch a callfor expressions of interest so that "we,the companies, combine our effortswithin the framework of protecting,preserving and promoting the naturaland cultural wealth of Tassili: humanity'sheritage"."Sonatrach, within the framework ofits social responsibility, through itsfoundation, has always confirmed itscommitment to contribute to theefforts of preserving, promoting andprotecting this exceptional heritage forwhich it intends to contribute moreand more actively, through its ownmeans or in partnership with othercompanies”, he concluded.“We are proudto participate inpreserving themagic of Tassili”In his ceremony opening speech, theChairman and CEO of the SonatrachGroup stated : “For those who havehad the opportunity to visit it and forthose who have not yet done so,Tassili is a magical place, and we, atSonatrach, our proud to participatein preserving the magic.”"But for us, oil producers, Tassili iseven more, as it is also, and first ofall, a place for producing knowledgeand reverting to sources”, he continued,adding that “it is practically anopen-air geological museum wherewe continue to learn a lot about thelayers of the sub-soil where thehydrocarbons, whose research andexploitation are our basic businessactivities, have been trapped forseveral millions of years”.“We are therefore, for more than onereason, in debt to Tassili and, formore than one reason, called uponto preserve it”, he emphasised toreiterate Sonatrach's determinationto continue its action in favour of thepark's office.Energie & Mines225November 2006

Heritage HERITAGEWith the help of the Sonatrach Tassili FoundationAn Algerian researcher developsa new type of wind turbineThe Minister of Energy and Mines, MrChakib Khelil, in the presence of theMinister of Culture, Mrs KhalidaToumi, on the fringes of the expressionof interest for the preservation and promotionof the natural and cultural heritageof Tassili, heard explanationsconcerning an invention presented byMr Etsouri Kaddour, course managerat the National Agronomics Institute.The latter indicated that a lot of remoteand impoverished villages, located inthe Algerian Great South, in general,and in the territories of the nationalparks of Tassili des N'Ajjers andAhaggar, in particular, cannot increasethe performance of their daily activitiesand particularly those related to agriculturedue to a lack of access to theelectric power required for the motorisationof their water wells.To do this, the Sonatrach-TassiliFoundation and the El HarrachNational Agronomics Institute arecooperating to help a team of researcherscomplete their research, bymaking a vertical axis wind turbine,beneficial to improving the socio-economicconditions of the populations ofthe Great South. This work comesfrom the results of research which takesaccount of the special weather conditionsand the fragility of the ecosystemsof the Saharan regions. According toMr Kaddour, the vertical axis wind turbineworks in all wind directions andwithout a guidance mechanism. Thetargeted aim is to reach the small producersand improve their daily life aswell as participating in the thriving oftheir farms. The objective does not stophere as this work is introduced in thenational economy, by adapting it to themore energy-consistent projects.Energie & Mines226November 2006