Italy’s Eni and Sonatrach of Algeria plan natural gas and oil development hub in LNG exporting nation

Friday, 26 March 2021
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Italian energy company Eni and Algerian oil and gas company Sonatrach have held talks in Milan to increase their cooperation in exploration and production, LNG and pipeline gas supplies.

Eni Chief Executive Claudio Descalzi and Sonatrach counterpart Toufik Hakkar discussed progress on their joint ventures and signed various new agreements on exploration and production, research and development and decarbonisation.

“These agreements mark a further step forward in strengthening the partnership between the two companies,” said a statement.

The Italian company and Sonatrach hope to improve output with more investment in developed and undeveloped acreage of Eni’s 12,436 square kilometre in Algeria.

The most recent data shows Eni’s oil and gas production was at an average of 90,000 barrels of oil equivalent per day.

Operated activities are located in the Bir Rebaa desert, in the Central-Eastern area of Algeria.

“The first of the agreements signed aims to implement an ambitious program for the relaunch of exploration and development activities in the Berkine Basin and provides for the creation of a gas and crude oil development hub through a synergy with existing installations,” explained Eni.

“This agreement is part of the process for the finalization of a new hydrocarbon contract in the Basin, under the aegis of the new Algerian oil law which came into force in December 2019,” added Eni.

Descalzi and Hakkar also signed an accord for the development of the partnership between Eni and Sonatrach in new technologies with a focus on renewable energy, biofuels and hydrogen.

Eni and Sonatrach additionally signed an agreement that provides for cooperation between the Eni Corporate University and the Institut Algerien du Petrole for the implementation of training programmes for students in the upstream sector, new technologies and the energy transition.

“These agreements represent the commitment made by our companies to strengthen a historic partnership,” they said.

Sonatrach is one of the main suppliers of LNG and pipeline natural gas to Europe and in February 2021 commissioned the Boosting III project for the Hassi R'mel gas hub in Laghouat province of central Algeria, which produces and supplies over half of the nation’s natural gas.

The Hassi R'Mel's Boosting III project came into operation as Sonatrach also announced increased natural gas sales in 2020 to both Spain and Italy, its main European markets.
The giant Hassi R’Mel field had been in long-term decline but the $2-billion project will boost volumes during 2021 and beyond.

The project will increase and stabilize feed-gas supplies to the Mediterranean Coast from the Hassi R'Mel hub to the port of Arzew where one of the nation’s two LNG exports plants are located.

Algerian LNG exports had been falling in previous years, though in the most recent official annual figures had recovered to a combined 12.34 million tonnes from the Arzew plant and the second facility at Skikda.

Developing new fields in Algeria and linking them to the rest of the gas network via the Hassi R'Mel hub has been a strategic priority for Sonatrach over the past few years.

The Booster III project will enable the maintenance of an estimated production level of 180 million cubic metres per day and to recover additional reserves estimated at 400 billion cubic metres of natural gas.

In 2020, Algeria exported to Italy a volume of gas of 14.8 Bcm, an increase of 12 percent compared with 2019.

The Algerian supplier also consolidated its position as Spain's leading gas supplier in 2020 with an exported volume of 9.6 Bcm, part of which flowed through to Portugal.

The volumes also comprised LNG cargoes delivered to the southern European nations as well as on the three pipelines, two to Spain and one to Italy.

Algerian gas supplies are carried from the Hassi R'Mel hub on the Medgaz pipeline via Beni Saf to Almeria in southern Spain and on the Maghreb-Europe Gas Pipeline from the Hassi R'mel field through Morocco to Cordoba in Spain.

The Italian gas also starts from the Hassi R'mel hub and is supplied through the Trans-Mediterranean Pipeline from Algeria via Tunisia to Sicily and then onwards to the mainland of Italy.

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