Population 40,962,036 Arabic (official), French, Berber dialects GDP (USD billions) $167

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2 MILLIONS About the country Population 4,962,36 Language Arabic (official), French, Berber dialects GDP (USD billions) $167 Currency Dinar Interest rates 3.5% Inflation 8.2% Imports from the UK (216) 414,247,114 Exports to the UK (216) 676,277,73 Labour cost (Avg. salary) Algerian in oil & gas: $39,6 (1) Expatriate in oil & gas: $96,7 (1) Freedom index 172 of 18 Doing business 156 of 19 Corruption 18 of 176 *As at March 217 unless stated. (1) 214 estimates. Trade / business 4, 3,5 3, 2,5 2, 1,5 1, 5 IMPORTS FROM / EXPORTS TO UK Imports Exports Business sectors Trade by sector [Top 1 imports from the UK in 216] Two Digit economic classification Imports from UK ( s) 84 - Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 85, Cereals 69, Pharmaceutical products 45, Miscellaneous chemical products 35, Electrical machinery and equipment and parts thereof; sound recorders and reproducers, 25, Aircraft, spacecraft, and parts thereof 22, Organic chemicals 18, Articles of iron or steel 17, Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical 14, Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof 13,132

3 How to communicate Both Arabic and French are commonly used to communicate in business context. Some people will also speak English. Meeting etiquette Building rapport is an important stage of doing business in Algeria and should not be rushed. A handshake is generally an appropriate greeting. You should always use your right hand to give and receive business cards. 1 Safety Militant groups pose a threat to safety. Robberies and thefts can also occur in certain areas so avoid carrying valuables. After dark you should also avoid areas you are not familiar with and travelling by road outside of the city. Westerners are at threat of kidnap. For the most up to date travel advice please visit: Visa requirements You will require a visa prior to travelling to Algeria. Contact the Algerian Consulate in London for further information. Tax and Local Requirements General Tax Regime: Corporate entities in Algeria are usually subject to corporate income tax (19-26%), value added tax (19%) and customs duties (2-5%). Corporate Tax is 19% for companies carrying out production activities, 23% for companies engaged in the construction sector and tourism, and 26% for companies carrying out other activities. Special tax rules may apply to hydrocarbon and mining companies. Employers must contribute 26% of the employee gross salary for social security contributions while employees are required to pay 9%. However, contributions do not have to be paid by foreign oil companies in cases where employees are covered in their home country. Value Added Tax: The standard rate of Value Added Tax (VAT) was increased as of 1 January 217 to 19%, or 9% for basics goods and services relating to certain services (e.g. materials for agriculture, traditional crafts, domestic animals and plants). Double Taxation Convention: A double taxation convention between the UK and Algeria was signed in 215 and was entered into force on 16 June 216. Energy Taxation: The Hydrocarbon Law (25) outlines taxation relating to energy exploration and production. Operators are required to pay royalties, on and on behalf of the contracting company, to the Algerian state oil licensing body, the National Agency for the Valorization of Hydrocarbons Resources (ALNAFT), on hydrocarbons produced and measured. Rates are calculated based on extraction level and the value of the hydrocarbons produced. A tax on petroleum revenue (i.e. Petroleum Profits Tax) is also payable by operators and is calculated based on the value of production, with deductions made for approved costs such as training and investments. In order to attract more foreign investors to projects in Algeria, particularly due to security concerns following a 213 terrorist attack on the In Amenas gas plant, an amendment to the Hydrocarbon Act (25) replaced revenue-based taxation with a profit-based taxation. Furthermore, taxation rates for unconventional resources were lowered due to the costs associated with such activities. Sonatrach and foreign contractors are also exempt from various taxes related to prospecting and exploitation activities. For instance, foreign contractors are exempt from customs duties on imported equipment for oil activity use and VAT on equipment imported or purchased in Algeria for such purposes. These amendments were brought in to encourage the development of existing fields and the exploration of new territories. Local requirements: Priority is given to local sub-contractors and personnel over foreign sub-contractors when goods and services are of a similar quality and cost. Foreign companies will also have to comply with the law which states that a foreign company can only hold up to 49% of the company in joint ventures. *Tax rates and accounting rules are subject to change so it is recommended that you seek professional advice before embarking on any activity that is likely to result in your incurring any liabilities in this regard. 1 Map provided by Vector Maps

