UPDATE 1-Algeria vows tax reform in energy sector, eyes shale gas cooperation

By Hamid Ould Ahmed

ORAN, Algeria, March 25 (Reuters) - Algeria plans to offertax incentives in a planned new energy law to attract moreinvestment and is in discussion with foreign energy firmsincluding BP and Anadarko to exploit its shalegas reserves, officials said on Sunday.

OPEC member Algeria is a key gas supplier to Europe, butgrowing domestic consumption has been hitting energy exports,the main source of the state budget.

In a bid to reverse the fall, the energy ministry hasstarted drafting amendments to the energy law, promising moreincentives for foreign investors.

"We will remove all obstacles, wage a battle againstbureaucracy and change tax procedures," Energy Minister MustaphaGuitouni told a gas and gas conference in the western city ofOran.

"The amendment is required by our energy security," he said."The current system must change. We will intensify consultationswith our partners."

The law has been in the works for years and is seen as keyto attracting more investment but no draft or details have beenpresented yet.

In the latest bidding round in 2014, Algeria awarded onlyfour of 31 blocks on offer after a disappointing auction in 2011as foreign firms balked at the terms.

Algeria was already preparing to exploit shale gas to boostoutput after failed attempts in the past years due to protestsby residents of affected areas over fears of pollution.

"Evaluation studies on shale gas potential are going on.This will take 5 to 10 years," he said, without providingfurther details.

Arezki Hocini, the head of the National Agency for theValorization of Hydrocarbon Resources (Almaty), said Algeria hadalready started discussions with oil majors including BP andAnadarko to help evaluate and exploit shale gas.

"We hope these discussions will lead to talks over possiblecontracts," he told reporters, without providing details.

While seeking to attract foreign investors state-run oil andgas company Sonatrach is also trying to expand abroad, mainly inthe Middle East, Guitouni said.

"Egypt is interested in working with us," he said, withoutelaborating.

Sonatrach earlier this year signed an agreement with Iraqicompanies to form joint ventures for gas projects.

Sonatrach had already started operations in Peru andneighbouring Libya, Niger and Mali.

Algeria has been talking for years about opening up theenergy sector but some in the political elite have resistedthis.

(Editing by Ulf Laessing and David Evans)

BP