National oil company Sonatrach has frozen bidding on a multi-billion-dollar contract to upgrade its 15 million tonne-a-year (t/y) Skikda refinery because of problems at its former subsidiary Naftec, contractors tell MEED.

Sonatrach decided in August 2008 to reintegrate Naftec, which was established in 1998 to oversee downstream development deals such as the Skikda refinery, as part of a wider restructuring of Algeria's energy industry.

Contractors received a letter from Naftec in November last year advising them it would no longer enforce its original bid deadline of 1 December on the Skikda deal.

While no revised deadline date was set, contractors expected that bidding would start by the second quarter of 2009.

However, contractors tell MEED that Sonatrach has informed firms inquiring about the Skikda deal that the contract is being delayed because of structural problems associated with the former subsidiary.

Would-be bidders include Spain's TR, South Korea's Samsung Engineering, and a group of South Korean firms comprising Hyundai Engineering, Daewoo International and Hanwha Engineering & Construction.

"We have been told that until Sonatrach has completed the roll-out of its new downstream arm, this facility will remain on hold," says one source close to the project.

One contractor says interest from Hyundai, Daewoo and Hanwha has cooled because of the delays, but none of the three firms have formally walked away from the project.

Problems with the integration of Naftec have also delayed bids for the revamp of the 58,000 barrel-a-day Algiers refinery, even though Naftec completed the front-end engineering and design (Feed) contract in November 2008.

Contractors were expecting bid documents in the first quarter of this year, but Sonatrach has yet to give potential bidders an official explanation for the delay.

However, one of the country's largest refinery projects, at Tiaret, is moving ahead. Sonatrach has invited more than a dozen companies to bid for the Feed contract on the refinery. The state-owned firm plans to launch a tender in the third quarter of this year.

Algeria abandoned earlier plans to develop a gas-to-liquids plant at Tiaret, which would have been the country's first, in April 2007. Naftec had sought a joint venture with an international partner for the plant.

In November 2008, Naftec awarded a $400m contract for the upgrade of its ageing refinery at Arzew to a consortium of three South Korean firms.

Hanwha Engineering & Construction and Hyundai Engineering with Daewoo International will expand the existing facility by 2011, although they have not disclosed the scope of the project.

The award comes after Naftec invited five companies to submit bids for the rehabilitation of the refinery in 2006, but decided the bidders were not in a position to carry out the job.