History of Hydrocarbons in Algeria*
Half a century in the service of the national development
A prosperous Algeria, an Algeria driven by the determinationof a countrywhich, shortly after independence, understood that access to energy remained key to economic, social and political development. To that end, after gaining its independence, Algeria founded Sonatrach, the «National Company for thetransportation and marketingof hydrocarbons», on December, 31, 1963.
Today, Sonatrach has become a powerful factor of national integration, stability, economic and social development.
From the inception of Sonatrach to the nationalization of hydrocarbons
- As confirmation of its inception, Sonatrachlaunched the construction of the first Algerianoil pipeline, the OZ1 pipeline, which linkedHaoud El Hamra to Arzew, over a distance of 805 km.
- Algeria decided to embark on the great gas adventure and put on stream the first natural gas liquefactioncomplex, officially called GL4Z (formerly CAMEL –Liquefied Methane AlgerianCompany), with a processing capacity of 1.8 billion m3 gas/year.
The achievement of this infrastructure allowed Algeria to fully integrate the hydrocarbons industry.
- The French-Algerian negotiations for the resolution of issues related to hydrocarbons and the industrial development in Algeria, led to the creation of a cooperative association, "ASCOOP", between SOPEFAL, representing the French government, and the Algerian government. This phase allowed the Algerian government to greatly expand its scope of activities in the country’s hydrocarbons management.
- Launching of the first hydrocarbons exploration seismic survey undertaken by Sonatrach with the drilling of three wells.
- The commissioning of the OZ1 Oil Pipeline, a work of a great strategic significance, contributed to enhance the production and transportation capacities by almost 30%.
- Increase in Sonatrach’s capital from 40 to 400 million Dinars.
- Sonatrach’s missions, which were limited to the management of pipelinesand marketing, have beenenlarged to theresearch, production and processingof hydrocarbons.
- Sonatrach became the National Company for the Research, Production, Transportation, Processing and Marketingof Hydrocarbons and their By- Products.
- Algeria launched a process of nationalization ofthe refining and distribution operations that will ultimately result in Sonatrach becoming a leader company inthedistributionof petroleum products on the domestic market and inaugurating the first company-branded gas station.
- First oil discovery in El Borma (East of Hassi Messaoud).
- Start of the newMesdar-Skikdaoil pipeline construction.
- Sonatrach acquired a majoritystake(more than 50%) in the hydrocarbons pipeline transportation in Algeria, created its own services companies and get the monopoly in the marketingof gas.
- Sonatrach also undertook the construction of an ammonia plant and planned the building of a petrochemical complex in Skikda together with the development of a liquefied natural gas terminal.
- Gas discovery in Gassi EL Adem, South East of Hassi Messaoud.
- Sonatrach is authorized to transport gaseous hydrocarbonsfrom the field ofHassi R'Mel and other Algerian producing zones via the Hassi R'Mel-Skikda gas pipeline.
In the light of its oil discoveries,Sonatrach evolved into an integrated company and became a company rich in hydrocarbons reserves.
- Algeria becomes a member of OPEC.
- The « Hassi Messaoud – Arzew » project presented by Sonatrach, to transport liquefied petroleum gas (LPG) and condensate, was approved by the Government. Sonatrach was authorized to exploit the infrastructure.
- Sonatrach begins oil development on the El BORMA fieldusing its own resources.
February 24, 1971
The Nationalization of Hydrocarbons
A new era for the country's economic development
- The nationalization of hydrocarbons decided by Algeria in February 1971 gave the national hydrocarbons company a new impetus.
- An increasingly rigorous strategy was put in place. Sonatrach’s objectives were then to extend all its operations to the whole oil and gas facilities and to control the entire hydrocarbons chain.
- This year also saw the acquisition of the first LNG tanker named after the Hassi R'Mel field.
- Commissioning of the Skikda natural gas liquefaction complex (GL1K), with a production capacity of 6.5 million m3/year of LNG, 170 000 tons/year of Ethane, 108 400 tons/year of Propane, 92 600 tons/year of Butane, 60 250 tons/year of Gasoline and 2tanker loading stations with a capacity of 50 000 to 70 000 m3.
- Commissioningof the ARZEW refinery, with a production capacity of 2400 000 tons/year of fuel, 70 000 tons/year of asphalt, 55 000 tons/year of lubricants and 110 000 tons/year of LPG’s.
- Commissioning of the LPG separation complex (GP2Z), with a production capacity of 600 000 tons/year of LPG’s.
- The production capacity of the Hassi R'Mel field rose to 14 billion m3 of natural gas and 2.4 million tons of stabilized condensate.
- Discovery of the Mereksen oil field.
- Bringing into service of two (02) plastics processing units, one in Setif and the other one in Chlef.
