Algeria’s Sonatrach is to allow Spain’s Gas Natural to acquire a 10 per cent share of the Medgaz pipeline as part of a settlement for a long-running legal battle between the two companies.

The deal is a resolution of the argument between the two firms over the cost Gas Natural pays for Algerian gas pumped through the pipeline.

As part of the agreement, Gas Natural will pay Sonatrach about $1.19bn, with the Algerian oil giant also taking a minority stake in the Spanish utility.

The current shareholders of Medgaz are:

• Sonatrach – 36 per cent
• Cepsa (Spain) – 20 per cent
• Iberdrola (Spain) – 20 per cent
• Endesa (Spain) – 12 per cent
• GDF Suez (France) – 12 per cent

The Medgaz pipeline started operations in May 2011 and has a capacity of 8 billion cubic metres a year.