Eni, TotalEnergies, Occidental Petroleum and Sonatrach have signed a production-sharing contract (PSC) extending control over two blocks in Algeria’s Berkine Basin.
The companies will invest $4 billion in works under the PSC, Sonatrach said. This should provide for the recovery of another 1bn barrels, bringing the recovery rate to 55%.
The deal comes at the same time that Algeria has announced a new deal to supply gas to Italy.
The companies signed up Block 404 and 208, in eastern Algeria. The PSC comes under Algeria’s new hydrocarbons law, approved in 2019.
Eni said the contract allowed companies to boost investments and increase reserves, while extending production by another 25 years. The PSC allows for new technologies to improve the reserve recovery factor and cut CO2 emissions.
Under the previous agreement, Oxy has a 24.5% stake in the blocks, while Eni and Total each have 12.25%. Sonatrach owns the remaining 51%. The companies did not report on the ownership of the blocks.
Eni CEO Claudio Descalzi said the new contract would make additional gas “available for export and for the domestic market, coherent with Eni’s commitment to the energy transition. It also highlights the importance of the strategic partnership with Sonatrach, aimed at long term investments in Algeria to maximise asset value”.
Total’s senior vice president for the Middle East and North Africa Laurent Vivier said the signing marked “a new milestone in the strategic partnership with Sonatrach. This project is in line with the company’s strategy to develop low-cost oil while contributing to carbon reduction programs to minimise our carbon footprint.”
Sonatrach reported the deal would see the companies acquire 3D seismic and drill 100 oil wells in addition to various other optimisation steps. These include two enhanced oil recovery (EOR) projects.
Block 208 holds the El Merk central processing facility (CPF), processing oil and NGLs. Block 404A holds the Hassi Berkine and Ourhoud CPFs.
Some production rights on Block 404 were due to end in December 2022. The partners signed a heads of agreement (HoA) for a new PSA on the blocks, covering all 18 fields, in 2021.
Political plans
Oxy CEO Vicki Hollub visited Algerian Minister of Energy and Mines Mohamed Arkab in early July. Total struck a deal in 2019 to buy Oxy’s stake, which it acquired from Anadarko Petroleum. The deal fell apart among opposition from the ministry.
The companies have produced 2.7bn barrels of oil equivalent thus far, with an investment of around $10bn.
Italian Prime Minister Mario Draghi visited Algiers this week and held talks with President Abdelmadjid Tebboune.
Draghi said energy had played a key role in the talks. “In recent months, Algeria has become our country’s leading gas supplier,” he said.
“Over the last few days, Algerian company Sonatrach has announced the upcoming supply of 4 billion cubic metres of gas to Italy, as part of the agreement signed with Eni in April,” Draghi continued. “This is an acceleration of the plan, and anticipates even larger supplies in the years to come.”
The Italian premier said the two sides had also discussed other energy options, including renewables and green hydrogen.