4 Oil and Gas A data snapshot, summer 216 (Offshore) 216 (Offshore) Total Total as % Regional* Total as % Global* Rank Regional* Rank Global* Reserves (Mbble) of of 5 Capex 216 (US$m) of of 5 Operational Fields (#) of of 5 *Percentages and rankings are based on the countries within this series of reports and not of all countries. For a full list of the countries included within the series please see the Global report. It is important to note that the above figures are recent offshore estimates. The country s total proved crude oil reserves were estimated at 12 billion barrels in 216 (16 th in the world). Natural gas proved reserves were estimated at 4.54 trillion cubic metres in 216 (11 th in the world). Milestones in oil and gas sector 1956 First commercial quantities of oil discovered 1963 Establishment of Sonatrach, the stateowned oil company 1969 Algeria joined OPEC 25 Hydrocarbon Law Introduced 213 Hydrocarbon Law amendment Map of production areas 2 P5 Reserves Reserves with a 5% and greater probability of being able to be produced. Figures are for reserves due onstream from 216 onwards. 3 These are fields that are producing, shut-in or suspended. Shut in and suspended are included as they could potentially be brought back to production.

5 Examples of companies already operating in country Contractors Partner in country Activity / Field Operators Fields / Activity US$m Capex Sonatrach Edison/EDF Enel Hera Sardinia Sonatrach CEPSA Iberdrola Endesa Engie Sonatrach In 23, a consortium called Galsi formed between Sonatrach, Edison, Enel and Hera to develop a pipeline between Algeria and Italy via Sardinia. The 837km pipeline is expected to go on stream in 218 with a capacity of eight million cubic metres per year. The section between Algeria and Southern Sardinia will be the deepest underwater pipeline at 2,885 metres. Sonatrach, Cepsa, Endesa, Iberdrola and GDF Suez own the Medgaz pipeline between Algeria and Spain. Construction on the onshore and offshore 21km pipeline began in 28. Sonatrach own approximately 8% of Algeria s hydrocarbon production and have an interest in all joint ventures in the country. They are involved in the exploration, production, pipeline transportation and marketing of hydrocarbons in fields operated alone or with partners. It was announced in late 216 that Sonatrach plan to increase output of natural gas and crude oil by 2% in the next 4 years as Tiguentourine, In Salah and Timimoune natural gas projects and oil wells in the Berkine basin are brought on stream. (217-2) Contractors Partner in country Activity / Field JGC JGC Algeria S.p.A In 216, Japan s JGC were awarded a contract by Sonatrach for a new system of production to increase levels at the Hassi Messaoud oilfield. National Oilwell Varco (NOV) Local presence Sonatrach awarded NOV a contract for well operations in 216. Schlumberger Local presence Following a 216 award, Schlumberger were contracted for technical assistance / managing well operations. Sinopec Groupement Isarene Groupement Isarene (Petroceltric, Enel and Sonatrach) awarded Sinopec a drilling rig contract for the Ain Tsila project in new development wells were expected to be drilled by the rig. Petrofac Local presence In 215, Petrofac was awarded a 5-year contract by Sonatrach to provide engineering design and procurement services. Other contracts include a 3-year services contract awarded by Sonatrach in 213 to boost production on In Salah and In Amenas projects by Sonatrach, BP and Statoil. Amec Foster Wheeler Sonatrach Amec Foster Wheeler were awarded a consultancy contract by Sonatrach in 215. This contract was to provide engineering services for the de-bottlenecking of the Hassi R Mel gas field. Amarinth Sonatrach In 215, Amarinth supplied a bespoke 2.8m vertical hydrocarbon condensate pump to a Sonatrach refinery in the country. C&C Technologies Megdaz C&C Technologies completed a marine survey of the Mediterranean seabed for Medgaz in order to identify a suitable pipeline corridor between Algeria and Spain

