TotalEnergies abandons Algeria project for bureaucracy problems

French giant Total Energies has ditched a petrochemical project in Arzew in Oran in Western Algeria, a withdrawal that analysts blamed on Algeria’s bureaucracy.

The news was relayed by Africa Intelligence news outlet on the eve of a visit by French President Emmanuel Macron to the country.

The French firm has sealed a deal wih Sonatrach to set up a 1.4 billion dollar petrochemical plant to make 550,000 of polypropylene annually.

Total Energies informed Sonatrach that it will backtrack on the investment citing lack of profitability of the project, but French experts ascribe the abortion of the project to heavy bureaucracy.

Since the bloody attack on one of its major oil sites in Ain Amenas in 2013, Algeria has been shunned by major oil and gas companies due to insecurity issues.

The country lags behind in the business climate surveys and has taken the backseat in the Doing Business Index and the Economic Freedom Index.

The perception of Algeria’s unfriendliness towards foreign investors is worsened by facade investment reforms that left unchanged a rule requiring 51% of national ownership of any projects.

The 51/49 rule provides that at least 51% of the shares of Algeria-based companies must be owned by Algerian nationals residing in Algeria or by companies, which are wholly owned by Algerian resident shareholders.

The archaic banking system has also been pushing investors away. Algeria’s banks remain state-dominated and highly corrupt thus thwarting foreign direct investments.

The political instability and the opacity surrounding the military-dominated regime also contribute to undermining the flow of foreign direct investments in Algeria’s oil and gas sector.

Algeria’s willingness to weaponize gas and use the resource to achieve its regional agenda is also deterring many Western companies.