Facing Oil Price Drop, Sonatrach Seeks Service Discounts

Source: Reuters 4/27/2015, Location: Africa

Algeria's state energy company Sonatrach has demanded its service providers cut their prices by up to 15 percent as the OPEC member country tries to ward off the impact of falling oil prices, industry sources said0.

The collapse in crude prices is testing Algeria's economy, which relies on energy sales for 60 percent of state revenues and to pay for a welfare system and subsidies that have helped calm social unrest.

The government has already announced a freeze in state job hiring in most sectors and several infrastructure and transport system projects have been put on hold to save cash.

Companies providing services in the hydrocarbon sector in Algeria have received a letter from Sonatrach urging them to cut costs by 10 to 15 percent, an industry source said.

Another industry source close to Sonatrach told Reuters: "Sonatrach has urged its partners in the oil and gas services to cut the cost by 10 to 15 percent".

A diplomat from country whose companies supply Sonatrach with services confirmed the demand. Both sources asked not to be identified. "I can tell you that the firms are not happy after getting the Sonatrach letter demanding a reduction by up to 15 percent," the diplomat said.

Sonatrach is the heart of Algeria's energy business and its financial health is a key indicator for the country's economy.

Sonatrach official Abderahmane Belkacem told state radio this week that the state firm spends around $23 billion a year in service costs. It has also called on local firms to start looking at ways they can provide services for Sonatrach.

The company did not return a call requesting a response.

As part of measures to counter the crude price drop, the Algerian government is also looking at ways to reduce the country's huge import bill and protect its foreign reserves.

The price drop arrived at a sensitive time for Algeria's leadership. Questions linger over the health of ageing President Abdelaziz Bouteflika, who has rarely been seen in public since suffering a stroke in 2013, even after re-election last year.

With nearly $200 billion in foreign exchange reserves and little foreign debt, Algeria is unlikely for now to face any economic collapse or the type of meltdown analysts are concerned about in fellow OPEC member Venezuela.

For more information about related Opportunities and Key Players visit Algeria Oil and Gas Projects


United States >>  6/28/2022 - Intersect Power, LLC, ("Intersect Power" or the "Company") announced today a $750 million growth equity investment led by TPG Rise Climate, the dedica...
United Arab Emirates >>  6/24/2022 - The Board of Lamprell PLC announces that it received a non-binding indicative cash offer from Blofeld Investment Management ("Blofeld"), a 25.06 per c...

United States >>  6/22/2022 - Cheniere Energy, Inc. announced that its Board of Directors has made a positive Financial Investment Decision (“FID”) with respect to the 10+ million ...
Austria >>  6/21/2022 - The International Renewable Energy Agency (IRENA) and the OPEC Fund for International Development (OPEC Fund) are ramping up efforts to advance renewa...

Canada >>  6/21/2022 - Carbon Streaming Corporation has entered into a carbon credit streaming agreement (“Carbon Stream”) with Will Solutions Inc. (“Will Solutions”), an es...
United Arab Emirates >>  6/21/2022 - According to an announcement made today by Abu Dhabi National Oil Company (ADNOC), the company has identified AED70 billion ($19 billion) in products ...

Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


Gulf Oil and Gas
Copyright © 2021 Universal Solutions All rights reserved. - Terms of Service - Privacy Policy.