6 What to consider before entering the market This element of your planning is vital and will vary depending on product, service, general business strategy and the country you are considering entering: Some things to consider: Is registration with an internal Government/Commission required? How do you register with an in-country oil firm to be one of their suppliers? Is pre-qualification required? If so, what is the process for this? Is it worth considering getting an in-country agent? What other options are available to you, for example: exporting, an in-country subsidiary, a joint venture partnership? It may also be worth registering with Achilles. The Achilles procurement portal is used across many countries and will help you be visible to the industry. By registering you are effectively ensuring you pre-qualify to be part of tender processes and this will help match you to potential buyers: For further information and to speak with a Scottish Development International (SDI) representative, please contact SDI via the contact details on the back of this guide. Role of Government/Regulator The Ministry of Energy and Mines is responsible for the development of policy and strategy relating to hydrocarbons and energy industries. The state s oil and natural gas company, Sonatrach, owns approximately 8% of all production in the country. By law Sonatrach has majority ownership of all oil and natural gas projects. The Hydrocarbons Regulating Authority (ARH) is a national agency which regulates hydrocarbon activities. Algeria s Hydrocarbon Act (25) governs all oil and gas activity and regulates the activity of foreign oil companies. Exploration contracts are typically granted for a maximum of 7 years, with an exploitation period of up to 25 years. Calls for tenders in recent years have failed to attract foreign investors for new oil and gas projects. Following these difficulties, the hydrocarbon law was amended in 213 in order to promote interest. The revisions allowed for taxations changes (see earlier) as well as a longer exploration phase of 11 years for unconventional resources. Sonatrach continues to have majority ownership of all oil and natural gas projects in Algeria. Algeria s Renewable Energy Strategy has outlined $1 billion of investment in energy by 23

7 Major Fields (onshore) Hassi R Mel Hassi Messaoud Ain Tsila In Salah Gas (ISG) project (In Salah Gas and In Amenas) Bir Seba Southwest Gas Project El Merk Hassi R Mel is Algeria s largest natural gas field and was discovered in Since then it has been operated by Sonatrach, a company owned by the state. Following the initial production of natural gas commencing in 1961, Algeria became the first country to export liquefied natural gas (LNG) in Algeria has been a key supplier of gas to Europe and in 215 annual outputs of 75 billion cubic meters were predicted for the next ten years, although this field is on the decline. Hassi Messaoud oil field was also discovered in 1956 and has since been developed by Sonatrach. This mature oil field is the largest in Algeria. Oil reserves are estimated at 6.4 billion barrels, with approximately 35, barrels produced per day. In 213, this field was responsible for 4% of Algeria s total crude oil production for the year. Ain Tsila gas condensate field was discovered in 212 and has since been developed by Petroceltic alongside Sonatrach and Enel. The project execution phase is planned for 216 to 219 and will include the drilling of 24 wells, construction of a gas processing plant and related infrastructure. The first two wells were delivering 3mn ft 3 /d on test. The reserves of 2.1 Trillion Cubic Feet of sales gas, 67 million barrels of condensate and 18 million barrels of LPG have been estimated. The In Salah Gas (ISG) project began in 21 and includes the development of seven natural dry gas fields in the Saharan desert. In Salah Gas, a joint venture between Sonatrach (35%), BP (33.2%) and Statoil (32%), operates the project. Estimated gas reserves are 34 bcm, of which 23 bcm are recoverable. Phase one of the project developed three fields (Reg, Teg and Krechba). First gas was produced in 24. The second stage of the ISG project, the In Salah Southern Fields (ISSF) project, began in 211 and involves the development of four dry gas fields (Tiguentourine, Hassi Farida, Ouan Taredert and Hassi Ouan Abecheu). A terrorist attack on the In Amenas plant which resulted in the death of 4 oil workers delayed the project. Work on these fields restarted in February 216. It is anticipated that this project will eventually produce 14.1 million cubic meters per day. Bir Sebaa began producing crude oil in 215. A joint venture between Petrovietnam Exploration and Production Corporation of Vietnam (PVEP), Thailand s PTTEP and Sonatrach lead the project. Production is approximately 2, barrels per day although this is expected to increase to 4, per day by 22. The Southwest Gas Project includes the development of the Reganne Nord, Timimoun and Touat fields. Production was originally anticipated to start in mid-216, however this is now expected in summer 217. The North Reggane, or Reggane Nord, project involves the development of six gas fields (Reggane, Azrafil Southeast, Kahlouche, South Kahlouche, Sali, Tiouliline). In 212, Repsol and partners (Sonatrach, RWE Dea and Edison) were granted permission to develop these fields. The target start date is 217 and peak output of 155 bcf/year is forecast. The Timimoun project, led by Total alongside Sonatrach and Cepsa, is expected to start in 217 and reach a peak output of 64 billion cubic feet per year. The El Merk oilfield is located in the Berkine basin. Exploration began in 199 and the first oil was produced from the field in 213. The project involves drilling up to 12 wells and the construction of a central processing facility (CPF) for processing, storing and exporting hydrocarbons. Anticipated peak production from the project is 16, barrels a day of liquid hydrocarbons, 6 million standard cubic feet a day of gas production and 8, barrels per day of produced water treatment.

