UPDATE 3-With rare speech, Algeria's ailing Bouteflika starts new term
* President gives first public address in two years
* Questions remain over his health
* Constitutional and economic reforms may be in making (Adds details on new PM, reforms, oil security)
By Patrick Markey
ALGIERS, April 28 (Reuters) - Algeria's President Abdelaziz Bouteflika was sworn in for a fourth term on Monday after he easily won an election opponents dismissed as rigged to return the ailing leader to power for another five years.
State television showed Bouteflika, 77, sitting in a wheelchair to take his oath and give his first public speech for at least two years. A stroke last year had already raised questions about his ability to govern.
"I thank the Algerian people for their renewed confidence," Bouteflika said in a weak, often wavering voice before hundreds of supporters in a packed Algiers hall. "The April 17 election was a victory for democracy."
Under Bouteflika, a veteran of the war that ended with independence in 1962, the OPEC producer has become a partner in Washington's campaign against al Qaeda-linked militancy in the Maghreb and a supplier of about a fifth of Europe's gas imports.
But Bouteflika's frail health has left questions about what happens next, who replaces him if he cannot govern for the entire term and how that would affect political and economic reforms and oil investment in the North African country.
The president, who left his campaigning to a circle of allies, named his former premier, Abdelmalek Sellal, as prime minister. Other posts in the new government were not immediately announced, but the choices may give an indication of the depth of reform proposals.
In the text of his speech, Bouteflika said he would soon start a "consensual constitutional revision" and called on representatives from civil society and political parties to join the process.
"To reinforce separation of powers, strengthen the independence of justice and the role of the opposition and guarantee rights and liberties," his speech said.
Many Algerians say their country has been governed behind the scenes by rival clans of independence-era leaders from the ruling Front de Liberation Nationale and old-guard army generals who see themselves as guardians of stability.
Six main opposition parties joined forces to boycott the April 17 ballot, saying it was biased in Bouteflika's favour and offered little chance of change to the status quo.
"Is this a president who can resolve problems and meet the people's aspirations? Can he fulfil his constitutional duties? Lots of questions remain without answers," said Lakhdar Benkhallaf, a representative of an Islamist party.
Since the stroke that put him in a Paris hospital for three months last year, Bouteflika has appeared only occasionally in public, usually when greeting foreign dignitaries such as U.S. Secretary of State John Kerry just before the vote.
FEUDING AND PARALYSIS
After his return from Paris, sources say, Bouteflika's allies strengthened his hand by removing several generals to curb the influence of Algeria's DRS military intelligence service, which has long played a kingmaker's role in politics.
Diplomats say that backroom tussling for influence among rival political and military clans has defined much of Algeria's post-independence politics.
Appointments to the new government will illustrate how those rivalries are evolving, and how likely broader reforms are, said Geoff Porter at North Africa Risk Consulting.
"How he does so and who he picks will shed light on a persistent question: did the election finally resolve or simply prolong Algeria's festering political feud?" he said.
"Bouteflika's fourth and undoubtedly final term could usher in real policy changes or the paralysis that has hampered Algerian growth for the last three years could continue."
Many Algerians are fearful of upheaval after a war with Islamist militants in the 1990s that killed 200,000 people. Bouteflika's campaign portrayed him as the man who brought security back to Algeria.
An ambush east of Algiers by Islamist militants tied to al Qaeda's North African wing killed 14 soldiers days after Bouteflika was re-elected, in one of the deadliest attacks against security forces in years.
With huge oil and gas revenues at its disposal, Algeria has mostly escaped the uprisings that saw off long-standing leaders in neighbouring Libya, Tunisia and Egypt in the "Arab Spring".
But local protests over housing shortages, services and jobs are common, and the new government must manage popular discontent over opportunities, especially among the young.
With more than $190 billion in foreign reserves, the government has a financial cushion for spending and subsidies to ease social tensions, as Bouteflika did to deal with rioting that erupted over food prices in 2011.
But analysts say reforms are needed to reduce red tape and restrictions to draw more foreign investment, especially in the oil and gas sector which make up most of the state's revenues.
The OPEC producer's oil production at the start of this year was at 1.2 million barrels per day, little changed since 2012. A new oil and gas bidding round for foreign companies this year will be key to bringing new output online.
A new energy law includes tax incentives. Many foreign oil companies, wary of costs and tough contractual terms in Algeria, are waiting for details of the new bid, which includes many shale oil and gas offers.
An attack by Islamist militants on the country's Amenas gas plant last year killed 40 oil workers, prompted BP and Norway's Statoil to pull contractors out and left other producers anxious over security. (Additional reporting by Hamid Ould Ahmed; Editing by Andrew Roche)
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