2.1.3. Price Demands in 1986

The oil price collapse in 1986 led Sonatrach to alter its gas pricing policy again. After some difficult negotiations in Europe, Sonatrach arranged a new base price of \$2.30/MBtu to reflect low oil prices and reintroduced a minimum price of \$1.30/MBtu [22]. Algeria also modified its contractual principles (including switching from indexation formula to market-based pricing) to resume exports of LNG to the deregulated US market.

Algerian push for higher gas prices resulted in lost market share in the USA in the 1970s and in Europe in the 1980s. Sonatrach's low gas exports led to reduced investments [22] and resulted in reduced production capacity. Consequently, when world energy consumption began to rise, Algeria could not increase its exports accordingly. This, together with the oil price collapse in 1986, brought a considerable financial strain on the country.

Non-opportunistic relations were restored in the early 1990s, as investment requirements prompted the government to attract foreign investments in the gas industry by relaxing some legislation. In the first half of the 1990s, Sonatrach offered more flexible take-or-pay provisions and pricing. New contracts signed in the early 1990s for the sale of gas to southern European countries indexed the price to gas oil and heavy fuel oil, to reflect the final consumers' willingness to pay. Capital inflow from the new contracts allowed doubling of the capacity of the Trans-Mediterranean pipeline (Transmed) in 1994, and completion of the MEG (Maghreb-Europe Gas) pipeline in 1996.

In the 2000s, Algeria's economy was booming given the high prices for oil and natural gas. By 2004, Algerian gas production became the eighth-largest in the world. By 2007, Algeria's proven gas reserves became the eighth-largest in the world [24]. Algeria has increasingly allowed greater foreign investment, and foreign gas producers have entered into numerous partnership agreements with Sonatrach. In 2006, however, Algeria created a windfall tax on profits of foreign oil companies when oil price exceeds \$30/bbl. In addition, Sonatrach's option for new projects was increased from 30% to 51% [24,25].

### *2.2. Indonesia*

Indonesia has about 3 Tcm (trillion cubic metres) of gas reserves [26], the largest in the Asia Pacific region. More than 70% of its reserves are located offshore. Since 1971, foreign oil companies can operate in Indonesia as contractors to state-owned Pertamina. Sales to Japan, South Korea, Taiwan and Singapore account for most of the Indonesian gas exports. Liquefied natural gas (LNG) is supplied under long-term contracts [5]. The gas is liquefied in two plants: Bontang and Tangguh; before 2015, a third plant—Arun—was operational, but it currently lacks feed gas for liquefaction [5,27–30].

Gas prices within the country are regulated, and the difference between the local price and the higher export price has caused friction between gas producers and the state in the 2000s [27]. For example, Indonesia has diverted gas exports to serve growing domestic demand. Indonesia has also disrupted exports due to a lack of gas reserves, which resulted from the failure to attract investments upstream. Changing market conditions have also led Indonesia to increase gas prices for new long-term contracts. The following paragraphs present the details of each instance of opportunistic behaviour.