8 Number of trees/platforms US$M US$M Activity and Opportunities (Offshore) Infrastructure (Units) Operational (216) Installations (217-2) (Units) Operational (216) Installations (217-2) Tree awards (216/217) Operational (216) 256 Installations (217-2) 284 Operational (216) Installations (217-2) 511 (KM) (KM) Capex by Operator: Historic and Forecast $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Sonatrach Edison/EDF Enel Hera Sardinia Sonatrach CEPSA Iberdrola Endesa Engie Sonatrach Total Capex: Historic and Forecast $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Axis Title Decommissioning Axis Title Dry Trees Wet Trees Fixed Platforms Technical Notes: Wet Trees Trees deployed subsea. Dry Trees Trees deployed on platforms. Capex Forecasts Infield Systems Capex forecasts are based on bottom up forecasting and as such is a full opportunity set of projects that could see spending over the forecast period. Onshore opportunities There are a total of 12 billion bbl of proven oil reserves in Algeria. The vast majority of these are onshore which explains the low figures above. Companies looking for opportunities should also consider the onshore market.

9 Opportunity Hotspots Scale Capability in country Growing / declining Target for Scottish companies Drilling & Wells LOW LOW Reservoirs LOW LOW Platforms & Topsides LOW LOW Marine, Subsea & Pipelines LOW LOW Integral & Support Services LOW LOW Decommissioning LOW LOW Ease of opportunities Algeria scores poorly on Ease of Doing Business and the freedom index. Sonatrach must hold at least 51% ownership in petroleum contracts and local content requirements may favour local companies, although opportunities do exist. Algeria is not currently a member of the World Trade Organisation (WTO) and their application has been ongoing since DID YOU KNOW? All of Algeria s proven crude oil reserves are located onshore, with limited exploration offshore. Europe receives over 75% of Algeria s crude oil exports. Algeria s government has a Renewable Energy Strategy which plans $1 billion of investment by 23. SE/SDI Contact enquiries@scotent.co.uk Telephone Nearest SDI office Scottish Development International 5 Atlantic Quay 15 Broomielaw Glasgow G2 8LU Local Embassy Ambassade Britannique 3 Chemin Capitaine Hocine Slimane (ex Chemin des Glycines) Hydra Algiers Algeria

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