Despite being rich in fossil fuels, Algeria faces challenges in its utilities sector in terms of distribution and efficiency. While the provision of electricity is a non-issue – though sustainable generation notably is – the rate of household connections to the natural gas network is in need of improvement, especially outside major cities. Drinking water is largely secure, yet business needs are straining resources, prompting increases in desalination and wastewater treatment.

Sector Structure

The distribution of gas and electricity began as a public service mission, and was solely controlled by the government until the early 2000s. Law No. 02-01 of 2002 brought a significant restructuring, in that it ended the state’s monopoly and allowed private operators to produce electricity. However, transport remains a natural monopoly, with private operators able to distribute electricity and gas only through concessions. The law also created the Algerian Electricity and Gas Regulation Commission, which oversees the sector. Today, the electricity and gas industries are under the direction of the Ministry of Energy (MoE), with other bodies, such as the Ministry of Environment and Renewable Energies, participating in the development of the national energy policy.

Despite liberalisation in 2002, public bodies remain dominant in the sector. Sonelgaz, the historical state-owned utilities operator, was itself reorganised in 2017 and now comprises 16 subsidiaries – compared to over 30 before the reshuffling – operating across electricity production, transport and distribution; and gas transport and distribution. Through its two subsidiaries, Sonelgaz Distribution d’Alger and Sonelgaz Distribution Centre, the company is the single distributor of electricity and gas in the country.

In terms of power producers, Algeria has six: Sonelgaz Production Electricité, Sharikat Kahraba Skikda and Shariket Kahraba oua Takat Moutadjadida, where Sonelgaz holds a majority stake in all three; as well as Sharikat Kahraba Hadjret Ennous – 51% held by Algerian Utilities International – Kahrama and Solar Power Plant One. The latter three are independent power producers, accounting for 45% of all output.

Water provision, meanwhile, is overseen by the Ministry of Water Resources (Ministère des Ressources en Eau, MRE), and guided by Law No. 05-12 of 2005. This legislation opened the segment to private actors by allowing water management through government concessions or via delegated management.

An example of delegated management is the agreement that has been in place since 2006 between Société des Eaux et de l’Assainissement d’Alger (SEAAL) and Suez, a private French firm, wherein the latter provides water and sanitation services for the Greater Algiers area. In September 2018 the contract was extended for three years.

Utilities Policy

The last few years have seen Algeria revise its energy policy amid lower hydrocarbons prices and growing domestic demand for utilities. Further impetus for revision is driven by nationwide infrastructure development and a growing local manufacturing industry. This has led the authorities to reorientate their position towards more efficient energy use and support of renewable sources. Launched in 2011 and updated in 2015, the Renewable Energy and Energy Efficiency Programme (Programme des Energies Renouvelables et de l’Efficacité Energétique, PEREE) aims to reach 22 GW of generation capacity from renewable energy by 2030, of which 10 GW will be destined for export (see Energy chapter).

At the community level, the Ministry of the Interior and Local Government has set up a territorial development plan for greater use of renewable energy and is working towards energy efficiency by teaching mindful consumption. The Green Mosques Programme, which plans to construct places of prayer powered by renewables that will also act as education points in the community, and efforts to equip primary schools with renewable energy are examples of such initiatives.

The National Agency for the Promotion and Rationalisation of Energy Use is also active in implementing energy efficiency aims, launching a programme in 2018 to encourage citizens to install solar water heaters for their homes, with financial support from the government equalling 45% of the total cost. In addition, Algeria ratified the Paris Agreement at the COP21 UN Conference on Climate Change, committing to reduce its greenhouse gas emissions. Joining this international accord with 190 other countries has further accelerated efforts to turn towards more renewable energy.

However, some local players believe energy-related policies lack the common vision required to move initiatives forward. “There is still no centralisation of strategy, as four entities are involved in renewable energy policy,” Mouloud Bakli, managing director of local consultancy firm Tell Group, told OBG. “There is no common line, even though it is a presidential priority.”

