Total Continues to Algeria in court – The World

This is a politically sensitive decision. Often considered an arm of French diplomacy, Total has, in any discretion to initiate litigation against Algeria and its state oil company, Sonatrach. The French group takes issue with, in the middle of the 2000s, Algeria has changed retroactively to his advantage the sharing of profits from oil and gas.

After searching in vain for friendly solutions, total and its Spanish partner Repsol began in May arbitration indicate several sources. They filed a petition together in Geneva to the International Court of Arbitration, which depends on the International Chamber of Commerce. Patrick Pouyanné, CEO of Total, hopes to obtain compensation from hundreds of millions of euros

The lawsuit -. Even if it is a private justice – may not improve relations between France and Algeria, already strained by the “Panama papers.” In early April, Le Monde found that relatives of the head of state, Abdelaziz Bouteflika, the Minister of Abdeslam Bouchouareb industry had had hidden assets in Panama. In the process, France’s ambassador was summoned by the Algerian Minister of Foreign Affairs.

Between Algeria and France, the history of oil relationship has often been met. They are French geologists and engineers, including those of the French Oil Company, the forerunner of Total, crisscrossing the first and discover the Sahara Algerian fields to mid 1950 Fifteen years later, in 1971, Algeria became independent resumes control of his riches, and nationalizes french assets for the benefit of its new national company, Sonatrach.

in the late 1990s, however, the country wants to accelerate the exploration and exploitation of its deposits, and appealed to foreign investment. Large Western companies tributary of the American Anadarko the British BP, via Italy’s ENI, Norway’s Statoil and Total.

Hardening of taxation

But in the mid 2000s, Alger again changes course. Seeing that the price of black gold continue to rise, the state abandons its sector liberalization promises. Hardens otherwise oil taxes to capture a greater share of the rent. A law introduced in 2006 as a “tax on exceptional profits” made by foreign companies. As soon as the price of oil exceeds 30 dollars, which is largely the case at the time, they must pay an additional tax of between 5% … 50% of the value of production.

This measure against the “superprofits” is the despair of Anadarko, BP and others. Companies react in two ways. Given this considered punitive tax and the simultaneous increase of production costs, many of them quit their investments in Algeria. At the point that the three tenders issued by the government to explore the mining sector in 2008, 2009 and 2011 ended in failure.

Many companies are attacking simultaneously in Algeria before arbitral tribunals . A State modifies oil taxes, it is within its sovereignty. However, the companies deny that this change will result in a unilateral and retroactive change in their contracts. According to them, the documents signed with Sonatrach had to ensure fiscal stability. The national oil must repay the tax they have paid.

This argument carries. To avoid being sentenced, Algeria in 2012 agrees to pay more than $ 4 billion (3.6 billion euros) in compensation, especially Anadarko, the largest operator and the Danish Maersk.

“for Total, Algeria is no longer a major partner”

Total, for its part, was very hesitant about what to do. Before he died in an accident in October 2014, the CEO Christophe de Margerie was poised to launch a procedure against Algeria. Initially, his successor has everything stopped, especially as the government wanted rather calm relations with the Bouteflika regime.

But the negotiations attempted with Sonatrach and Algeria did unsuccessful, Patrick Pouyanné was resolved in spring to resort to arbitration. Despite the lateness of this action, the chances of recovering jointly with Repsol few hundred million, more than 500 million may have been judged superior to risks. The French government consulted no vetoed.

By doing this pressure, the leaders hope to push Algerians to negotiate an agreement. “The door remains open” do you note in the French camp. But if no solution is found, it will not be a drama either. “For Total, Algeria is no longer a major partner,” says a person familiar with the matter. On site, the group employs about 200 people. All production from a gas field, the Tin Fouyé Tabankort, in which Total holds 35% alongside Sonatrach and Repsol. The Algeria, whose oil production has declined by 20% in ten years, representing only 1% of Total’s hydrocarbon volumes.

The group nevertheless involved in another project, that of exploitation Timimoun gas field, 800 kilometers south-west of Algiers. A plant is being built. Total holds 38% of the project, alongside the Spanish Cepsa and above the inevitable Sonatrach, which controls 51% of shares. “Total is a major investor in Algeria and intends to continue its development,” indicates the company to comment on this highly flammable folder.