PROSPECTS FOR NATURALIZATION OF ALGERIAN OIL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001800020004-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: December 12, 2016
• Document Release Date: May 9, 2002
• Sequence Number: 4
• Publication Date: October 18, 1963
• Content Type: BRIEF

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CONFIDENTIAL
Current Support Brief
PROSPECTS FOR NATIONALIZATION OF ALGERIAN OIL
CIA/RR CB 63-84
18 October 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
GROUP I
Excluded from automatic
downgrading and
declassification
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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PROSPECTS FOR NATIONALIZATION OF ALGERIAN OIL
In spite of Algerian President Ben Bella's -r lent statemen s s calling
for widespread nationalization, the regime
next few years, to nationalize foreign oil and gas properties. Factors
inhibiting nationalization include the government's p
that the sale of nationalized oil abroad would bed 1 almost impossible that
the nationalization of French oil interests
an
Also, ad it onal n n-Bloc howi foreign
French financial aid, and that prospects
investment probably would evaporate.
overnment, probably would be unable to
interest in aiding the fledgling g
share of loll iza-
market more than a token amount of Algerian oil. Alte houtgh
tion is unlikely, Algeria probably will seek
revenues. Moreover, Ben Bella, plans to broaden the govern fort's role
in the future development of Saharan oil and g
some $40e A illgerian oil in-
plans poses a likely avenue of Soviet involvement
dustry. In 1962 Saharan oil and gas earned view of the expanding
Algeria -- $50 million is expected for 1963 1/ In
output of Saharan oil, oil production and revenues by 1965 may be double
the level of 1963? 2/
to Background
f
Revenues obtained from the oil industry are o major importance p?r-
the government of Algerian These revenues
ove nment rece pts~ t1When
haps the only reliable domestic source of g in 1
96 additional funds were required in the ordinary
assbgned to the dev lopment
40 percent of the oil receipts that had because
budget were transferred to the ordinary budget, 3/ presumably other domestic receipts were not available nfor this pure sehasFurtheamore, 1963 reportedly been the major portion of domestic revenues ubudgets, however, both
quired from the oil industry 4/ planned development and ordinary, provided for total revenues from the oil in-
dustry of only about $50 million. If, in fact,
domestic sourcestmustst
of domestic revenues, total receipts from other be less than $50 million.
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2. Factors Impeding Nationalization
The possibility of nationalization poses a threat not only to the oil
revenues but also to the large amounts of foreign aid now being obtained.
It would follow logically that if Algeria were to confiscate the French-
owned oil industry, a sharp reduction or even elimination of French finan-
cial assistance would follow. In 1963 an elimination of both French aid
and oil revenues would have removed most of the revenues obtained ex-
cept the small sums obtained from other domestic sources and the rela-
tively small quantities of foreign aid obtained from other countries. Al-
though the USSR has extended $100 million in economic credits, it is con-
siderably below the amount of aid being supplied by the French.
The French market for Algerian oil is of critical importance to
Algeria. France purchased, at premium prices, 65 percent of the ap-
proximately 410, 000 barrels a day produced in 1962. 6/ Algerian nation-
alization almost certainly would result in denial of this market. In addi-
tion, international oil companies most likely would consider Algerian
nationalization illegal and refuse to market Algerian production.
Nationalization also would call a halt to the expansion of Algeria's
natural gas industry, which is based on a potential market in Western
Europe. The gas liquefaction plant at Arzew, scheduled to begin oper-
ations in 1964, will have an initial capacity of about 50 billion cubic
feet of natural gas annually. 7/ In 1962, Algeria produced only a modest
amount of gas. 8/ If the ambitious plans for a trans-Mediterranean gas
pipeline network from Algeria to Europe are realized, production of gas
in 1968 might reach 350 billion cubic feet. 9/ The achievement of this
project would be contingent on international cooperation including France
and other Western European countries,
A rapid increase in production of oil and gas is a major goal of the
Algerian government. 10/ Such an expansion, however, requires massive
injections of capital from external sources. These sources would be
seriously discouraged, however, by nationalization of foreign oil or gas
* The French market is rigidly controlled by the government, and the
price paid for Saharan crude is well above the level of the world market. 5/
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properties. Furthermore, foreign funds for investment in other fields
to offset theodiacquire. Soviet financial sup- rect and indirect cons quenc es
also would become increasingly
port of a magnitude sufficient
of nationalization is not likely to be forthcoming.
Thus far the regime's conduct toward the foreign oil and gas corpora-
tions has been in accord with the Franco-Algerian agreements signed at
Evian-les-Bains. These agreements provided that, except for certain
rights which were transferred to the Algerian government, all Saharan
oil and gas interests acquired before 1 July 1962 would be maintained
intact. 11/ In February Bella stated that
there were although
rentpgans for
share of the oil income was
expropriation of oil and gas properties. 12/ This statement suggesthat
the regime will seek a more favorable split of the oil revenues -- presently
equivalent to about 50 percent of the profits, 13 / but, barring a major po-
litical shift, the regime probably will move cautiously.
To achieve an expanded role in the Saharan oil industry, the govern-
ment is attempting to establish a national petroleum company to handle
new oil and gas ventures. 14/ In addition, the government possibly will
seek to increase participation by representatives of the Algerian govern-
ment on the boards of directors ownof reign -controlle s a substantial share firms.
of the Saharane
Algerian government already
petroleum industry as a result of its assumption of 40. 5 percent owner-
ship of S. N. Repal* in accordance with the "Evian" agreement. 17 /
>l~ -producing-and-transporting company with
S. N. Repal, an oil-and-gas
se Messaoud Field -- one of the two major
interests centering in the Has
oil fields currently operating in the Algerian Sahara. Almost one-half
of the shares are still owned by the French government. 16/
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