Sonatrach signs BHP, partners to develop Algerian gas fields

Sonatrach, Algeria's national oil company, has signed a risk service contract with Broken Hill Pty. Co. Ltd. (BHP) under which BHP will develop four natural gas and condensate reservoirs in Algeria's Ohanet region, officials said Monday. The deal requires BHP and its partners to invest about $1 billion in the development program.


Sonatrach, Algeria's national oil company, has signed a risk service contract with Broken Hill Pty. Co. Ltd. (BHP) under which BHP will develop four natural gas and condensate reservoirs in Algeria's Ohanet region, officials said Monday. That deal requires BHP and its partners to invest about $1 billion in the development program.

BHP, with a 60% interest, will fund $618 million of the development costs, officials said. Other partners include the Japan Ohanet Oil & Gas Co. Ltd. consortium, 30%; and Petrofac Resources (Ohanet) LLC, 10%.

The participants will recover their investment, along with an agreed fixed profits, over an 8-year period from the start of production. First production is scheduled for October 2003. Peak liquids production is projected at around 58,000 b/d, to be shared by the foreign partners according to their equity interests.

The agreement marks a major step for BHP in establishing a core business in Algeria that is expected to generate large and relatively stable cash flow and earnings. It also provides an important balance to other projects, ensuring downside protection to low oil price environments, officials said.

The payback and profits for all participants will be in the form of condensate, butane, and propane lifted at prevailing market prices from export ports on the Algerian coast.

The deal is subject to formal approval by the Algerian government.

The Ohanet fields are estimated to contain total proven and probable reserves of more than 3.4 tcf of pipeline-quality gas, 107 million bbl of condensate; and 116 million bbl of LPG.

Under the agreement, BHP's reserves entitlement will fluctuate with price movements. However, company officials said they expect to book proved reserves in the range of 55-75 million boe.

Ohanet is located in the Illizi province of Algeria, about 1,300 km southeast of Algiers and 100 km west of the Libyan border. The fields were discovered in the late 1950s and early 1960s and have since been appraised and delineated by more than 65 wells.

Ohanet will be the seventh wet gas field development in the area southeast of the Hassi R'Mel complex

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