Anadarko Petroleum Corporation has settled a six-year dispute with Algeria’s state-owned oil producer Sonatrach over a special tax on crude production, the US-based company says.

The Algerian government passed the exceptional profits tax law in 2006, imposing a levy on gross production rates on foreign oil companies operating in the North African country.

Anadarko disputed the tax and launched arbitration proceedings against Sonatrach, resulting in delays to the El-Merk megaproject being developed by the two companies in the east of Algeria.

The new agreement between Anadarko and Sonatrach is expected to be approved by the Algerian government within the next four months.

The deal will provide Anadarko with additional crude volumes worth $1.8bn in the 12 months after approval. The two companies also re-negotiated the production sharing agreement (PSA), which Anadarko says would give it an extra $2.6bn of the project’s value.

Sonatrach and Anadarko’s joint El-Merk development includes a central processing facility, export pipelines and facilities infrastructure. The project was 88 per cent complete at the end of 2011, according to Anadarko, and is expected to start producing during 2012.   

It was originally planned to have production capacity of 108,000 barrels a day (b/d) of crude oil; 55,000 b/d of condensate and 75,000 b/d of liquefied petroleum gas.