Algeria’s Sonatrach to Raise Gas Exports by 25 Percent in 2009

Algeria’s Sonatrach to Raise Gas Exports by 25 Percent in 2009

By Maher Chmaytelli and Adam L. Freeman, Bloomberg, December, 17, 2008 , Source

Algeria, Africa’s largest natural- gas exporter, will increase exports of the fuel by 25 percent in 2009 to 77.5 billion cubic meters a year through pipelines supplying Italy and Spain, said state-oil company Sonatrach.

“In March, we will reach the final capacity of 33.5 billion cubic meters a year in the Enrico Mattei pipeline” that supplies Italy, company Chairman Mohamed Meziane said yesterday in an interview in the western Algerian city of Oran.

Italy’s antitrust regulator forced Eni SpA to guarantee its competitors access to the 742-kilometer (461-mile) gas pipeline that transports Algerian gas through Tunisia into Italy. The regulator also slapped Eni with a 290 million-euro ($400 million) fine for abusing its position as Italy’s biggest gas importer by restricting pipeline access to rivals.

“Eni still enjoys a dominant position in importing gas to Italy,” said Edoardo Luini, an analyst at in Rome. “Unfortunately, access to import infrastructure remains difficult.”

The Enrico Mattei pipeline, also know as the Trans- Mediterranean pipeline, currently transports about 26 billion cubic meters a year, Meziane said. Work to increase capacity was completed in October, according to an Eni SpA spokeswoman, who declined to be identified by name.

The Enrico Mattei expansion will be the first additional gas supply from North Africa to reach Europe since 2005, when Egypt began exporting liquefied natural gas, or LNG, to the continent.

Reduce Dependence

The European Union has stepped up efforts to increase its intake of gas from Africa since January 2006, when Russia, which accounts for 25 percent of EU gas imports, briefly halted shipments to Ukraine over a pricing dispute.

Another Algerian sub-sea pipeline to Europe, the Medgaz, will come on stream in September 2009, delivering 8 billion cubic meters a year to Spain, said Meziane.

“We’re on track to achieve our development plan,” Meziane said, denying that the slump in oil prices could delay the company’s four-year $45 billion expansion plan to 2012.

Sonatrach will make $76 billion from oil and gas exports this year, instead of a projected $80 billion, after crude prices declined by two-thirds to about $44 dollars a barrel from a record $147.27 in July, he said. The company expects a lower income in 2009, he said.

Sonatrach’s development plan provides for increasing gas exports to 85 billion cubic meters a year by 2012, from 62 billion at present, and generating a third of its income from foreign operations by 2015.

Under Construction

A second pipeline to Italy, built in partnership with Edison Spa, will add 8 billion cubic meters a year to Algeria’s exports, in 2012, said Meziane. Algeria will increase foreign gas sales further, from two LNG plants under construction, that will each add 6 billion cubic meters a year to capacity by 2012, he said.

LNG is gas cooled to a liquid to allow its transportation on tanker ships to places not linked by a pipeline to the point of production.

Gas fields to be developed by Repsol YPF SA, Total SA and GDF Suez SA in the southern Reggane area will help feed the expansion, said Meziane. The agreements with Total to allow the development of Timimoun, and with GDF Suez for Touat, two fields in the Reggane area, are expected before year-end. Talks with Repsol will continue till next year, he said.

Repsol Dispute

Meziane said the Reggane development will not be affected by Sonatrach’s dispute with Repsol. Algeria in 2007 scrapped a contract with the Spanish company to develop the fields of Gassi Touil, in the east, citing a three-year delay in the completion of the project. Sonatrach has taken over the project that will feed one of the LNG plants under construction, in Arzew, near Oran. The other LNG plant is being built near the eastern city of Skikda.

In addition to exploration and production operations in Africa and in Peru, Sonatrach is still in discussions with OAO Gazprom to identify joint projects, in Russia or elsewhere, said Meziane.

Algeria on Dec. 13 announced Eni, OAO Gazprom, BG Group Plc and E.ON AG beat out 46 other companies for rights to explore for oil and gas in that country.

To contact the reporters on this story: Maher Chmaytelli in Oran, Algeria, at [email protected]; Adam L. Freeman in Rome at [email protected]
Last Updated: December 17, 2008 03:59 EST