The new law is aimed at attracting foreign investors to help Algeria strengthen its energy output, but would maintain a 49% limit on foreign ownership if passed into law by parliament, Presstv Reported.
Protesters said the law was intended by the caretaker government to secure the support of Western countries in a standoff over mass protests that have rocked Algeria for months.
The government did not immediately comment.
Energy industry sources in Algeria say the proposed law should be more generous to investors, with greater tax incentives and lower customs duty.
Algeria's economy and state revenues are highly dependent on the energy sector, and foreign currency reserves have more than halved since oil prices began to drop in 2014.
The weekly mass protests since February have toppled veteran leader Abdelaziz Bouteflika and forced the authorities to detain many senior officials on corruption charges.
The army, which has emerged as the strongest power in Algeria since Bouteflika stepped down in April, hopes a presidential election planned for December. 12 will help quell the protests.
But demonstrators have said the vote cannot be free or fair if the military and senior officials tied to Bouteflika retain political power.