Democratic and Popular Republic of Algeria

Ministry of Energy and Mines

National Agency for the Valorization of Hydrocarbon Resources
«ALNAFT»

4TH National and International bid round for E&P contracts awarding

Fiscal regime
of
upstream activities
 Introduction

The fiscal regime applicable to the oil and gas upstream activities is
governed by law n° 05-07 dated 28 April 2005, modified and
completed, pertaining to hydrocarbons.

The fiscal regime consists exclusively of:

• Surface tax
• Royalty
• Petroleum Revenue tax
• Additionnal income tax
• Gas flaring tax, specific tax on water and transfer duty.

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 Surface Tax

 Surface tax is payed annually to the public treasury by the

operator in the name and on behalf of the contractor.

 The tax is paid upon entry into force of the E&P contract and on
each anniversary date of the said entry into force.

 Calculation of surface tax is based on the area of the perimeter

existing at the date of payment.

 The hydrocarbons law has set down unit amounts (DZD/km2)

used to calculate the said tax. They depend on the period
(research, retention exceptional, exploitation), and the fiscal zone
(A, B, C, D).

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 Surface Tax

DZD/km2
Research period Retention /
Exploitation
Zone Exceptional
1-3 4-5 6-7 period
periods
A 4,000 6,000 8,000 400,000 16,000
B 4,800 8,000 12,000 560,000 24,000
C 6,000 10,000 14,000 720,000 28,000
D 8,000 12,000 16,000 800,000 32,000

 Unit amounts are annually indexed by ALNAFT and notified to

the contractor.

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 Surface Tax
 Tax calculation related to an unconventional hydrocarbons
E&P perimeter is based on fiscal zone A amounts.

 Tax calculation related to pilot phase is based on the 3rd

phase amounts in case the pilot phase occurs at the end of
3rd research phase.

 Tax calculation in case of two (2) years extension of research

period is based on exceptional period amounts.

 Surface tax is a non deductible charge.

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 Royalty

 Royalty is payed monthly to ALNAFT by the operator in the

name and on behalf of the contractor.

 Royalty is paid in cash. But ALNAFT may ask the contractor to

pay it in kind in accordance with the provisions of the E&P
contract.

 Royalty is established, for each perimeter of exploitation, on the

basis of produced quantities, calculated at measurement point.

 Modalities for determining and counting hydrocarbons quantities

liable to royalty and modes of royalty payment are set by
regulation.
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 Royalty

 The base of royalty calculation is the production value :

 Gross production less:

• Consumed for direct needs of production

• Lost before measurement point
• Reintroduced into the field (same contract).

 Production subject to royalty is valued at base prices

calculated according to article 90 of the law, for each nature
of hydrocarbons.

 Resulting amount of quantities subject to royalty multiplied

by base prices, is reduced of pipeline transportation costs.

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 Royalty

 Applicable royalty rates are indicated in the contract.

Hydrocarbons law has fixed minimums rate :

Zone A Zone B Zone C Zone D

0 – 20,000 b.o.e. / day 5.5 % 8% 11 % 12.5 %
20,001 – 50,000 b.o.e /day 10.5 % 13 % 16 % 20 %
50,001 – 100,000 b.o.e / day 15.5 % 18 % 20 % 23 %
> 100,000 b.o.e / day 12 % 14.5 % 17 % 20 %

 Applicable royalty rate is set at five percent (5 %) for the whole

production to :
• Unconventional hydrocarbons quantities, and
• Case 3 type perimeter quantities.
 Royalty is a deductible charge.
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 Petroleum Revenue Tax

 Petroleum revenue tax is payed to public treasury by the operator in

the name and on behalf of the contractor.

 Petroleum revenue tax is determined from the production value, that

served to calculate royalty, less authorized deductions :

• Royalty
• Annual development investment tranches by applying Uplift rules
• Annual research investment tranches by applying Uplift rules
• Provisions for abandonment and / or restoration costs
• Training expenses for developing the national human resources
• Cost of purchasing gas for enhanced recovery.

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 Petroleum Revenue Tax

 Petroleum revenue determined is submitted to PRT rates fixed

on the basis of the project profitability.
 Profitability is defined by the factors R1 and R2 calculated, as
follows, for each calendar year i :

R1 =

R2 =

 The list and the nature of operating costs deductible for gross
profit calculation and the list and the nature of investment
expenditures are fixed by regulation.

