Q: Sonatrach is currently implementing a five-year $40bn investment plan. Are you planning to increase this for next 2023-2027 plan? Could you talk about some of your goals and ambitions?

A: Sonatrach is maintaining its medium-term investment plan of around $40 billion, chiefly aimed at maintaining upstream oil and gas output through the mobilization of new reserves and bringing them rapidly into production, as well as downstream developments such as refining and petrochemicals.

This is reflected in our sustained value creation strategy made up of four main development areas: upstream oil, upstream gas, hydrocarbon processing principally refining and petrochemicals, and hydrocarbon marketing. This is aimed at strengthening Sonatrach’s share of international markets, particularly for gas. On the energy transition, we are also focused on reducing the carbon footprint of our hydrocarbon industry and bringing low-carbon solutions.

Of the latest $40bn five-year plan, more than $30bn will be allocated to exploration and production with the objective of increasing production in the short and medium term and preparing a portfolio of future projects, particularly for natural gas. These investments will help us to improve our energy security and help us reliably supply the global market.

As for downstream, we are expecting to invest more than $7bn in refining, petrochemicals and gas liquefaction projects that will encourage value creation in Algeria and enhance our export potential.

In addition, we have earmarked nearly $1bn for projects that are part of Sonatrach’s strategy for the company’s contribution to the energy transition. These include gas flare recovery projects at production sites and LNG complexes, solar photovoltaic electricity projects to power [oil and gas] production, transport and processing sites, and pilot projects for production and transport of green hydrogen.


Q: Sonatrach has signed three new upstream agreements under Algeria’s new oil law. Are you negotiating with any other firms?

A: Absolutely. Sonatrach has signed, under the new 19-13 hydrocarbons law, three production sharing contracts. The first one with Eni at the end of 2021. The second was with Sinopec in May 2022 and the latest one with a consortium of Occidental, Eni and TotalEnergies in July 2022 (MEES, 27 July 2022).

Through these three contracts, we plan to mobilize nearly $6bn to keep developing fields by improving recovery of crude oil, of condensate, of LPG and of natural gas and extending the life of these fields.

These contracts certify attractiveness of the Hydrocarbons Law 19-13 and efforts made by Algeria to improve the business climate which should encourage foreign firms to invest more.

In the same context, Sonatrach is discussing the potential for new exploration and development projects with interested partners that are operating in Algeria as well as with other companies interested in partnerships. We hope to sign new contracts in 2023.

Q: Algeria is set to hold a bid round in early 2023 according to Alnaft president. What blocks will be on offer? Have you already had interest?

A: Indeed, some Sonatrach-operated blocks which are in the exploration phase are of interest to many foreign companies that have expressed interest in teaming with Sonatrach and sharing risks and profits. Foreign companies have also shown interest in other adjacent non-contracted acreage as well as in new contract types. The interest of these companies will certainly be considered by Alnaft while preparing the next tender.


Q: Many in Europe have looked to Algeria to help cover the loss in gas supplies from Russia. What is Algeria doing to increase supplies given that your exports to Europe fell by around 10% for 2022 (MEES, 6 January).

A: Before answering, I would like to make it clear about our exports to Europe for 2022. Our commitments to our European customers have been fully met and we have delivered more than 4bcm of natural gas to them on a spot basis. In addition, Sonatrach has other customers globally and we are enhancing our gas deliverability.

Every year, Sonatrach invests significant sums in exploration, in field development and in gas transport and processing facilities. Several projects have been commissioned over the last three years, such as new gas fields in Tinhert, Gassi Touil and Berkine South, the gas boosting projects in Hassi R’Mel, Hamra and In Amenas, the new GR7 pipeline for gas transport from South-West fields, as well as an expansion of the Medgaz pipeline linking Algeria to Spain.

