Uchenna Izundu
International Editor
LONDON, Sept. 13 -- Sonatrach has taken sole control of the Gassi Touil integrated gas project in eastern Algeria and dismissed Repsol YPF SA and Gas Natural SDG SA from the project development.
Sonatrach terminated the contract after months of political struggle between Algiers and Madrid over control. Media reports said Sonatrach blamed the companies for cost overruns and delays.
Repsol YPF and Gas Natural plan to launch international arbitral proceedings against Sonatrach, protesting that the project had been taken "through illegitimate means." They will seek damages and determination of whether the contract had been rightfully terminated.
This was the first project in Algeria to be awarded to a foreign consortium. However, to exert greater control over its national resources, Algeria within the past 18 months passed a law requiring Sonatrach to maintain a 51% stake in energy projects.
Sonatrach's decision leaves the Spanish companies without access to huge reserves and supply contracts after they beat stiff competition to win the lucrative tender in 2004. For Repsol in particular, the effect is galling, as the company was also forced to revise downwards its oil and gas reserves in South America partly due to energy nationalizations in Bolivia and Venezuela.
The $7 billion Gassi Touil project involved exploration and production phases as well as construction of a 4 million-tonne/year gas liquefaction plant and marketing activities by 2009. Repsol YPF held a 48% stake, Gas Natural 32%, and Sonatrach 20%.
Contact Uchenna Izundu at [email protected].