This is one of a series of country briefings produced by NRGI to summarize the evolving situation with respect to the pandemic and its economic impacts. The analysis it contains is subject to change with circumstances, and may be updated in due course.
ETAP is facing serious financial challenges exacerbated by the economic impacts of the pandemic. In the fourth quarter of 2019, ETAP was not able to pay its taxes to the Ministry of Finance. It has not paid taxes since, and as a consequence, the Ministry of Finance seized ETAP’s bank accounts in September 2020. ETAP, with the support of the Ministry of Industry, Energy and Mines, has asked the Ministry of Finance to reschedule its tax debt, which amounts to over TND 30 million (USD 10 million). The situation may lead to ETAP being unable to pay staff in the coming months. Further challenges threaten Tunisia’s energy production chain as both the national refinery company and the national electricity company are unable to pay ETAP for oil and gas because they are also facing financial challenges.
The coronavirus pandemic has exacerbated the social challenges facing Tunisia’s mining sector, particularly in the Gafsa phosphate mining basin. The region’s reliance on the phosphate industry as its main employer means that it is highly vulnerable to any significant reduction in production, andproduction has indeed slowed due to the pandemic. According to the chief executive officer of the state-owned Companie des Phosphates de Gafsa (CPG), before the pandemic, the expected production for 2020 was 5.5 million tons, but production will not exceed 4.5 million tons, because only 30 percent of employees were able to work during the March to May lockdown in Tunisia. However, even the 4.5 million tons estimate is optimistic, since in July phosphate production came to an almost total stop due to protest action by job seekers. CPG failed to exceed 36 thousand tons of production that month, exacerbating its financial challenges. The company is reported to be at risk of bankruptcy.
Tunisia imports 75 percent of its energy from abroad, which negatively affects the country’s balance of trade. In April, the government, taking advantage of the low international oil price, took steps to remove the country’s fuel subsidy. Having removed the subsidy when the price was low, Tunisians have not seen a steep rise in the cost of fuel, but if the international oil price rebounds, they will. In response to protests about the removal of the subsidy, the government has reiterated its determination to achieve energy self-sufficiency by revising parts of its legal framework for oil and gas, and granting incentives to encourage private oil and gas investors to operate in Tunisia. Tunisia’s fiscal regime for hydrocarbons—oil, gas and coal—is unattractive to investors.
The government has also said that it will adopt a new legal framework for the non-conventional hydrocarbon sector (mainly shale gas). While investors had previously shown some interest in Tunisia’s shale gas, the current economic turmoil, low gas price and the fact that many investors will have to tighten their belts, mean a legal framework may be insufficient to induce investment going forward.
In addition, Tunisia has been preparing to join the Extractive Industries Transparency Initiative (EITI). In the first part of the year, the EITI process in the country was suspended because it was not possible to hold meetings of the multi-stakeholder group (MSG) due to the lockdown and restrictions on movements. The MSG held a meeting just after the end of lockdown in early July with high-level representation from the government. The government and other MSG members committed to making Tunisia’s application to the EITI international secretariat before the end of the year.
The financial difficulties of the national oil company, ETAP, and the national phosphate company, CPG, will be defining features of Tunisia’s extractive sector in the coming year. If CGP is unable to meet social expectation as the main employer in the Gafsa region, the protests and associated drop in production will likely continue. In addition, the country will lose a source of foreign currency as phosphate exports accounted for 3.7 percent of total exports in 2019. Any reduction in ETAP’s activities due to the lack of financial resources will also have a major impact on Tunisia’s energy deficit.