Sonatrach intends to keep developing its gas potential, in order to supply additional volumes to domestic and international markets, especially the European market. Several projects are underway and will be commissioned during the next two years, such as the Hassi Mouina and Hassi Ba Hamou fields in the South-West, and Isarene and TFT South in the South-East. Other projects are expected in 2023 and 2024 such as Hassi R’Mel, Hamra, Ohanet and Touat (MEES, 25 March 2022).

More gas is expected and will be intended to meet additional domestic demand as well as demand from our European partners depending on operational and commercial conditions.

Furthermore, I would like to emphasize that whilst Sonatrach understands that supply security and supply diversification are key issues for European countries, they also need to commit to long-term offtake deals in order to provide security of demand for their key suppliers.

Like all gas producing countries, Algeria through a major investment program, is committing to ensure its partners a stable, sustainable and reliable supply of natural gas as long as demand for gas remains strong. As you know, the gas industry is very capital intensive.

Q: Could you talk about Sonatrach’s natural gas marketing strategy and talk about how your gas sales contracts work?

A: The upsurge in energy prices, with gas prices in Europe and Asia reaching never equaled historic levels among unprecedented multiple tensions, has highlighted Algeria’s key role in securing natural gas supplies to its customers, especially European ones. In these very difficult market conditions, Algeria is positioned as one of the world’s most important sources of gas supply, thanks to substantial natural gas reserves and recent output boosts from new discoveries, particularly near-field, which has generated a significant boost to gas volumes available for export, both via pipelines and LNG tankers.

These competitive advantages, including in marketing, make Algeria a reliable supplier and an important and strategic player in the gas market.

Europe is the traditional market for Algeria, which strives to preserve its market share as well as consolidating and diversifying it through long-term contracts, traditionally established on this market to ensure security of supply. But we are also adapting to market changes, concluding medium and short-term contracts, whether for natural gas delivered by pipelines or LNG shipped mainly by our own fleet of LNG vessels.

Sonatrach has adapted its contractual sales strategy to changing energy market conditions in order to capture the best margins. Sonatrach also optimizes its sales by delivering to new markets when these allow a better valorization of its gas.

Q: Sonatrach’s LNG export capacity is officially stated as 25.5mn t/y, but you haven’t exported anything close to this for years. Will this change?

A: It is important to note that Sonatrach has considerable flexibility through its liquefaction complexes. The four LNG complexes, which total a liquefaction capacity of more than 30 bcm/y, have allowed Sonatrach for decades to supply its traditional market which is Europe, but also to reach distant markets such as the Asian and American continents. This undeniable flexibility is one of Sonatrach’s major competitive advantages, allowing us to take advantage of arbitrage opportunities to obtain the best value for our gas.

In this regard, it should be recalled that energy markets are just emerging today from the exceptional situation of the Covid-19 pandemic, including a decline in demand from importing countries. Sonatrach has adapted to this situation and has even carried out maintenance work in its complexes during this period, while meeting its contractual commitments to its LNG customers.

The energy outlook suggests that current fluctuating fundamentals will continue for some time, but we are ready and will be there as we have always been.

Q: Algeria’s sales gas hit a record 103bcm in 2021 (MEES, 25 March 2022). What did 2022 bring?

A: In 2022, Sonatrach also reached several records, but we are convinced that only visibility on market behaviors and future demand for natural gas, could support investment policies in capital intensive projects and gas projects.

Even if renewable energies can be deployed rapidly, the maintenance of gas as a core component in the long-term energy mix is an inevitable reality and the current situation marked by a strong demand for gas and spot prices that remain at exceptional levels obviously favors the increase of exports.

However, Sonatrach is committed to the long term and as long as visibility on future gas demand is guaranteed, we are committed to making the necessary investments to increase our production, to meet demand from domestic market and to guarantee the supply security for Sonatrach’s traditional markets, and even on new markets if our capacities reach the levels we are expecting.


Q: Can you talk about some new gas projects you are working on. When will they come online?

