ALGIERS-Sonatrach group intends to reduce by 50% its budget in 2020 and postpone non-urgent projects following the impact of the new coronavirus (Covid 19) on oil markets, said CEO Toufik Hakkar in an interview with “El-Khabar” daily released Sunday.
“Given the impact of this pandemic on supply and demand, we intend to reduce the costs of investments and recruitments this year because they do not affect the level of production. We aim to postpone some projects and decrease employment costs to US7 (-30%), i.e. 50% Sonatrach’s budget for this year,” stated Hakkar.
Sonatrach has in fact begun the implementation of a cost reduction programme “aimed at enhancing the company’s performance this year and providing the Public Treasury with tax revenues,” said Hakkar.
The cost reduction is part of preventive measures against a possible impact of the crisis on the company’s mid-term and long-term investment programmes pending the improvement of the market situation at the end of the first semester of this year, explained the CEO.
Sonatrach is constantly vigilant and observes the situation but it is too early to expect any international evolution or any impact on our project,” stressed Hakkar.
To monitor market developments, Sonatrach has created a follow-up unit to act quickly in the face of any eventuality and the group banks on its operational flexibility to keep its traditional markets and to better recover revenues of oil and gas sales.
Advanced talks with international oil groups
Besides, Sonatrach seeks to take advantage of this situation to discuss new projects in collaboration with companies interested in investing in Algeria, stated the CEO.
The group is “in advanced negotiations” with several groups thanks to the new law on hydrocarbons that further attracts investors in the light of falling oil prices and increased competition among producer countries, said Hakkar.
“As we realize that the transformation of opportunities into genuine projects is a long and exhausting operation, we currently focus on current projects by taking advantage of the digital means we have. Despite the crisis, Sonatrach sealed a memorandum of understanding (MoU) on 12 March with the US Group Chevron to start joint studies on hydrocarbon projects,” recalled the group’s CEO.
“We are in advanced consultations with other companies and we will soon announce other MoUs,” he continued.
As for the possibility of resort to foreign debts to finance projects, Hakkar said that the group’s current five-year investment programme “does not envisage the use of foreign funding because the major projects planned in the petrochemical sector rely on self-financing without granting guarantees to shareholders, especially as the contribution of investors is limited to part of the capital and the rest of financing is assured by Algerian banks.