Structure

With 120,000 employees, Algeria’s state-owned energy giant Sonatrach is the largest company in Africa. Established in 1963, the firm is responsible for the exploration, production, distribution and marketing of hydrocarbons and downstream products in Algeria. Since hydrocarbons account for 97.5 per cent of Algeria’s export earnings, Sonatrach is the mainstay of the country’s economy.

Through the investments of Sonatrach and its partners, Algeria has grown to become the world’s third largest exporter of liquefied petroleum gas (LPG), the fourth largest exporter of liquefied natural gas, the fifth largest natural gas exporter and the ninth largest exporter of oil. Sonatrach is ranked sixth among the world’s natural gas companies in terms of reserves and production.

Sonatrach’s chief executive officer (CEO) reports directly to the energy minister, while four vice-presidents manage departments responsible for upstream, downstream, pipeline transportation and commercialisation.

Through a network of holding companies, Sonatrach has a stake in the majority of Algeria’s industrial enterprises, from oil and gas, petrochemicals and fertiliser plants, to mining of metals and minerals, and renewable energy in the North African country.

Until 2005, Sonatrach was responsible for the licensing and regulation of the oil and gas industry. A new hydrocarbons law passed that year transferred these responsibilities to two newly-created state organisations: Alnaft, the new licensing agency, and Autorite de Regulation des Hydrocarbures, the regulator.

Operations

Sonatrach is responsible for the development of Algeria’s upstream hydrocarbons sector, which it carries out either on its own or in partnership with international oil firms. It fully owns Hassi Messaoud, Algeria’s largest oilfield, and Hassi R’Mel, the country’s main gas reservoir. In 2009, the company made 16 new hydrocarbons discoveries, seven of them in partnership with international oil companies.

Sonatrach is obliged by law to take a stake of at least 51 per cent in all oil and gas contracts. This obligation was briefly removed under the 2005 hydrocarbons law, when its share was cut to 20-30 per cent. But the stipulation that it take a majority share was reinstated when amendments to the law were passed in 2006. No agreements were signed in the interim period.

Sonatrach owns a national network of oil and gas pipelines of more than 16,000 kilometres. It has a share in two existing export pipelines to Europe, as well as a 36 per cent interest in the Medgaz pipeline to Spain, due to come on stream in July, and a 41.6 per cent stake in the planned Galsi pipeline to Italy.

Sonatrach also owns gas liquefaction facilities at Skikda and Arzew, both of which are in the process of being expanded, as well as two LPG plants, five refineries, two helium plants and a number of small petrochemicals units. In addition, it is building two new fertiliser plants in partnership with foreign firms, and it has made investments in the hydrocarbons sectors in the neighbouring markets of Libya, Egypt and Tunisia, as well as in Europe and South America. New legislation introduced in 2008 stating that international companies can take no more than a minority stake in local joint ventures will mean Sonatrach plays an increasingly important role in the development of the downstream industry.

Ambitions

Sonatrach is central to Algeria’s ambitions, set out in 2005, to increase gas export capacity to 85 billion cubic metres a year (cm/y) from 62 billion cm/y, and oil exports from 1.5 million barrels a day (b/d) to 2 million b/d. It aims to do this by continuing to produce from existing basins such as Hassi Messaoud and Hassi R’Mel, as well as increasing output from acreage in the Berkine basin and elsewhere, and targeting new production in areas such as the tight gas fields in the southwest.

According to former Sonatrach CEO Mohamed Meziane, the firm plans to invest $65bn during the next five years, including an average $1.5bn a year on exploration. Downstream, the company is planning to build a new methanol plant and ethane cracker, and a number of other petrochemical facilities. It is currently looking for contractors to develop a 300,000 b/d refinery at Tiaret and aims to expand its international footprint.