Algerian national oil company Sonatrach has signed a contract with the French oil major Total agreeing to build a petrochemical plant in Algeria.

The project is worth $1.4bn and will be located in Arzew, a port city in western Algeria, Total said in a statement.

Engineering studies have started already and front-end engineering and design (feed) will start in the summer.

The initiation of the feed work subject to approval by Algerian regulatory authorities.

Algerian state energy company Sonatrach will own a 51 per cent stake in the project, with Total holding the remaining 49 per cent.

The plant in Arzew will have annual production capacity of 550,000 tonnes of polypropylene.

“This project in Algeria illustrates our petrochemical growth strategy which consists of expanding our activities from competitively advantaged feedstock, especially derived from gas, to take advantage of the growing global plastics demand. This polypropylene project complements our other projects announced recently in the United States, in the Middle-East and in Asia, which are primarily focused on polyethylene”, Total CEO Patrick Pouyanne said in the statement.

“It is also an opportunity to strengthen our cooperation with Sonatrach, by moving beyond our long-standing exploration and production relationship to invest in the downstream together.”

The company also said in the statement: "The facility will valorize propane, produced in large quantities locally, by transforming it into polypropylene, a plastic for which demand is growing strongly."

Speaking to the French newspaper Les Echos before the contract was signed the CEO of Sonatrach, Abdelmoumen Ould Kaddour, said: “It will be the first unit to produce propylene and polypropylene in Algeria ... most of it will be exported to Europe”.

On 8 May MEED reported that Sonatrach and French oil major Total were preparing to launch a new petrochemical project in Algeria.

The facility will be a propane dehydrogenation polypropylene (PHD/PP) plant.

It will be built on a greenfield site, according to industry sources.

The project is going to be based on a feasibility study for a “world-scale petrochemicals complex” that Sonatrach commissioned Total to undertake in December 2016.

Propane dehydrogenation (PDH) is a process that is used to produce polymer-grade propylene (PP) from propane without using a steam cracker or fluid catalytic cracking unit.

Sonatrach is currently working on a strategic plan to reach mid-term and long-term goals, called SH2030.

It is thought that the planned petrochemical facility with Total will be a key element of the downstream strategy laid out in SH2030.

Total’s exploration and production activities in Algeria date back to 1952.

In 2017, Total produced 15,000 barrels of oil equivalent a day (boe/d) in Algeria, all of it from the Tin Fouyé Tabankort (TFT) gas and condensate field.

The Group currently holds a 35 per cent in interest in TFT.

In March 2018, Total started up production from the Timimoun gas field in southwestern Algeria.

The Group has a 37.75 per cent interest in the field, which has a production capacity of 5 million cubic meters of gas a-day (around 30,000 boe/d).

Total also markets lubricants and bitumen in Algeria.

Through the Maersk Oil acquisition, which closed on 8 March 2018, Total now holds a 12.25 per cent interest in the El-Merk, Hassi Berkine and Ourhoud oil fields, which have a combined production capacity of 400,000 boe/d.

In November 2017, Total announced the acquisition of Engie’s upstream liquefied natural gas (LNG) assets.

Once closed, this transaction will add 4.6 million tonnes per year to the Group’s global LNG portfolio.