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Sonatrach, Occidental Petroleum, Eni and TotalEnergy to drill 100 oil wells together in Berkine

Written by Frédéric Dubessy on Wednesday, July 20th 2022 à 15:18 | Read 551 times

Production sharing is made possible by a modification of the Algerian law (photo: Sonatrach)
Production sharing is made possible by a modification of the Algerian law (photo: Sonatrach)
ALGERIA / ITALY / FRANCE. Algeria's Sonatrach signed a "production sharing" contract with the American Occidental Petroleum, the Italian Eni and the French TotalEnergies in Algiers on Tuesday 19 July 2022. It follows a memorandum of understanding initialled at the end of January 2021 by the four partners and concerns the Berkine perimeter (blocks 404 and 208).

Located 300 km south-east of Hassi Messaoud, in the eastern part of Western Sahara and close to the Tunisian border, it is already operated by this grouping since an association contract dated 23 October 1989. Under the latter, more than $10bn (€9.77bn) has been invested for a cumulative production of around 2.7 billion barrels of oil equivalent.

"The parties are committed to continuing the development and exploitation of this perimeter through a programme of work including: high density 3D seismic acquisition, the drilling of one hundred oil wells, the conversion of forty-six wells (...) the implementation of two EOR (Enhanced Oil Recovery) pilot projects and the realisation of environmental projects relating to the reduction of the carbon footprint", a Sonatrach press release states.

An investment of nearly $4bn

"This new contract on the Berkine asset (...) marks a new stage in our strategic partnership with Sonatrach. It is in line with our company's strategy to develop low-cost oil projects while contributing to emission reduction programmes in order to minimise our carbon footprint," commented Laurent Vivier, Senior Vice President Middle East and North Africa, Exploration & Production, TotalEnergies, in a separate release.

With a fixed duration of twenty-five years, this production sharing with foreign companies operating in Algeria is made possible by a modification of the Algerian law on hydrocarbons promulgated in November 2019.

The overall investment of this development and exploitation plan is estimated at nearly $4 billion (about €3.91 billion). It will eventually ensure "an additional recovery of more than 1 billion barrels of oil equivalent of hydrocarbons, which will increase the average ultimate recovery rate to 55%," the Algerian company said.

Doubling of Italian imports of Algerian gas

In its search for an alternative to Russian gas, which accounts for 45% of its supplies in this area, Rome will be able to continue to count on Algeria, which has gone from being Italy's second to its first supplier in a few months.

In April 2022, during a meeting with Algerian President Abdelmadjid Tebboune, Mario Draghi, President of the Italian Council, had obtained the promise of a strengthening of energy cooperation between the two countries. A new gas agreement was signed at the time between Eni and Sonatrach.

By 2022, Italy, which imports 95% of its gas, was to receive 10 billion cubic metres of gas from Algeria, Azerbaijan and Libya. But since the beginning of the year, Italian imports of Algerian gas alone have reached 13.9 billion cubic metres, i.e. a doubling of the planned deliveries (+113%).

On Tuesday 19 July 2022, Mario Draghi was assured that Algiers would supply his country with an additional four billion cubic metres of gas. "The agreements signed today in Algiers reflect the broad spectrum of collaboration between our countries. Algeria is a very important partner for Italy, it has become the first supplier of gas to our country", Mario Draghi was pleased to say. On his return to the Algerian capital on Monday 18 and Tuesday 19 July 2022, he initialled fifteen memorandums of understanding and agreements concerning justice, microenterprises and start-ups, industrial cooperation, sustainable development and energy.

By the end of February 2022 and the beginning of the conflict in Ukraine, Algiers officially indicated that it was ready to deliver more gas to Europe.

According to Toufik Hakkar, "production (of oil) has increased by 5%, exports by 19% in volume and by 70% in figure in 2021". Sonatrach's CEO plans to invest $39bn (€38.1bn) over the period 2022-2026 in partnership with foreign groups to maintain national capacities. In the current year alone, the Algerian group should devote $8 billion (€7.8 billion) to exploration, production and petrochemicals. Toufik Hakkar is preparing the construction of a new refinery in Hassi Messaoud and the extension of the one in Skikda to "meet local demand for fuel", says the CEO.

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