By Hamid Ould Ahmed
ORAN, Algeria, March 25 (Reuters) - Algeria plans to offer tax incentives in a planned new energy law to attract more investment and is in discussion with foreign energy firms including BP and Anadarko to exploit its shale gas reserves, officials said on Sunday.
OPEC member Algeria is a key gas supplier to Europe, but growing domestic consumption has been hitting energy exports, the main source of the state budget.
In a bid to reverse the fall, the energy ministry has started drafting amendments to the energy law, promising more incentives for foreign investors.
"We will remove all obstacles, wage a battle against bureaucracy and change tax procedures," Energy Minister Mustapha Guitouni told a gas and gas conference in the western city of Oran.
"The amendment is required by our energy security," he said. "The current system must change. We will intensify consultations with our partners."
The law has been in the works for years and is seen as key to attracting more investment but no draft or details have been presented yet.
In the latest bidding round in 2014, Algeria awarded only four of 31 blocks on offer after a disappointing auction in 2011 as foreign firms balked at the terms.
Algeria was already preparing to exploit shale gas to boost output after failed attempts in the past years due to protests by residents of affected areas over fears of pollution.
"Evaluation studies on shale gas potential are going on. This will take 5 to 10 years," he said, without providing further details.
Arezki Hocini, the head of the National Agency for the Valorization of Hydrocarbon Resources (Almaty), said Algeria had already started discussions with oil majors including BP and Anadarko to help evaluate and exploit shale gas.
"We hope these discussions will lead to talks over possible contracts," he told reporters, without providing details.
While seeking to attract foreign investors state-run oil and gas company Sonatrach is also trying to expand abroad, mainly in the Middle East, Guitouni said.
"Egypt is interested in working with us," he said, without elaborating.
Sonatrach earlier this year signed an agreement with Iraqi companies to form joint ventures for gas projects.
Sonatrach had already started operations in Peru and neighbouring Libya, Niger and Mali.
Algeria has been talking for years about opening up the energy sector but some in the political elite have resisted this.
Editing by Ulf Laessing and David Evans