Despite declines in oil and gas prices, Sonatrach, the Algerian national oil company, is maintaining its investment program.
The company has expansion plans in traditional areas such as refining and LNG and is venturing into desalination schemes, power generation, and petrochemicals.
It estimated the 2008-12 investment program would cost $45 billion but said 2009-13 spending would total $64 billion, boosted by the 60 discoveries it made last year. This budget includes $1.5 billion/year for exploration.
If oil prices fall to $30/bbl, Sonatrach will review future projects but not those already planned.
A major project under way is the $2.6 billion modernization and expansion of Sonatrach’s 300,000 b/d Skikda refinery. Samsung Engineering Co. has a 3-year engineering, procurement, and construction contract to upgrade most of the refinery, from crude distillation unit through aromatics facilities, in a project that will increase crude capacity to 330,000 b/d.
Samsung also will add plants for the production of isomerate (700,000 tonnes/year), paraxylene (220,000 tonnes/year), and benzene (200,000 tonnes/year).
A Sonatrach unit, Naftec, operates all four of Algeria’s refineries, which have capacities totaling 450,000 b/d. Algeria wants to raise total refining capacity to 1 million b/d by 2013.
Sonatrach is also adding a 4.7-million-tonne/year train at its LNG export terminal at Arzew, where existing capacity is 16.4 million tonnes/year. The new train is due online in 2012.
Earlier this year the NOC let a $1.1 billion contract to SNC-Lavalin Group Inc., Montreal, to build a gas gathering system, gas processing plant, and carbon dioxide injection facilities to serve four gas fields in eastern Algeria (OGJ Online, June 16, 2009). The facilities will treat about 353 MMscfd. Residue gas will move more than 1,000 km to Arzew for liquefaction.
Sonatrach also has awarded five contracts totaling $61 million to Italian engineering company Maire Tecnimont SPA for conceptual design and front-end engineering design of expansion of the Algerian gas transmission network. Completion is slated for August 2010.
Licensing results
Samuel Ciszuk, energy analyst for the Middle East and North Africa at IHS Global Insight, said Sonatrach’s challenges over the next 3-5 years would be the risk of a delay in its upstream gas exploration, development, and production because of poor results in its latest licensing round.
A December offering of 11 licenses drew limited interest from foreign companies, which complained of poor acreage and financial strains (OGJ Online, Dec. 16, 2008).
Ciszuk said the setback makes “the operation and investment in the whole southwestern area look less certain to move ahead successfully. Gas from that area is necessary to feed future Algerian export commitments and domestic need, and now its development pace has been delayed by at least a year.”
In July, Algeria invited operators to bid for 25 blocks it said have “high-potential petroleum resources (OGJ Online, July 1, 2009).”
Energy and Mines Minister Chakib Khelil said Algeria would work with companies that have technology to handle unconventional gas rather than those that want to swap reserves in other countries.
While Sonatrach says cooperation with international oil companies has always been important, experience has been mixed. For example, the company’s relationship with Repsol YPF and Gas Natural broke down over a gas gathering and processing project in the Gassi Touil region of eastern Algeria, forcing Sonatrach to work alone. Gas from the project is to feed the LNG train under construction at Arzew.
Sonatrach in June let a 42-month turnkey engineering, procurement, and construction contract to JGC Corp. for the project, which will handle 12 million cu m/day from seven gas fields (OGJ Online, June 12, 2009).
Ciszuk said: “Sonatrach’s relationship seems a bit hit-and-miss sometimes, with quite hard attitudes sometimes and long good relationships in some cases. The company would do good to spread a more business-minded culture throughout its domestic upstream parts—although compared with Libya, for instance, Sonatrach is of course very savvy.”