With the diversification of its activities (from research to petrochemistry), the need for a guideline strategy became obvious for Algeria.
The « Valhyd»Plan(Hydrocarbons Valorization) was launched. Its objectives were to raise oil and gas production rates, to recover gasassociated with oil in order to re-inject it as part ofthe secondary recovery, produce the maximum amount of LPG’s and condensates, market natural gas in its gaseous and liquid forms, export finished products as an alternative to crude oil and meet the domestic market needs in refined products, petrochemicals, fertilizers and plastics.
Thanks to massive investment,Algeria became a major oil exporting country.
- Coming on-stream of the Hassi R'Mel Module 1, with a production capacity of 18 billion m3/year of gas and 3 million tons/year of condensate.
- Bringing into service of the Arzew liquefaction complex (GL1Z), with a production capacity of 17.5 million m3/year of LNG.
- Coming on-streamof the Hassi R'Mel Module 2, with a production capacity of 20 billion m3/year of gas, 4 million tons/year of condensate and 880 000 tons/year of LPG’s.
- Completion of the Hassi R'Mel Module 4, with a production capacity of 20 billion m3/year of gas, 4 million tons/year of condensate and 880 000 tons/year of LPG’s.
During this period, Algeria launched majoreconomic projectsthat enabledthe creationof arobustindustrial base. Thisallowed it tobenefitfrom oil revenues, of which a substantial part wasreinvested ineconomic development projects.
Sonatrachis committedunder afive-year planin a newextensive restructuring process,which led tothe creation of17 companies.
- 4 industrial companies:
- NAFTAL (hydrocarbon refining and distribution).
- ENIP (petrochemicals industry).
- ENPC (plastics and rubber industry).
- ASMIDAL (fertilizers).
- 3 realization companies:
- ENGTP (Great oil works)
- ENGCB (Civil engineering and building)
- ENAC (pipelines)
- 6 oil services companies
- ENAGEO (Geophysics)
- ENAFOR&ENTP ( Drilling)
- ENSP (wells service)
- ENEP (Oil Engineering)
- CERHYD (Hydrocarbon Research Center)
- 4 management companies in the industrial zones of Arzew, Skikda, Hassi R’Mel and Hassi Messaoud
This restructuringallowedSonatrachto focus primarily onits core businesses.
From 33 peoplein 1963with thetransportation andmarketingof hydrocarbonsas a main objective, thecompany grew to more than103,300workersin 1981 witha scope of business coveringthe controlof the whole hydrocarbons chain.
- In 1981, commissioning of the liquefaction complex (GL2Z) in Bethioua, with a processing capacity of 13 billion m3/year.
- In 1983,the pipeline "Enrico Mattei" came on-streamto supplyItalyandSlovenia via neighboring Tunisia, with a capacity exceedingnow 32 billionm3 per year.
Openness to partnership
Law86-14of August 19th1986definedthe newlegal frameworkfor thehydrocarbonsprospecting, exploration, research andtransportation activities allowingSonatrach toopento partnership.
Four types of partnershipwere possiblewhich would includegrantingSonatrachthe privilege of holdinga minimum participation of51%:
- Partnership under a“Production Sharing Contract” (PSC)
- Partnership under a “contract of service”
- Joint venturewithout legal personalityin whichthe foreign partnerisa trading companyincorporated under Algerian lawwith its headquarters inAlgeria
- Partnership in the form of a stock trading company, incorporated under Algerian law, having its headquartersin Algeria.
Sonatrach, a world renowned oil and gas group
The amendments introduced byLaw 91/01 in December 1991, allowed foreign companiesnamely operatingin the gas sectorto recover invested funds andgave thema fair remuneration for the effortsundertaken.
More than 130oil companiesincludingmajors,establishedcontact withSonatrachand 26research and prospectingcontractswere signed duringthetwo yearsthat followed thenew institutional framework.
-Commissioning in1996of the Maghreb- Europe,so-called "Pedro DuranFarell",pipelinewhich suppliesSpain andPortugalvia Morocco.Its capacity isover 11 billionm3 ofgas per year.
Modernization and development
From 2000 until today
Sonatrachhasmade considerable efforts in:the exploration, development and exploitationof fields, hydrocarbons transportationinfrastructures(gas pipelines andcompression stations),natural gasliquefaction plants andmethane tankers.
Since the year 2000, several projects havebeen launched inthe development processof competencies, internationalization, petrochemistry development anddiversificationof Sonatrach activities,also,theprimaryproduction targetsetfor the period 1999-2007was largely exceeded.
Fieldsbrought on streamduring the period (99-2009) by Sonatrach aloneor in partnershipcontributed to the growthofthe hydrocarbonsprimary production from 8Mtoeto 233Mtoe.