Freedom: The pandemic shock caused by the spread of Covid-19 has had adverse consequences on the global oil industry, which has barely recovered from the consequences of the 2014 price drop. What issues and challenges do oil companies face? face to be able to bounce back?

Francis Perrin: The year 2020 is indeed a very bad year for the international oil industry with massive financial losses, especially during the first half of the year, a significant reduction in costs and investments and, in several cases, in particular in America du Nord, bankruptcies and mergers/acquisitions. These difficulties are of course the direct consequence of the drop in global oil consumption in 2020 and the collapse of crude prices in the first four months of the year.

On this point, the situation is improving for oil players. The price of Brent from the North Sea is above $50 a barrel, while its average was just $18/barrel in April, and oil consumption will inevitably pick up again in 2021. But we must remain cautious and flexible because there are possible downside factors for oil prices next year, for example an increase in production from Iran if the future Biden administration lifts or suspends economic sanctions imposed against this country by the Trump administration.

There are also the challenges of climate change which are of a different nature than those linked to the Covid-19 pandemic. The latter are very important, but above all concern the short term for oil players, whereas climate change is a challenge that is part of the medium, long and very long term. The case of ExxonMobil, the world's leading private oil group, is a good illustration of these various challenges.

The American giant recently announced heavy asset write-downs (we are purging the short term), the launch of a new oil development in Guyana (South America) at a cost of 9 billion dollars with production starting in 2024, a discovery of hydrocarbons off Surinam (South America) and a plan to reduce its greenhouse gas emissions. We manage the short term and prepare for the medium and long term.

In Algeria, the decline in investments in hydrocarbons predates the pandemic. Is the new law on hydrocarbons able to restart the growth of the sector in the context of the crisis that the world oil industry is currently going through?

It is quite true that foreign oil companies were investing much less in Algeria than in the past well before the Covid-19 crisis in 2020. The paradox is that the last two reforms of the hydrocarbons law, in 2013 and at the end of 2019, came shortly before two very difficult periods for the oil and gas sector: the fall in prices between the summer of 2014 and the beginning of 2016 and the pandemic in 2020. That said, this latest reform should not be buried too quickly .

There are interesting points for foreign investors, in particular, and not only for offshore and unconventional hydrocarbons. Over the past year, many foreign companies have expressed an interest in cooperating with Sonatrach within the framework of the new legislative provisions. Examples include Eni (Italy), ExxonMobil and Chevron (United States), Lukoil and Zarubezhneft (Russia), OMV (Austria), Cepsa (Spain), Total (France), Wintershall (Germany) and TPAO (Turkey).

This is a first step which leads to negotiations with the national company, even if nothing says that these will lead to agreements. In this list, Eni has already taken action. But a positive point is that, despite all that has happened in 2020, several foreign firms remain interested in the potential of hydrocarbon exploration and development in Algeria. Another interesting element is that some of them are not currently working in the country.

Specialists believe that for many oil-producing countries, the post-Covid-19 era will necessarily be that of energy transition. Would this also be the case for Algeria in your opinion?

I think we are going a little too fast. The energy transition, that is to say the rise of non-carbon energies and the gradual decline of fossil fuels, began before the pandemic and will continue after.

Covid or not, the international community has made commitments in the fight against climate change through the Paris Agreement (Cop 21) in December 2015 and the energy transition is imperative. But the weight of fossil fuels (oil, natural gas and coal) is such worldwide (80-85% of global energy consumption) that they will remain very important for quite some time to come.

Algeria will remain a hydrocarbon producing country for a long time, but it is essential to diversify the economy which is too dependent on oil and natural gas, these still representing approximately 95% of national exports. This diversification is therefore justified by climatic, but also economic, industrial, social and strategic reasons.

This is true for Algeria as for all developing or emerging countries highly dependent on oil and gas. But this transition will be long, difficult and costly, and it is part of the revenues from the hydrocarbons sector that will finance this transition. So don't throw the baby out with the bathwater. Algeria has significant assets in terms of renewable energies, particularly solar, and strategies have been adopted for the development of this sector. It's time to step up a gear.