Algeria’s Sonatrach signs natural gas contracts with TotalEnergies

Sonatrach has agreed to extend LNG deliveries to the French energy major at the Fos-Cavaou port until 2024

A worker standing on the uploading dock of Cavaou LNG terminal in Fos-sur-Mer, France. AFP
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Algeria's state-owned company Sonatrach has signed natural gas contracts with French energy major TotalEnergies.

The agreements include hydrocarbon contracts concerning the exploitation of Tin Fouye-Tabankort (TFT) II and TFT South fields in south-east Algeria, as well as liquefied natural gas and renewable energy contracts, TotalEnergies said on Monday.

Sonatrach and TotalEnergies will pursue the investment programme already launched to increase gas production at the fields, including upgrading existing facilities and drilling additional wells.

The combined production of the two fields is expected to exceed 100,000 barrels of oil equivalent per day by 2026, up from about 60,000 boed last year.

The new agreements “testify to TotalEnergies’ close ties to Algeria, whose resources contribute directly to Europe’s energy supply and security”, said Patrick Pouyanne, chairman and chief executive of TotalEnergies.

“We are also happy to support Algeria in the energy transition, by examining and developing its huge potential for renewables production.”

Sonatrach has also agreed to extend deliveries of 2 million tonnes per year of LNG to TotalEnergies at the Fos-Cavaou port near Marseille until 2024.

The companies also signed a separate deal to explore the development of renewable energy projects in the North African country.

The initiatives may include “solarising” oil and gas sites, powering desalination plants with renewables, producing low-carbon hydrogen for exports, and conducting research and development in low-carbon energy sources.

Algeria, a member of Opec, relies heavily on oil and gas, which accounted for 19 per cent of the country's gross domestic product, 93 per cent of product exports, and 38 per cent of budget revenue between 2016 and 2021, according to the World Bank.

Algeria is Africa's biggest gas exporter and supplies about 11 per cent of the natural gas consumed in Europe, which has boosted LNG imports from other markets to replace Russian supplies.

The EU set gas storage targets last year after Russia slashed its exports to the region in response to economic sanctions levied due to Moscow's invasion of Ukraine.

Global LNG trade hit a high of $450 billion in 2022 as Europe aimed to secure supplies to replace Russian gas, according to the International Energy Agency.

Despite a rise in demand, LNG supply grew by only 5.5 per cent last year, mostly due to maintenance at large export terminals and the closure of Freeport LNG’s Texas-based plant – one of the world’s largest export centres for the supercooled fuel – after a fire in June 2022.

France’s natural gas consumption fell by 9 per cent last year, thanks to milder weather and higher prices, according to French gas transport grid operator GRTgaz.

However, gas-fired electricity generation plants increased their consumption by 54.4 per cent in 2022 to a record 61 terawatt hours.

Updated: July 10, 2023, 8:16 AM