One of the keys to promoting energy efficiency among the populace and spurring development of renewable energy by businesses may lie in the revision of state subsidies, which historically have not fostered conscientious use due to low prices.


Indeed, utilities are inexpensive in Algeria compared to most countries. This is the result of abundant gas, which allows for low production costs that are passed on to the end user, and subsidies granted by the state for gas, electricity and water. Electricity costs were roughly $0.0525 per KWh in 2017, below the MENA average of $0.0692 and the non-MENA average of $0.1562, according to the World Bank. That same year water cost consumers around AD20 (€0.15) per cu metre, while its real price was about AD60 (€0.44) per cu metre, meaning the government paid two-thirds of the cost to water companies.

In 2013 the state paid $17bn for electricity and fuels, and $3bn for water, according to Abdellatif Benachenhou, the minister of finance at the time. However, in the post-2014 era of lower hydrocarbons prices – which account for 60% of the government budget and 95% of exports – the authorities are taking another look at the subsidy system. To lessen their share of the state budget, Abderrahmane Raouya, the current minister of finance, announced in July 2018 that subsidies would be eased beginning in 2019, first in energy, then in water.

Coinciding with state support for traditional utilities, a feed-in tariff for electricity generated by renewable sources has been in place since April 2014. It incentivises producers of solar and wind energy by guaranteeing a purchase price beyond a base tariff to ensure an attractive return on investment.

By the Numbers

Commercial production of primary energy was 165.9m tonnes of oil equivalent (toe) in 2017, flat on the previous year, according to the 2017 “National Energy Balance” report published by the MoE. Of this, 108.3m toe were exported and 59.6m toe consumed, while imports of 4.2m toe bridged the gap.

Algeria produced 96.6bn cu metres of natural gas in 2017, according to the MoE report, up 1.7% year-on-year. Nearly 40% – or 37.6bn cu metres – was exported that year. Meanwhile, the country’s electricity generation grew by 6% in 2017 to stand at 75.2 TWh, against 71 TWh in 2016, according to the June 2018 “BP Statistical Review of World Energy” report. This continues a growth trend, as electricity production posted an average expansion of 7.3% per year over 2006-16. In the 2011 PEREE, the government forecast electricity output would reach up to 80 TWh in 2020 and 150 TWh in 2030 to meet rising domestic demand, with any excess potentially being exported to neighbouring countries like Tunisia and Libya.

The supply of drinking water, for its part, amounted to 3.6bn cu metres in 2017, with 50% stemming from groundwater resources, 35% coming from dams and 15% from desalination plants, according to Abdelwahab Smati, director of water resources mobilisation at the MRE, noting that this is not a cause for concern. Industrial water use, meanwhile, is the target of efficiency measures. Agriculture accounts for 70% of national water consumption, and there is room for improvement in its use. While land irrigated with water economisers rose from 90,000 ha in 2000 to 600,000 ha in 2018, 50% of the irrigated surface still employs traditional systems that often result in water waste (see Agriculture chapter). The MENA region as a whole struggles with water security, and with much of Algeria’s territory in the Sahara desert, it is no exception. Water availability in the country stands at 470 cu metres per inhabitant per year, below the scarcity threshold of 1000 cu metres set by the World Bank.

Utilities Coverage

According to Mustapha Guitouni, the minister of energy, the country’s electrification rate was 99% in 2018, and the gas coverage ratio between 60% and 62%. Recent efforts have been made in wilayas (provinces) with a particularly low connection rate to natural gas. In December 2017 some 1500 homes in the Mila wilaya were brought into the fold, bringing gas penetration there to 64%. Similar projects were launched in January 2018. In Tablat, a town in the wilaya of Médéa, 2870 households will receive natural gas when a new pipeline is completed; the wilaya had a gas coverage ratio of just 47% at the beginning of 2018. Natural gas distribution networks were also commissioned in January for the municipalities of Sedraya and Beni-Slimane. This will result in some 1000 and 1145 new subscribers, respectively.

