Algeria’s state energy company Sonatrach signed two agreements on Sunday with France’s Total, one of its longest-standing partners, to jointly develop a gas field and build a new petrochemicals complex.

The partners are moving ahead with plans to create a new joint venture, Sonatrach Total Entreprise Polymeres (STEP), which will build a new petrochemicals complex at Arzew in western Algeria.

The project includes a propane dehydrogenation (PDH) unit and a 550,000 tonne a year (t/y) polypropylene production plant. Total has been working on feasibility studies for the plant since December 2016 and now the partners plan to start the front-end engineering and design (feed) from November.

Sonatrach is also developing a number of other petrochemical projects in Algeria, including revamping an ethylene plant in the coastal city of Skikda, a phosphate plant in Tebessa and a fertiliser plant in Souk Ahras province.

At the same time, the partners have also signed a deal to jointly develop the Erg Issouane gas field in the Tin Fouye Tabankort Sud concession area, which could hold as much as 100 million barrels of oil equivalent.

The development represents an investment of around $400m – Total will hold a 49 per cent stake in the development, while Sonatrach maintains the majority stake. The first gas from Erg Issouane is expected to be produced in late-2021, with gas piped to an existing gas treatment facility. Sonatrach and Total have already signed a gas marketing deal.

The gas development deal comes despite delays to Algeria’s long-awaited new hydrocarbons law, which is intended to make the country more attractive to international investors. It is expected to be finalised before the end of the year.

The new law aims to address Algeria's oil and gas tax regime as well as any other shortcomings in the existing legislation in order to help bring more investors like Total back to the country. Algeria passed its last hydrocarbons law in 2005, with a key change replacing Sonatrach's right to take a majority stake in all upstream partnerships and reducing its stake to no more than 30 per cent.

However, the law faced significant opposition and had to be reversed just a year later. The amendment in 2006 also introduced windfall taxes on profits, making investments even less attractive, and subsequent licensing rounds failed to bring in new companies.