A: As I already said, we are planning to bring new fields on stream in 2023 and 2024. I have already mentioned the main ones.

At the same time, given the current context of the European market, and to contribute to further supplying the market, Sonatrach considered during the first quarter of 2022 the possibility of accelerating the development of some discoveries, in particular LD2 in Hassi R’Mel, where reassessment early last year highlighted additional gas reserves, deemed between 100 and 300 bcm (MEES, 1 July 2022).

A fast-track program has thus been established and allowed the start of production from first wells in this discovery in December 2022.

In addition, Sonatrach has identified a portfolio of discoveries made in the recent years that can be developed rapidly given their proximity to existing and underutilized processing facilities.

In this respect, two projects have been selected, Ahnet and In Amenas Periphery, with a fast-track program for production start-up in 2023.

It should be noted that this effort to develop the three projects, LD2 in Hassi R’mel, Ahnet and In Amenas Periphery, although they were not initially included in our plans, will enable additional gas supplies of 10bcm per year. Other gas projects currently at the study phase may be considered, particularly in the South-West region, if finance and technology are to be mobilized, particularly in partnerships, and if gas demand remains sustained.

Q: What is Algeria doing to limit rising domestic gas consumption which limits exports?

A: Controlling domestic natural gas consumption is a key issue as potential gas savings can be exported.

I would like to remind you that the growth in gas consumption in Algeria recorded in the past is explained by economic growth and improving citizens’ access to energy, but also through the implementation of several industrial projects that need gas.

On the other hand, efforts have been made to control this growth, particularly in power generation through new more efficient combined cycle power plants.

Consequently, we may expect slower growth in future, reinforced by energy policy measures adopted by the government, notably the development of renewable energies and implementation of an energy efficiency program, which will maintain gas consumption of the power generation sector at its current maximum level.

As for Sonatrach, as a gas consumer to power its facilities, we have begun to implement a medium-term rehabilitation and modernization program, which focuses on reducing self-consumption at production sites, compressor stations and LNG complexes.

We are also building photovoltaic power plants to meet energy demand from our production sites. We have already built a 10MW power plant at the Bir Rebaa North field and started work on the second plant in same site (MEES, 17 December 2021). We are also preparing to launch other similar projects at several other sites with a capacity of more 100MW and we are continuing to develop other projects with a potential around 1000MW.

Q: What is Sonatrach doing to cut gas flaring?

A: I would like to remind that Sonatrach has always invested in the recovery of flared gas, through several projects of associated gas recovery and facility revamps, particularly in major production sites such as Hassi Messaoud, which has enabled us to reduce the flaring rate to 2%.

Today, we have registered a number of projects to recover flared gases at the relevant production sites and LNG complexes. These projects will enable us in the medium term to achieve our goals that consist of reducing gas flaring to less than 1% and eliminating routine flaring.

Q: Compared to your rising gas production, oil output capacity has remained depressed with production 2mn b/d to 1.5mn b/d. What is your current capacity and what are your targets?

A: As you certainly know, since the beginning of the pandemic, Opec has decided to reduce production quotas to support market balance. Algeria, being a member of Opec, is required to respect its quota, which is today around 1.03 million b/d of crude oil.

In terms of development, Sonatrach has launched some projects aimed, in the medium term, at maintaining or even increasing its crude oil output, within the limit of our Opec quota, in high-potential regions such as Touggourt, Hassi Messaoud, Hassi Berkine, Bir Sbaa and Hassi Bir Rekaiz (MEES, 26 August 2022).

Such investments mainly relate to extension works, recovery improvements and new developments.

In addition to this effort, we are working on the reassessment of significant volumes of oil classified as probable and possible in ‘near-field’ areas. We are introducing advanced technologies, particularly 3D seismic, and we hope to recover a good portion of these volumes, which would support our crude oil production in the long-term.


Q: What is Algeria’s stance in Opec? Do you aim for a specific price level? How do you see the world market evolving over the next year?

