May 17, 2020

Positive signs for Algeria's oil and gas industry

Admin
3 min
Oil and gas processing plant
[email protected] Make sure to check out the latest issue of Energy Digital magazine Following amendments to Algerias hydrocarbon law in 2013, a new...

Make sure to check out the latest issue of Energy Digital magazine

Following amendments to Algeria’s hydrocarbon law in 2013, a new bidding round has now been opened in the country, presenting the largest offering so far of 31 concessions with 92 blocks, including areas with significant unconventional potential; however, the success of the newly introduced law can only be determined by the round’s results, say analysts with research and consulting firm GlobalData.

Rabie Khellafi, GlobalData’s lead analyst covering Upstream Oil & Gas in the Middle East and North Africa region, and Gustavo Bianchotti, GlobalData’s senior analyst for Europe, Middle East and North African Upstream Research, state that various changes to Algeria’s hydrocarbon law in 2005, 2006 and most recently in February 2013 have occurred either in response to regional and world market developments, or as the result of Algeria’s shifting political dynamics.

“Under the new law, priority will be given to Algeria’s domestic market supply, and National Oil Company Sonatrach will be confirmed as a majority shareholder in all Algerian oil and gas assets, holding its monopoly over midstream and downstream operations,” Khellafi says. “This means that the firm must retain at least a 51 percent interest stake in any future contracts or projects.”

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The calculation of the petroleum tax (Taxe sur le Revenu Petrolier, TRP), which represents approximately 50 percent of the total taxes paid by international oil companies (IOCs), has also been amended from a sliding scale method, based on cumulative production values, to the R-factor method, a formula based on cumulative profits to investment.

Given the latest terms and other fiscal measures laid out in the amended law, such as cost recovery limits and an average government take of around 70 percent, the Algerian fiscal terms are not as unforgiving as previously portrayed. In fact, they are within world standards when compared to other countries with equivalent prospectivity. For example, with the fiscal regimes of the Qatari Production Sharing Agreements (PSA), and of the Nigerian Shelf, Syrian, Libyan and UAE Exploration and Production Sharing Agreements (EPSA), the amended Algerian fiscal terms compare favorably.

The analysts believe that the introduction of this mechanism, in conjunction with generous new incentives for unconventional resources and underexplored areas in Algeria, is a positive sign for the country’s oil and gas industry.

 “The impact of the 2013 changes could prove more positive on the relationship between Algeria’s government and IOCs, which have shown very little enthusiasm in the country’s previous bidding rounds,” Bianchotti says.

“However, after a decade of fiscal instability, it is yet to be seen whether these changes will be sufficient to entice an industry that has witnessed a simultaneous rise in domestic demand and decline in oil and gas production. Ultimately, the competitiveness of the country’s latest fiscal regime and the attractiveness of its oil and gas investment climate can only be determined by the results of the current round,” Bianchotti says.

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Jul 26, 2021

Ofwat allows retailers to raise prices from April

Ofwat
Utilities
water
prices
Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

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