BP Amoco, Algeria Sign Gas Development Deal

BP Amoco and Algerian state hydrocarbons firm Sonatrach signed a $2.5-billion deal to jointly develop Algeria’s In Salah gas reserves, executives of the two firms said.

BP Amoco will fund 65% of the development of the 200 billion cubic meters of gas over the next three decades and Sonatrach will contribute 35%, the firms said at the deal’s signing ceremony Saturday in Algiers.

“It is one of the two or three BP major investments in the world. . . . This project is significant in our company’s worldwide strategy,” BP Executive Vice President Tony Megges said.

In Salah is expected to be the second-largest gas field in Algeria after Sonatrach-run Hassi R’mel.

“The signing of the final contract marks the effective start of the exploitation of the In Salah gas fields between Sonatrach and BP,” said Sonatrach Chief Executive Chakib Khelil, who is also Algeria’s energy and mines minister.

The output, of 9 billion cubic meters of gas, will come from the El Krechba, Teg and Reg fields, hiking Algeria’s gas production by an estimated 15%.

The deal also involved the finalizing of three contracts worth $1.15 billion for the setting up of exploitation tools and the completion of a drilling project.

A consortium that includes Japan’s JGC has won a $667-million deal for the construction of processing and storage facilities, and U.S. engineering and construction firm Bechtel Group Inc. has clinched a $439-million contract for a 286-mile gas pipeline network.

Officials said investments for the first phase, running from 2001 to 2004, would amount to $1.72 billion. The second phase, running until 2027, would cost $781 million.

The joint venture’s marketing company, In Salah Gas, already has secured the sale of 4 billion cubic meters of gas per year to Italy’s power generation group Enel.

Algeria sells about 62 billion cubic meters of gas per year to its traditional markets in southern Europe, mainly Italy and Spain, through two trans-Mediterranean pipelines.

Gas exports represent 40% of the country’s foreign revenues.