ALGERIA. JOINT VENTURES Collaboration with foreign operators has increased both know-how and capacity
Partnerships underpin the industry

The sector relies on a wealth of experience built up through overseas partnerships

The Algerian energy sector has taken a long time to develop as a player with international potential, but underpinning the industry is a wealth of experience built up through cooperation and partnerships with foreign firms. As the sector opens up to competition, these partnerships are expected to grow to provide both services and expertise to other sectors of the Algerian economy.
The result of one such partnership is Brown & Root-Condor, an engineering company founded in 1994 by Algerian operation Condor Engineering and Brown & Root of the US Halliburton group, together with Algeria’s Sonatrach.

Condor had been established only two years earlier, with about 30 employees and a turnover of just $400,000 a year. Today, the partnership employs 500 people and has a multi-million dollar turnover.

‘We need to free the energy sector’ Ould Kaddour

Ould Kaddour, its chairman and managing director, says the partnership came about at just the right time. “It was at a time when some of the most important investments were being made, not only in hydrocarbons but also in other sectors. We were lucky, and we had the privilege of making a successful contribution to several significant projects.”
He adds: “Thanks to a tight and permanent collaboration with our two main shareholders, Sonatrach and Brown & Root, we have made the most of these years to acquire further know-how and raise our employees’ competence as a whole. Today, we have the capacity and organisation to lead all sorts of projects.”
Among these is a hospital specialising in the treatment of burns victims. The state-of-the-art hospital at Ain Naadja was built in just 14 months.

Other projects include two major regional hospitals, at Oran and Constantine, and the development of the Tifernine oil field, some 440km south of Hassi Messaoud. The remoteness of the latter involved a massive logistics operation, including the construction of 90km of road, a base camp for 70 workers, a satellite telecommunications link and the airlifting of equipment.
“We are focusing on the Algerian market, because we don’t even cover five per cent of it,” says Mr Kaddour. “I mean not only oil and gas, but also infrastructure such as airports. So it is a huge market.”

In addition to great reserves of oil and gas, Algeria boasts a base of skilled workers

Mr Kaddour says Brown & Root-Condor had prepared in advance for the liberalisation of the Algerian economy. “For years we wondered what was wrong in Algeria when it has so many assets. Algeria is more than two million square kilometres and has 1,000km of coastline, huge oil and gas resources and skilled workers. We noted that Chile, for example, had a growth rate of more than 10 per cent over 10 years.”
Part of the reason why Chile’s economy grew faster than Algeria’s was the fact that it privatised state-owned enterprises earlier. Nor did Chile have to make the mental leap from being a socialist state to a free economy.
Mr Kaddour says his firm watched with interest experiments in other countries, from housing programmes to financial systems. “We then tried to capitalise on all these experiments in a survey done by national and international experts for the Algerian New Deal Initiative.

“We need to free the energy sector, facilitate investments and procedures, open up the economy and liberalise it to the maximum so that the government assumes its traditional role of governing, and citizens are weaned off the reflex reaction that there will always be state aid. That does not help them at all. To quote John F Kennedy, don’t ask what the state can do for you, ask rather what you can do for the state.”
He acknowledges that Algerian firms will face international competition, but says they will need to be protected for a few years before customs tariffs and other measures are finally removed.

“Companies should be given all possible means to better manage their needs and to be able to face the world for 10 to 15 years with protectionist measures, and then the Algerian market will be totally open to competition,” he adds.
ENSP (Entreprise Nationale de Services Pétroliers), a subsidiary of Sonatrach which specialises in oil and gas drilling equipment and fluids, has also gained enormous expertise through its joint ventures with foreign companies. It invests one per cent of its annual turnover in the training and development of its employees.

‘Everything here is to be discovered’ Azzedine Gasmi

Azzedine Gasmi, president of ENSP, says the group’s strengths lie in its experience and its competitiveness. “There were competitors here even before the creation of ENSP, but we do not consider them only as competitors. We work in collaboration with them,” he says.
ENSP has a 50:50 joint venture with Weatherfort (WSP) specialising in tube fittings; a 51:49 venture with Halliburton (HESP) and a similar venture with BJ Services Company (BJSP). It also has a 50:50 venture with Solid Energy Services of Canada, specialising in well testing; and a 50:50 venture with Medes (Mediterranean Environmental Services).
Mr Gasmi sums up Algeria’s potential: “Algeria is virtually virgin, unknown territory. In America there are 500 wells drilled for every seven here. Everything is to be done and to be discovered in Algeria.”