oil extraction plant

Economy and Business in Algeria

Algeria’s economy was, by its independence, based mainly on agriculture and oil recovery. Under the French colonial rule, modern farming along the coast was developed, with many larger plantations. large production of grapes. Although Algeria has significant agricultural production, only a small part of the country is cultivable, and it is the extraction of minerals, and above all oil and gas, that is the basis for the economy – and for an ambitious industrialization policy.

The protracted war of liberation against France ended in independence in 1962, and most of the French settlers left the country with their capital and expertise. As a result, an important market for domestic commodity production also disappeared. Independent Algeria embarked on a socialist policy, with little room for private ownership in business, and several sectors were nationalized in the 1960s. A number of larger state companies were created, in most sectors.

During the 1970s, rising oil prices led to the export of petroleum products from agricultural products as Algeria’s main source of income. From the early 1990s onwards, liberalization of economic policy took place – in the wake of a similar revival in the political field from the late 1980s. Larger leeway was given to private business, both in agriculture and trade, and small industry was given priority at the expense of the state-run heavy industry, and a privatization program was initiated with a legislative change in 1995.

In the 1990s, Algeria was hit by severe political turmoil, and the civil war has hampered economic development. by weakening confidence in Algeria abroad. In 2001, the government launched an economic recovery plan, as well as a new privatization program. Algeria has high unemployment, and a significant part of its economic activity is in the informal sector, which accounts for over a third of its employment outside agriculture.


Agriculture was the most important trade route during the colonial period, but has gradually deteriorated relatively as oil deposits have recovered and the industrial sector has increased. In 2000, agriculture accounted for just under one-tenth of gross national income. Agriculture continues to employ approx. 1 / 4 of the working population, and represents a significant part of economic life – with contributions also to exports. However, the opportunities for expansion are limited, with 90% of Algeria consisting of desert, semi-desert and mountains, which at best can be used for pasture for sheep, goats and camels. Agriculture takes place in a belt along the coast, where the country’s remaining forests are also found.

Forestry has also taken place as part of stopping desert emergence from the south. Most of the cultivated area is used for grain production (essentially wheat and barley), but Algeria is also one of the world’s leading producers and exporters of dates, and there is also significant production of citrus fruits, olives and vegetables. The extensive production of grapes – as well as wine – during the colonial period has been reduced, but has been the subject of armament in recent years. However, Algeria is not self-sufficient in food and must import an ever-increasing share of its consumption. Large investments in agriculture in the 1980s were supposed to ensure a self-sufficiency of food of 80% in the year 2000, but this was stated during the political and economic crisis of the 1990s.


Algeria has a smaller fishing sector, consisting essentially of family-run small boats. In the 1990s, the government implemented measures to increase catches, which have been well below projected potential, of approx. 170,000 tonnes a year. From 1994, foreign trawlers can access Algeria’s waters.


Under the colonial rule, a limited industrial base was established in Algeria, primarily for the processing of agricultural products and textile production. After independence, great political emphasis was placed on industrialization to develop a socialist economy, based on the expanding petroleum industry as well as agriculture and mining. The petrochemical industry is dominant, with refineries and other facilities including. in Algiers, Arzew, Messoaud and Skikda. An iron and steel plant, based on local deposits of iron ore, has been established in Annaba. This industry is also central to the establishment of other industrial enterprises, including for building materials. Attempts to attract foreign investment to small industries have produced limited results, and from the 1980s the state has reduced its direct participation in business.


Algeria is rich in several types of minerals, and crude oil and natural gas have become the country’s most important sources of income. Commercial production of oil began in the Sahara in 1958, and the most important production areas have been at Hassi Messaoud in central Algeria, as well as at Edjaleh-Zarzaitine near the border with Libya. At the end of the 1970s, production reached 1.2 million barrels per day, and was twenty years later at approx. 1.5 million barrels; production has fluctuated among other things. as a result of the quota allocations from OPEC.

oil extraction plant

An oil extraction plant at Hassi-Messaoud

New oil fields were put into production in the mid-1990s, and in 2002 Algeria’s proven oil reserves were 9.2 billion barrels. At the same time, the country had known reserves of natural gas of approx. 5520 billion cubic meters, including one of the world’s largest fields in the Hassi R’Mel region, where gas was found in 1956. To a large extent, the gas deposits in Algeria are independent of the oil. Algeria has invested heavily in gas pipelines, and exports began as early as 1965. Several gas pipelines are built for export to Europe; blue. one via Tunisia to Italy and on to Slovenia, which was opened in 1983, and one which goes via Morocco to Spain, opened in 1996, to which Portugal has also linked.

Another pipeline is planned for Spain, and an agreement has been signed between Algeria and Nigeria to investigate the possibility of a pipeline from Nigeria’s gas fields to the Algerian pipeline. Nearly half of Algeria’s revenue comes from natural gas sales; Algeria is the world’s second largest exporter of this product. Algeria also has the world’s fourth largest known oil reserves, and exploration continues. About. 95% of the country’s export revenue comes from the petroleum sector. Algeria also has rich deposits of iron ore, phosphate, lead and zinc, as well as coal, mercury, manganese, copper and salt.

From 1991, both local and foreign investors were encouraged to participate in the recovery, but the Civil War limited interest. A new mining law from 1999 has led to several agreements with foreign companies on exploration and extraction.

Foreign Trade

Algeria’s most important export goods are oil and gas, and the most important trading partner is the former colonial power France. The most important markets for Algeria’s exports are Italy, the United States and France; these three also account for the majority of imports, with France as the largest supplier. Algeria has entered into trade agreements with the EU. Algeria has for many years had a surplus in the trade balance, but is in deficit when oil prices fall. Algeria’s exports are totally dominated by petroleum products, but also export agricultural products, including dates, vegetables, tobacco and hides.

Transport and Communications

Algeria has a well-developed road network totaling 104,000 km, of which 640 km is a highway (1996). Parts of the road network have expired in recent years, but new roads have also been built that connect the oil fields to the coast. A Trans-Saharan road is under construction. The railway network is approx. 4300 km, connecting all the major cities in the northern part of the country. A side track reaches Béchar in the Sahara. A subway is under construction in Algiers. The main airport is at Algiers. The main port cities are Algiers, Annaba, Arzew, Bejaïa, Oran and Skikda. In 2000, work for a possible establishment of a subway in Algiers was resumed. As a result of economic liberalization, several private airlines have started operating in the country.

About the author