Total and Sonatrach reopen talks on Arzew cracker

10 July 2012

Algeria’s state oil group working to deliver required gas feedstock to shelved $7bn scheme

Total has reopened discussions with Algeria’s state-owned oil group Sonatrach over the joint development of an ethane cracker project in Arzew, Oran province, the French oil major says.

The estimated $7bn scheme was put on hold in the second quarter of 2011 as Sonatrach was unable to allot the required volumes of ethane feedstock to the proposed petrochemicals complex.

“The project has faced a few issues since [the landmark agreement in] 2007, but the project is still alive. Sonatrach is working to deliver ethane to the project and the discussions have been reopened,” a spokesperson from Total said.

The cracker, which will use ethane feedstock from Algeria’s southern gas fields, will be designed to produce 1.4 million tonnes a year (t/y) of ethylene.

Three separate lines will use the ethylene to produce 450,000 t/y of linear low density polyethylene (LLDPE), 350,000 t/y of high density polyethylene (HDPE) and 410,000 t/y of monoethylene glycol (MEG).

Sonatrach and Total tendered and received bids for the front-end engineering design (feed) during 2010, but the project was placed on hold before the start of the design phase.

An agreement is understood to be in place for Qatar Petroleum to take a 10 per cent stake in the Arzew project. This would leave Total with a 39 per cent share and Sonatrach with the controlling 51 per cent.

The main barrier to the project’s progress is a shortage of gas feedstock in Algeria. Chronic underinvestment in the country’s gas sector has left it struggling to keep up with rising domestic demand and export commitments to Europe. The partners are also still yet to negotiate a feedstock price, which is central to the profit potential of the scheme.

There are signs that Algeria’s greenfield gas projects are making progress with the $3bn North Reggane scheme, the country’s largest gas development, is currently in the feed stage. The Timimoun and Adrar fields form another promising gas project in Algeria’s southwest region.

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