The industries of Algeria, which traditionally have been concentrated around Algiers and Oran, have included carpet mills, cement factories, chemical plants, automobile assembly plants, food-processing installations, oil refineries, soap factories, and textile plants. Other major industries have produced bricks and tiles, rolled steel, farm machinery, electrical supplies, machine tools, phosphates, sulfuric acid, paper and cartons, matches, and tobacco products.
Before independence, industry made significant gains. New enterprises were developed in food processing and packaging, textiles, leather, chemicals, metalworking, building materials, and farm machinery. A new large steel plant was built at Annaba, a petroleum refinery at Algiers, a petrochemical complex at Arzew, and a phosphate production center at Djebel Onk, near the Tunisian border. Other industries were set up to produce automobiles, tractors, cement, rubber tires, and ammonia.
French firms were nationalized after independence, between 1962 and 1974. The government put great emphasis on the development of the hydrocarbons sector, including the building of refineries and natural gas liquefaction plants. Algeria had five oil refineries with a capacity of 470,000 barrels per day by 1989. As of 2003, it had four oil refineries with a capacity of 450,000 barrels per day. Algeria's total production capacity in 2003 was1.1 million barrels per day. Algeria is a member of the Organization of the Petroleum Exporting Countries (OPEC), and its production quota was set at 780,000 barrels per day as of February 2003. Algeria has been pressing to have its OPEC quota raised, as it is likely that its production capacity will increase rapidly. As of 2003, Algeria expected to raise its production capacity to 1.5 million barrels per day by 2004, and to 2 million barrels per day in 10 years.
The government has encouraged diversification away from Algeria's heavy reliance on hydrocarbons, although those efforts have not been entirely successful, especially given the increase in oil and natural gas export revenues since 1999. Algeria is considered to be underexplored, and significant oil and natural gas discoveries have been made in recent years, which have increased Algeria's proven oil reserves to 11,314 million barrels, placing it 14th in the world in total oil reserves. Algeria's proven natural gas reserves were 160 trillion cu ft in 2003, the fifth largest in the world. The state-owned hydrocarbons company, Sonatrach, invested nearly $20 billion between 1996 and 2000 on new pipelines and extensions. The company's Trans-Maghreb pipeline opened in 1996, supplying Spain and Portugal with natural gas, and Sonatrach substantially increased the capacity of its Trans-Med gas pipeline to Italy. In 2001, Sonatrach undertook a feasibility study on another natural gas pipeline under the Mediterranean to Sicily, the Italian mainland, and southern France. As of 2003, there was also the possiblity of a Trans-Saharan natural gas pipeline, running from Nigeria, across the Sahara, and on to Algeria and the Mediterranean coast. In 1998, Sonatrach issued bonds for the first time, showing the regime's loosening hold on the state-run enterprise. Algeria's oil and natural gas industries increasingly are becoming more open to foreign investors.
The textile and leather industry declined 14.7% in 2001, and 27 state-owned textile companies had gone out of business since 1996, resulting in a loss of 22,000 jobs. Textile manufacturer Group Texmaco, however, was successful as of 2002. It accounted for 30% of the market and had 18,000 employees, although it was operating at 20% capacity in 2002.
As of 2000, industry accounted for about 33% of the nation's GDP. The hydrocarbons sector (mostly petroleum and natural gas) alone accounted for 30% of GDP in 2003 and over 95% of export revenues. Algerian industry has been in the process of a structural transformation as it moves from a socialist, government-controlled economy to a free-market economy. Consequently, industrial production has fallen as inefficient plants are closed and large oversized industries are scaled back. As of 2002, of the 1,270 state-owned companies, 53% were considered sound after substantial restructuring, 30% were functioning but in poor financial shape, and the remaining 18% were bankrupt or nearly so (approximately 230 companies). The industrial sector has generally been in decline since the 1990s. The government has spent $15 billion to restructure industry, but industrial output continued to decline in the beginning of the 21st century. Manufacturing production fell 6.7% in the first quarter of 2002.