In terms of water coverage, resources are unevenly distributed across the arid country and thus supply can vary greatly between regions. Rising temperatures induced by climate change, coupled with growing demand, are set to worsen this vulnerability.

Therefore, Algeria has made considerable moves to ensure better access to water for its population, resulting in the construction of infrastructure and a strategy to diversify its water resources.

“Algeria suffered from high hydraulic stress in the early 2000s, so many projects were launched to change that,” Arezki Berraki, the managing director of the National Agency of Dams and Transfers, explained to OBG. “The country has gone from 44 dams in 2000 to 80 in 2018, and there will hopefully be 85 in 2020,” Berraki added. Ongoing efforts have similarly helped to raise the average amount of water per inhabitant per day from 123 litres in 1999 to 180 litres in 2017.

However, while 90% of the country is connected to the national water supply, according to data from state-run Algerian Water, there is great discrepancy between urban (95%) and rural (70%) areas. Taps in the latter can often run dry when there are leakages or breakdowns in distribution infrastructure.

Infrastructure Development

To match growing demand for utilities, Sonelgaz is investing some AD1.95trn (€14.1bn) over the 2017-27 period to create additional electricity generation capacity of 21.3 GW. The company is also planning 34,441 km of electricity transmission lines during the same period – bringing the total length of the network to 60,790 km in 2027 – and 8035 km of additional gas pipelines.

International energy majors are also active in infrastructure projects around the country. For example, a new AD32bn (€232.3m), 446-MW gas turbine power plant is expected for early 2019 delivery in Boutlelis to enhance the electricity capacity of the western part of the country. It is being built by a consortium of GE and Cegelec Energy, part of France’s VINCI Energies.

To address growing water needs, four new dams were built in 2018, bringing the total to the aforementioned 80. In November 2018 Hocine Necib, the minister of water resources and environment, announced the forthcoming reception of two new dams in the wilayas of El Tarfa and Batna for a combined storage capacity of 143m cu metres. He also noted that 2019 will see many projects related to drinking water supply networks and water treatment facilities.


To help meet water demand from agriculture and industry, and to slow the depletion of groundwater resources, desalination is an increasingly used technique for water treatment. In 2003 Algeria began a programme aimed at constructing 13 desalination stations; 11 were operational as of 2018, with a total production capacity of 2.1m cu metres per day.

Desalinated water accounted for approximately 17% of all drinking water in the country in 2018, with this set to increase to as high as 25% with the operationalisation of additional desalination facilities.

Four desalination stations are planned to be constructed in the coming years, according to Guitouni, although a specific timeline for the projects had yet to be announced as of late 2018. The facilities will likely be constructed in Fouka, El Tarf, Béjaïa and Skikda. However, while seen as necessary by many, the desalination process does add to water costs.


Although often overshadowed by other utilities, waste and wastewater management is a vital part of any society. Algeria has grown its waste-water treatment network from 12 stations in 2000 with a capacity of 90m cu metres per year to 177 in 2016 with a capacity of 805m cu metres. According to Omar Bougueroua, director of drinking water supply at the MRE, the production of clean water from all treatment plants stood at 400m cu metres per year in mid-2018.

SEAAL, for its part, manages four water treatment plants in Algiers and three in Tipasa, west of the capital. These have a combined theoretical average flow of 313,800 cu metres per day, for an annual sanitation capacity of over 114m cu metres. “Investments in desalination and wastewater treatment will be targeted in the coming years, and we would like foreign companies to associate with Algerian operators in structuring these projects,” Berraki told OBG.


With its sizeable hydrocarbons resources, Algeria relies heavily on fossil fuels for its utilities. A gas coverage rate of 60-62% will ensure natural gas stays in high demand, as efforts to connect rural households to the distribution network continue; however, electrification of close to 100% means generation plans for the segment are now pivoting to focus on renewable sources. For water, heightened demand and dry conditions are translating to greater employment of desalination and wastewater treatment. Future investment opportunities in the utilities sector, therefore, are set to be especially focused on rural gas needs, green electrification and unconventional water resources.