Do you see further growth potential In the European markets for Algerian gas?

Which other markets are you actively targeting?

• A direct Line to Europe via Spain. This project is the subject of a technical and economic feasibility study with a number of partners.
• A direct Line to Italy via Sardinia. A company involving Sonatrach, Enelpower and Wintershall has recently been set up to study this project.
• A new liquefaction plant that will be part of an integrated upstream-downstream project to be developed in partnership.

Obviously, Europe will remain Sonatrach's main market, because of its geographical proximity, however, Sonatrach is making diversification, especially geographical diversification, an integral part of its marketing strategy.

Sonatrach already exports gas to the US through two contracts with American customers and the renewed interest of the American - and European - operators in LNG in this part of the world allows us to foresee an expansion of our exports to that market.

Moreover, we are currently examining various options in order to reach distant markets from production sources outside Algeria.

The sedimentary basins in Algeria are vast and under-explored. The average exploration density is 10 wells/10,000 Km² compared with an average of 100 wells/10,000 Km² worldwide.

By way of example, all of the basins in the Western Sahara are under-explored with fewer than 2 wells/10,000 Km². In the main, they have potential for gas, with some possibility of oil in the southern part of the basins. All the simulations agree that Large quantities of gas are produced and expelled from the base rock. So if we take into account only 5 per cent of the produced and expelled quantities that may have been trapped and stored, they amount to some 700 tons of oil equivalent (toe). Up to now, only around 35 toe have been discovered.

These basins, which so far could not be made into attractive projects for companies due to lack of infrastructure, are acquiring more and more potential because of the gas pipeline currently under construction, to link these areas with Hasi R'mel.

As a result, it will be possible to develop the numerous deposits already discovered in these basins.

The third call for tender that is currently under way is creating a lot of interest among the companies, especially in the three gas projects concerning the six blocks whose proven potential is around 15 tons of oil equivalent.

In the east of Algeria, many of the blocks are still open to competition, both in the southern part of the Illizi basin and in the western and southern parts of the Berkine basin. The potential of the Berkine basin is no Longer in doubt. In terms of development, the call for tenders regarding the gas fields and the tendering process for the Gassi Touil integrated project offer unrivalled opportunities to the oil and gas companies.

In the future, whole territories remain to be explored, especially in the north of Algeria, and in particular the Nappes area, which may have major potential in view of all[ the similar examples around the edge of the Mediterranean - and the offshore area which is just beginning to be explored.

The future of oil exploration in Algeria is therefore very promising.

What measures is the government taking to add value to Algeria's oil and gas exports?

What are your plans for the development of the petrochemical industry in particular?

First of all, I should point out that the downstream oil industry is open to investment: it is governed by the investment code and thus benefits from the advantages and incentives in the code.

Moreover, the proposed bill on hydrocarbons presented to the government envisages other incentivising benefits, especially the consolidation of profits for investors upstream and downstream, including for the business activities that are governed by the law relating to electricity and the distribution of natural gas.

In order to answer your question about adding value to Algerian oil and gas, I would like to mention the projects that are being launched in these businesses, namely:

• A 2000 MW generation project, of which 1200 MW is destined for export and 800 MW to meet the needs of the domestic market, which represents an added value for the gas exported;
• A 5 million tonne condensate refinery project, for which a tendering procedure will be Launched soon, which will enable value to be added to part of the condensate;
• The Adrar refinery project, with the development and extraction of the small oil deposits in the region, for which tendering began in 2001 and for which the choice of partner will be decided, in public, immediately after the opening of the sealed bids, in August;
• The integrated upstream-downstream gas project with a liquefaction plant as previously mentioned, for which tendering began in April. The choice of partner will be made in March 2003.
• Participation in the propane dehydrogenation plant at Tarragona in Spain with BASF, with whom other projects might be arranged.

Projects that are being worked on with partners operating in Algeria, aimed at creating added value from fuel oil and from the basic petrochemical industry.

• The helium extraction project using gas from the Skikda liquefaction complex that will be carried out in association with Linde, the partner selected after an international open tendering procedure.

To go on to the second part of your question about the petrochemical industry: I must tell you that this industry, despite the investment so far, has not had the place it ought to have in Algeria, given the potential that exists in terms of raw materials, energy and human skilled resources.

We therefore organised an international meeting at the beginning of 2001, attended by several renowned petrochemical companies, with the aim of deciding on a strategy and an approach to developing a petrochemical partnership in Algeria and abroad on projects that will allow our industry to grow and create added value.

This pragmatic strategy is already enabling us to talk to our partners about actual projects, such as an ethane cracking complex, a fuel oil cracking complex, polymerisation plants and other projects that will give further impetus to the sector.

In terms of organisation and responsibilities, a new organisational structure has been created, making the upstream division of Sonatrach responsible for the development of the petrochemical industry instead of the ENIP company, which is now in charge of the operation of the existing complexes and their overhaul.

As early as 1983, Algeria promulgated the law relating to the protection of the environment; since then it has joined a series of international conventions and treaties on the subject.

During the last decade a number of regulatory and institutional measures have been introduced in order to deal effectively with environmental concerns in development projects and with highly polluting activities.

