Sonatrach was supposed to have provided the groups with the contractual terms and technical scheme for the refinery in November, but these are now expected in April, the source said. The delay is understood to be due to Sonatrach’s need to find a new contractual model. The traditional production-sharing agreement proposed in the original tender is thought not to be commercially viable for Sonatrach.

The tender for the construction and operation of a new refinery 270 kilometres west of the In Salah gas fields project was issued in January 2001. It included the establishment of industrial projects using fuel produced by the refinery; the development of oil reserves estimated at 600 million barrels; and the opportunity to develop the Sbaa basin’s gas reserves, estimated at 6 trillion cubic feet. However, Sonatrach withdrew this final element shortly after issuing the tender.

Three groups submitted technical proposals for the project last June. They are China National Petroleum Company, with China National Oil & Gas Exploration & Development Corporation (CNODC); Cepsaof Spain, with TotalFinaElfof France; and the US’ Marathon Oil Company. Officials from Total and Cepsa say their group has lost interest in the project since the possibility for gas development was withdrawn.

Access to the gas reserves was considered by some as a way for Sonatrach to attract private investment to such a remote location. The proposed site of the refinery is more than 1,000 kilometres south of Algiers, making transportation of the refined product to the coast for export an extremely costly exercise. As a result, the refinery is expected either to serve the local market or countries in sub-Saharan Africa. Either way, commercial banks are unlikely to be attracted to the project if there is no hard currency revenue. Financing therefore is expected either to come from an institution such as the African Development Bank or through internal project financing (MEED 19:1:01).