BP is set to award contracts worth almost $1.5bn on its two largest assets in Algeria, even though the UK-based oil company is widely expected to sell them in the coming months.

The UK’s Petrofac is the low bidder on an estimated $1.1bn project to develop four fields in the south of the In Salah concession in the southern Sahara. Japan’s JGC Corporation was ranked second, with Italy’s Saipem third and Entrepose Contracting of France fourth, according to a source close to the process. The acreage has production capacity of 9 billion cubic metres a year (cm/y)

JGC Corporation is the low bidder on an estimated $220m compression project on the In Amenas concession in the Illizi basin in the south east. Saipem was ranked second, with Petrofac third, according to the same source. The field has capacity of 8 billion cm/y of gas and 50,000 barrels a day of oil equivalent in liquids.

Total gas reserves in In Salah’s southern fields are about half the size of those from the three producing fields in the north of the concession. The new processing facility will have capacity of about 400 million cubic feet a day.

“It’s a pretty extensive project involving lots of connecting pipelines and a processing facility just north of In Salah town,” says Mike Mossman, BP’s acting Algeria country manager.

Both projects are part of the original field development plans for the two concessions and are designed to maintain plateau production life. “We should notify the [winners] by the end of this month,” says Mossman.

A compression project is also near to completion to maintain output on the three In Salah fields currently in production. “It is coming on stream at the moment,” says Mossman. “We have completed the first part and the other is due for completion around the end of the year.”

BP also has a stake in the promising Bourarhet block next to In Amenas, which is in the exploration and appraisal stage.

“We’ve drilled another two wells this year and are looking at how to take it forward,” says Mossman. The first discovery was made there in 2008.

The development of Bourarhet would require significant investment, as well as the expansion of the country’s pipeline network to handle the additional production.

“It’s quite an extensive area of tight gas, so it would need quite a lot of infrastructure to develop,” says Mossman. “Some would be our responsibility, but the export pipeline would have to come from the government.”

The field is of a similar size to In Amenas, says Mossman: “You need something of that size to make the investment viable.”

Despite the company’s ongoing investment, indications from government officials that BP is likely to divest its holding in the two concessions are supported by industry sources speaking to MEED.

Algeria’s energy minister Youcef Yousfi has said a deal with Russian-UK joint venture TNK-BP over the acquisition of BP assets in Algeria is “being discussed”, while Russian energy minister Sergei Schmatko has said Algeria’s state energy company, Sonatrach, is “looking seriously” at taking over the acreage.

If a sale does go ahead, BP’s two partners, Sonatrach and Norway’s Statoil, would have first refusal on the acreage. “My impression is that Sonatrach and Statoil will buy BP’s shares in In Amenas and In Salah, giving Sonatrach the majority stake,” says Hakim Darbouche, a specialist in Algeria at the Oxford Institute of Energy Studies.

BP has not officially confirmed that it is looking to divest its assets in Algeria, but is also careful not to deny that talks are taking place. “At the moment nothing has been agreed,” says Mossman.

“We have not confirmed on the record that we are looking at a disposal option,” says a BP spokesman in London. “If we were, Sonatrach and Statoil would have pre-emption rights. We would also have to have approval from the Algerian government.”

The UK company has confirmed that the sale of the In Amenas and In Salah fields, both of which have been producing for several years, would be consistent with BP’s divestment strategy.

“We are looking at mature existing developments with low potential for growth,” says the spokesman. “I suppose [the two assets] fall into that category. [But] there’s still some growth there – they are less mature than the assets we’ve divested so far. They are still assets worth investing in.”

It is unlikely that the company’s stake in Bourarhet would be sold, as it is not a mature asset.

Any sale is likely to be a protracted process. “If BP gets [the deal done] by the end of the first quarter of 2011, I think they’d be happy, but it could take longer than that,” says Samuel Ciszuk, Middle East energy analyst at IHS Global Insight.

BP has a 33.15 per cent stake in the In Salah gas field and 25 per cent in the In Amenas fields, while Statoil holds a 31.85 per cent interest in In Salah and 25 per cent in In Amenas, with Sonatrach holding the balance.

BP has set a target of $30bn in disposals by the end of 2011 to pay for its clean-up operation in the Gulf of Mexico. According to the company’s third-quarter results, published in October, they have raised about $14bn to date.