LNG

Italian Prime Minister Giorgia Meloni, who has visited Algeria on her first foreign trip since taking office, signed four accords with the North African nation, including one on a new natural gas pipeline between Algeria and Italy.

Sonatrach, the Algerian national energy company and LNG producer, said it signed an agreement worth US$490 million with Chinese major Sinopec in the form of a production sharing contract for the Zarzaitine block in the Illizi basin of eastern Algeria.

Algeria and Italy said they had signed an agreement for the North African nation to supply more natural gas to European Union member Italy to replace falling supplies from Russia.

Discussions have taken place in the Algerian capital Algiers between the Chief Executive of Italian oil and gas company, Claudio Descalzi and Algeria’s Prime Minister Aymen Benabderrahmane, the country's Energy Minister Mohamed Arkab and Algerian energy company Sonatrach's CEO Toufik Hakkar.

Sonatrach, the Algerian state energy company and LNG exporter, said it was putting into service on January 4 the compression system booster of the Medgaz natural gas pipeline from Algeria to Spain and Portugal.

The chief executives of Italian energy company Eni and Algerian LNG, pipeline natural gas and oil group Sonatrach have signed an accord related to the North African nation’s onshore Berkine Basin.

Sonatrach CEO Toufik Hakkar and his Eni counterpart Claudio Descalzi, signed the deal in the presence of the Algerian Minister of Energy and Mines Mohamed Arkab and Italian Ambassador to Algeria Giovanni Pugliese.

“Eni and Sonatrach also signed a memorandum of understanding for cooperation on initiatives in the energy transition,” said a statement.

“The agreements are testimony to the commitment of Sonatrach and Eni to continue the shared strategy of accelerated project development,” said Eni CEO Descalzi.

The Algerian Government noted that the Berkine Basin contract was the first ever signed under the aegis of the new Algerian oil law and covers an area of 7,880 square kilometres in the southern part of the Berkine Basin, in close proximity to the company's current production assets.

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Descalzi and Hakkar stated that they shared the commitment to create an ambitious exploration and development programme in the area.

“In the first phase, the project envisages the fast-tracked development of reserves estimated at 135 million barrels of oil equivalent, with a start-up of production expected by the end of 2022,” it added.

“This project will enhance synergies with existing plants. The entry into force of the new contract is subject to approval by the competent Algerian authorities,” they stated.

Eni has been present in Algeria since 1981 and is the operator of various permits with an equity production in the country of 95,000 barrels of oil equivalent per day.

Eni also recently agreed earlier in December 2021 to sell a minority stake in two pipelines involved in transporting natural gas from Algeria to Italy for €385 million ($435M) to Italian LNG terminal and gas grid operator Snam.

Eni said that deal involved Snam purchasing a 49.9 percent stake in the onshore gas pipelines running from Algeria to the Tunisia border and the Tunisia coast (TTPC), and the offshore gas pipelines connecting the Tunisian coast to Italy (TMPC).

Eni said the transaction would create synergies in the respective areas of expertise in gas transport on a strategic route for the security of the natural gas supply to Italy.

Snam said the deal consolidated Snam’s central role in Italy’s security of supply as well as in energy transport from the Mediterranean region.

Snam operates the gas grid and the onshore Panigaglia facility in the northwest near Genoa as well as having a 49 percent stake in the LNG facility, the “FSRU Toscana”, which is deployed off the Italian west coast.

Sonatrach, the Algerian oil and gas producer and exporter of LNG and pipeline gas to Europe, has reported progress on two natural gas projects in the country’s southwest Sahara desert region.

Naturgy Group of Spain, the utility with LNG deliveries from both the US and Russia, has confirmed with Algerian oil and gas company Sonatrach that the expansion project on the Medgaz natural gas pipeline from Algeria to Spain would start operations in the fourth quarter of 2021.

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.

Algerian state energy company Sonatrach, one of the main suppliers of LNG and pipeline natural gas to Europe, said it planned to increase production and sales in the coming year amid upgrades at its liquefaction plants at Skikda and Arzew on the Mediterranean coast and new natural gas discoveries for export in the future alongside industrial development in petrochemicals.