A: Algeria has always adhered to Opec’s decisions and participated in them and has always showed a collaborative and constructive spirit with the organization’s other member countries.

Algeria has also played a leading role in various Opec’s agreements, starting with those concluded in Algeria in December 2008 and September 2016.

Besides, the Minister of Energy and Mines, Mohamed Arkab, and the Secretary General of Opec, Haitham Al-Ghais, have always shared, during their meetings, their points of view on the current situation of global oil market and its development prospects in the short and medium term, as well as the uncertainties that presently affect it.

During a recent meeting the secretary general of Opec praised Algeria’s role in the organization, emphasizing the guidelines and recommendations of the President of the Republic regarding the imperative of supporting the collective decision.

It should be noted that the decisions of the Organization and its allies (Opec+), are ‘‘purely economic and technical’’, based on technical survey of global situation regarding economy and oil demand, in addition to supplies from Opec and non-Opec, to reach a decision that is at the service of oil consuming and producing states, but also at the service of the global economy.

Opec’s target is balancing supply and demand, not a specific oil price.

Q: What is Algeria’s downstream strategy?

A: First, it should be noted that Sonatrach has significant hydrocarbon processing capacities, which allow it to position itself as a leader in the Mediterranean market and as a major player in the European market. This is a position that we intend to protect and consolidate over the next few years.

In addition to existing hydrocarbon processing facilities which consists of five crude oil refineries, one condensate refinery, four natural gas liquefaction complexes, two LPG separation complexes, one methanol complex, one polyethylene unit, four ammonia plants and two helium and nitrogen units, Sonatrach has taken the lead in launching several other projects to maintain and rehabilitate the current capacities and also to develop new processing capacities especially in refining and petrochemicals.

To meet such objective, Sonatrach has allocated around 20% of its overall investment for the next five years to processing activities. The projects launched will be carried out by Sonatrach itself and in partnerships and will focus on refining, LNG and petrochemical activities.

These projects are aimed at meeting domestic demand for refined products and petrochemicals, to reduce imports, to export surpluses to global markets, to encourage local development of small and medium enterprises and at the same time to create direct and indirect employment opportunities.

As for refining, we are optimizing refining facilities and increasing their output capacity, particularly gasoline and diesel in order to maximize the valorization of our crude oil and to meet domestic demand for fuels in the medium and long term.

The main projects in this area include a fuel oil cracking unit in Skikda, to increase our diesel output capacity by 37%. We are also constructing a new naphtha reforming unit at Arzew refinery, with an output capacity of 1.2 million tons of gasoline.

We are building a production unit for Methyl Tert-Butyl Ether (MTBE), a gasoline additive, which will allow us to stop importing this product and export any surplus. The contract for this project was signed in July 2022 with Chinese contractors CNTIC and LPEC (MEES, 27 May 2022). We are also constructing a new 5 million t/year refinery near Hassi Messaoud (MEES, 10 January 2020).

Concerning LNG, Sonatrach intends to develop its LNG export capacities through two projects underway, a storage tank and a new loading jetty at the port of Skikda. These projects will allow us to improve our export flexibility and accommodate large vessels that can supply remote regions (MEES, 12 August 2022).

Q: What is Algeria’s petrochemicals strategy?

A: As I mentioned earlier, Sonatrach already has a petrochemical asset in operation that employs nearly 3,000 people and generates nearly $2bn in sales annually.

Petrochemistry is a strategic option for Sonatrach and for Algeria. It allows valorizing hydrocarbons, meeting domestic demand for petrochemical products thus reducing the country’s import bill, creating direct and indirect jobs and leading to the creation of small and medium-sized companies in a variety of petrochemical segments (transport, fibers and textile, pharmaceutical industry, hydraulics & building, films & packaging, automotive & shipping).

