April 6, 2018 / 2:27 PM / 15 days ago

Algeria seeks to cut energy consumption after oil earnings fall

* Algeria plans to reduce energy spending

* Govt wants to convert cars to natural gas, boost renewables

* OPEC producer suffers from halving of energy revenues since 2014

By Hamid Ould Ahmed

ALGIERS, April 6 (Reuters) - Algeria is offering motorists incentives to more than double the number of cars running on natural gas by 2021 in an effort to reduce consumption of costly imported fuel amid strained public finances, officials said.

The North African country has been struggling with a halving since 2014 of vital oil and gas revenues, which make up 60 percent of the budget and 95 percent of exports.

It has banned imports of 900 items, frozen public hiring and development projects, but now wants to tackle energy spending as the country - a member of the oil producer group OPEC - needs to save more.

Officials hope that making the use of liquefied petroleum gas (LPG) more attractive will reduce gasoline and diesel consumption, 2.9 million tonnes of which Algeria needs to import annually.

The government is offering to cover partially the cost of car conversions for drivers, tax exemptions and a stable retail price for LPG, of which domestic output is sufficient.

In contrast, the pump price of subsidised gasoline and diesel has risen about 50 percent since 2016.

Algeria plans to convert 500,000 vehicles by 2021 and 1.1 million by 2030, said Mohamed Bouzeriba, head of the National Agency for the Promotion and Rationalisation of the Use of Energy.

So far, only 200,000 cars run on gas out of a total 6 million.

Making the switch is appealing for some Algerians who complain about imported food inflation.

“As a taxi driver, only LPG can help me rebalance my budget,” Mohamed Tami said as he refilled his car.

Algeria, which has spent billions of dollars to provide cheap apartments and other benefits as a means of avoiding protests, is keen to tackle energy spending to maintain social order.

POWER

Authorities also want to cut electricity consumption. State utility Sonelgaz still needs aid despite a 20 percent power price increase two years ago, the first in more than a decade.

Demand for electricity has risen significantly in recent years due to infrastructure projects aimed at diversifying the economy away from oil and gas.

Algeria has also been building thousands of subsidised housing units and connecting them to the power grid.

To boost power output, the government plans to invite bids for the construction of three photovoltaic solar plants with a capacity of 4,000 megawatts, officials said.

In an effort to save power, the state electricity company has started to replace public lighting in some towns and roads under an energy-efficiency programme.

Officials say measures may also include higher electricity prices for firms in the next few years.

“Everyone must comply with rationalisation, especially in administrative and public buildings, social housing, schools and mosques as well as with public lighting,” Energy Minister Mustapha Guitouni said at a conference.

To hammer home the message, state television has launched campaigns urging people to reduce consumption. It is also promoting solar water heaters, energy-saving lamps and thermal insulation in the housing sector.

But analysts say making some appliances available may need additional spending as Algeria imports most of its needs. (Editing by Ulf Laessing and Dale Hudson)

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