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 Petroleum Revenue Tax

 Petroleum revenue tax rates set by the hydrocarbons law are as

follows:
Case 1 Case 2 Case 3 U.C.H

R1≤ 1 20 % 30 % 20 % 10 %
R1 > 1 & R2 < 1 20 %+50 % X R2 30 %+40 % X R2 20 %+50 % X R2 10 %+30 % X R2
R2≥ 1 70% 70% 70% 40%

Maximum daily production < 50,000  PRT payment is made in twelve (12)
Case 1
b.o.e monthly installments and a
liquidation is performed at the end
Maximum daily production ≥ 50,000 of the year.
Case 2
b.o.e
Perimeters situated in poorly  PRT is a deductible charge.
explored, remote or geologically
Case 3
complex areas – The list is defined by
regulation.
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 Additional Income Tax

 Additional income tax is due, annually to the public treasury, from each person
participating in an E&P contract.

 Its calculation is based on depreciation rates provided in the appendix of the

hydrocarbons law.

 Modalities of tax calculation are set by regulation.

 Additional income tax rates are set by the hydrocarbons law as follows :

• Case 2 type perimeter : 30 %

• Case 1 & case 3 type and for unconventional hydrocarbons
perimeters :
 19 % as R2 < 1
 80 % as R2 ≥ 1

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 Additional Income Tax

 Each person participating in an E&P contract may consolidate :

• The results of its activities, in Algeria, governed by the
hydrocarbons law,
• The results of the said activities and those regulated by the
electricity and gas distribution law.

 Each person participating in an E&P contract and invest in the

activities subject of electricity and gas distribution law and/or in
downstream activities may benefit from a reduced rate set at 15%.

 Modalities of application of the reduced rate and consolidation are

set by regulation.

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 Gas flaring tax

 Gas flaring is prohibited. Exceptionnelly and for limited durations, ALNAFT

may grant a flaring authorization to the operator.

 The conditions for granting such authorization as well as the admissible limits
are defined by regulation.

 The operator is liable for a specific tax, payable to the public treasuray, of
8,000 DZD per thousand normal cubic meters (Nm3).

 This amount is annually indexed by ALNAFT and notified to the contractor.

 For remote or isolated areas, specific pricing conditions are fixed by regulation.
Such areas refers to zone where there are no or limited infrastructures for
gathering and /or carrying gas.

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 Gas flaring tax

 Are exempted from the specific tax payment :

• Quantities of gas flared, during research period, in

connection with test operations of research or delineation
wells
• Quantities of gas flared, during startup period, for durations
that not exceed limits set by ALNAFT.

 Gas flaring tax is a non deductible charge.

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 Water tax

 The use of water in oil and gas operations is subject to a specific

tax payable by the operator in accordance with the legislation and
regulation in force.

 For operations related to unconventional hydrocarbons, the use

of water from the public domain is carried out under an
authorization or a concession delivred by the administration in
charge of water resources, in coordination with ALNAFT.

 Water must be used rationally in particular by reuse after

treatment regarding unconventional hydrocarbons operations.

 Water tax is a non deductible charge.

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 Transfer duty

 The transfer of rights and obligations relating to an E&P contract is subject to

payment, to the public treasury, of a duty calculated at the rate of one percent
(1 %) of the transaction value.

 To be valid, the transfer must be beforehand approved by ALNAFT and must

led to the conclusion of an addendum to the contract approved by the
council of ministers (decree published in official gazette).

 The calculation and payment of the transfer duty method is set by regulation.

 Non commercial transfers between a person and its directly and wholly
owned subsidiaries are exempted from the payment of the said transfer duty.

 Transfer duty is a non deductible charge.

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 Exemptions

 Research and / or exploitation activities benefit from exemptions

on :

• Value added tax (VAT)

• Professional activity tax
• Customs duties
• Any other tax or duty on the operating results set for the
benefit of the state, territorial authorities and any public
company.

The list of equipements, goods and services benefiting from the

exemption of VAT and customs duties is fixed by regulation.

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Thank you for your attention

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