Within that context, the energy and mining sector has implemented awareness campaigns, training programmes and actions to mitigate the impact of these activities on the environment and public health.

The process of reform begun by Algeria has devoted special attention to the promotion of sustainable development. As a result, measures have been adapted to strengthen the legal and institutional frameworks in order to give the country a relevant environmental policy and appropriate mechanisms for its implementation.

To that end, the government has developed anew legal structure to frame the main laws, i.e. the law relating to the management, control and elimination of waste and the Law relating to regional and sustainable development that were proclaimed in December 2001, and the proposed legislation on the environment in the context of sustainable development, which is in the process of being approved by government institutions.

The 2002 Finance Act introduced several taxes on polluting businesses in order to translate into practical action the application of the 'polluter pays' principle and to ensure funding for the Environment and Pollution Control Fund that was set up to finance environmental projects.

As part of the reforms in the energy and mining sector, the Ministry introduced a number of specific clauses into the laws relating to mines and electricity and the proposed legislation on hydrocarbons. The future regulatory bodies will be responsible inter alia for the application of environmental regulations.

Algerian energy policy is to encourage the long-term priority and maximum use of gas, based on the reduction of the impact of the energy system on the environment and a reduction in pollution and greenhouse gas emissions.

In that regard, and with regard to renewable energy, action has been taken, including:

• The development of the use of LPG as a fuel;
• The promotion of natural gas as a fuel, with pilot operations;
• A drastic reduction in gas flaring;
• The marketing of Lead-free petrol, gradually reducing the content, with a view to total elimination by 2005;
• The equipping with solar energy systems of 18 communities in the south of the country and an additional 18 in the process of being equipped;
• The development of environmental management for the energy and mining sector as a whole

Are you satisfied with the social programmes undertaken so far by the international oil companies working In Algeria?

A social programme began to be developed by the foreign oil companies in Algeria in 2000 and seeks to offer job and development opportunities to the people living in the far south, which is an area of immense natural wealth.

This programme occupies an important place in our energy policy because we consider that the commercial activities of the foreign oil and service companies in Algeria must go hand in hand with social activities.

To that end, all the companies invited to do so responded favourably in the majority to the initiative and declared that they were prepared to participate.

Numerous operations have been organised in favour of the people living in the far south especially:

• The development of community infrastructures, such as solar-powered electricity plants and water desalination plants,
• Economic development, such as the creation of small manufacturing units for small businesses,
• Education, such as English language and IT training for young job seekers and the donation of IT equipment,
• Health, by equipping hospital departments.

It should be noted that the studies and the implementation of projects are done entirely by the companies, with the help of the community and government authorities.

Finally, I hope nonetheless that this programme will be taken up more widely and developed by the foreign oil companies, following the example of what has been done by BP, which is leading the field in Algeria in this regard.

What do you consider to be Sonatrach's technological strengths and where can they best be applied Internationally?

Since its creation in 1963, Sonatrach has seen remarkable growth in its activities.

As far as gas exports are concerned, Algeria is the world's third Largest exporter with a volume of more than 60 billion m³ of gas, mainly destined for the European market.

Sonatrach has acquired great experience in the development of the whole of the gas chain, integrating its various segments, i.e. development, transport, liquefaction, shipping and gas trading.

It is important to stress that Sonatrach is a pioneer as far as gas liquefaction is concerned. You will remember that the first liquefaction plant in the world was built in Algeria in 1964.

From a maritime point of view, Sonatrach manages a fleet of six gas carriers with an overall capacity of 679,000 m³ of LNG.

As part of its international expansion strategy, Sonatrach lists the development of gas activities, through partnership, as one of its main objectives both for the upstream and the downstream business.

In that context it has already become involved in numerous international projects such as the regasification terminal at Ferrol in Galicia (Spain), the gas pipeline from Camisea in Peru, and the project for two new gas routes to Europe from Algeria, as already mentioned.

Moreover, Sonatrach intends to explore many new partnership arrangements in the international gas sector.

What message will you be hoping to convey to the Industry executives and government officials attending the World Petroleum Congress In Rio In September?

I would say that the message is above all one of hope: hope in mankind, hope in science and technology. Our industry is faced with a dual challenge of pushing back the limit of exhaustion of reserves whilst preserving the sustainable nature of their use. Our companies will have to show that they are responsible civil businesses that take account of the needs of society and aim to improve the living conditions of citizens and to participate in the progress of humanity. This is a vast programme. I am convinced that man will continue to make greater efforts and employ ever more resourceful means to overcome these challenges.

Our industry is the stage for a true technological revolution, pushing the limits of the possible even further. Brazil is in the forefront of the race for knowledge in our industry. From that point of view, it is an example for producing countries to emulate, and I am very hopeful that I will be able to strengthen the links between our oil companies, and through them, between our national universities and research centres.

My general feeling is that this new century wilt be characterised by interdependence and partnership. A renewed, imaginative partnership, bringing growth and strategic opportunities for all, and at the heart of it wilt be cooperation in the field of science and technology.

Brazil and Algeria have everything to gain in exploring how they can complement each other in order to establish a partnership where the energy sector could be the major structural feature. As you know, our Brazilian friends have already been involved in the upstream oil business in Algeria and on our side, we are beginning to invest in Latin America.