In this regard, Sonatrach’s petrochemical program includes two new facilities: one in Algeria with TotalEnergies and the other in Turkey’s Ceyhan port (MEES, 15 October 2021). Combined these will have a 1mn t/y capacity.

Sonatrach is also building a production facility for Linear Alkyl-Benzene (LAB), which is used in the detergent industry, with a capacity of 100,000 t/y (MEES,19 August 2022).

Other projects are under study and relate mainly to production at Skikda of ethylene, a product currently imported, and the recovery of by-products from lubricant units at the Arzew refinery into chemical specialty products used in cosmetics, pharmaceutical and automotive industries for domestic and international markets.

Moreover, a shareholders’ agreement was signed in March 2022 between Sonatrach’s Asmidal subsidiary, Manadjim El Djazair (Manal) and Chinese companies ‘Wuhuan’ and ‘Tian’an’ for creating a joint venture in charge of developing and exploiting an integrated phosphate project which will enable Algeria to position itself among the main exporting countries of manure and fertilizers in the world, with a provisional production exceeding the 5mn t/y of phosphate products. This large-scale project will have significant socio-economic impacts on the country.

Q: Is the Arzew petrochemicals project with TotalEnergies going ahead?

A: Absolutely. This project, which consists of the construction in Arzew of a propane dehydrogenation unit with production facilities for 550,000 t/y of polypropylene (PDH-PP), in partnership with TotalEnergies, is currently in the selection phase of the EPC contractor. The final investment decision (FID) is scheduled for early 2023.

Q: Could you talk about Sonatrach’s decarbonization efforts and specifically plans to create a hydrogen industry? There are two pilot projects?

A: Sonatrach has placed carbon footprint reduction in its hydrocarbon production process among its top priorities and sees renewable energies as a future growth lever that will enable it to play a leading role in the energy transition.

The first objective in this context is to provide clean products to the market and to be in line with Algeria’s climate commitments.

This issue is being addressed through three axes. First, the mitigation of greenhouse gas emissions, the main actions of which consist of reducing gas flaring to less than 1% and eliminating routine flaring by 2030 in accordance with Algeria’s commitments under the World Bank’s program. And from 2024, we will be launching an investment program to reduce fugitive methane emissions.

We are also implementing action plans relating to energy efficiency, in particular projects to reduce Sonatrach’s own hydrocarbons consumption particularly via the construction of photovoltaic power plants at our sites.

The second axis concerns greenhouse gas emission offsets through a large-scale forestry program in partnership with the Algerian public entity in charge of forests (Direction Générale des Forêts). We are also looking into carbon sequestration technology with discussions underway with partners to explore and assess opportunities in this area.

The third axis involves our strategy for low carbon solutions such as green hydrogen and biofuels. Pilot projects are planned for this purpose.

Sonatrach considers that climate change is a major concern for everyone. As Algeria has a proven potential in renewable energies, Sonatrach is set to play a leading role in the development of future low-carbon industry, such as green hydrogen and photovoltaic electric power, which represents an important growth driver for Algeria.

As for pilot projects, we are expecting to launch two projects starting in 2023, of green hydrogen production and its transport via gas pipelines.

We are expecting to launch two such pilot projects starting in 2023, for green hydrogen production and for its transport via gas pipeline (MEES, 2 December 2022).

It is important to point out that Sonatrach is not just an investor, but also an operator throughout the hydrocarbon chain and it intends to be so for the renewable energies value chain. These projects are important for us. They allow us to experiment with the production and transport of green hydrogen and to master related technology.

Regarding photovoltaic, our ambition is to multiply photovoltaic electricity projects through, first, all our installations and production facilities, like the two power plants at Bir Rebaa North. Second, we are using our expertise to serve the national renewable energy development program. This means that Sonatrach is resolutely committed, in the medium and long term, to a decarbonized energy vision that produces low CO2 emissions.

*Interview conducted by MEES North Africa Editor Aydın Çalık. See MEES, 6 January for related analysis.