Versalis, the chemicals arm of Italian energy group Eni, has signed a memorandum of understanding (MoU) with Sonatrach to build a petrochemicals complex in Algeria.

Eni and Sonatrach, Algeria’s state oil and gas company, signed a cooperation agreement in November 2016, and will now pursue studies to develop “one or a few world-scale industrial petrochemical facilities”, the Italian group said.

Since Algeria’s upper house passed a new mining bill on 31 January 2015, the country has seen an increase in petrochemical project activity.

Algeria has large reserves and production of natural gas, which can be used as a feedstock to produce polyolefins and other products.

Currently there are three active petrochemical projects in Algeria worth a total of $4.3bn, although the construction schedule for all three schemes remains uncertain.

Chemicals production in Algeria is largely limited to fertiliser production.