ALGERIA - Power Generation.

The power generating capacity in Algeria has reached 9,273 MW. It should exceed 11,000 MW by 2010 and 20,000 MW by 2015. Most of the increase in generating capacity will involve IPPs, with Sonatrach having branched into the power business in partnership with Sonelgaz. Around 95% of the current capacity is provided by gas-fired plants.

According to Sonelgaz, demand for electricity in Algeria is growing at a rate of about 6% per annum. Domestic power demand should rise to 9,300 MW by 2010, compared to about 5,447 MW in 1996. Sonelgaz also exports some power to Morocco during low demand periods.

Sonelgaz has been trying to become self-sufficient financially. It is to raise the power tariffs to cover costs. It began raising the tariff gradually in 1994. It is also to become more tough towards clients failing to pay their bill on time, like the state water utilities and other public services. Already Sonelgaz cuts clients off if they do not pay within two weeks. To become profitable, eventually, Sonelgaz will have to raise power and gas tariffs to international market levels in line with IMF policy.

On May 23, 2001, Sonatrach (51%) and Sonelgaz (49%) established a JV called Algerian Energy Co. (AEC) to invest locally and abroad in power generation, transmission and distribution, and the transport and distribution of gas. With an initial capital of AD 250m ($2.5m), it plans to sell power to the local market, the neighbouring countries and southern Europe. AEC intends to bring in Western partners.

The first major AEC venture is Sharikat Kahraba Skikda (SKS - Skikda Power Co.) formed in mid-May 2003, which has an 825 MW IPP built by SNC-Lavalin of Canada under an EPC contract signed in July 2003. SNC-Lavalin has taken an 11% equity in SKS, with the other owners being Sonelgaz (39%), Sonatrach (30%) and AEC (20%). The multi-shaft plant consists of two gas turbines and two steam turbines. The first block of turbines was commissioned in late 2005 and the second became operational in 2006. SNC-Lavalin also has the operations and maintenance (O&M) contract for the SKS plant.

The second AEC venture is Sharikat Kahraba Berroughia formed in 2004 which has a 490 MW plant at Berroughia, 100 km south of Algiers. This is one of the fast-track projects and was completed in 2006. Siemens had the $193m EPC contract for this as well as a seven-year O&M contract worth $23m.

SNC-Lavalin is building a gas-fuelled thermal power station with a capacity of 1,227 MW at Tipasa, west of Algiers. Following an international tender, the Canadian company was awarded two contracts for this power station, one for the engineering, procurement and construction (EPC), and one O&M. The two contracts are worth US$1.15 bn between them. The power plant is scheduled for completion in 2008.

The contracts were in mid-2006 signed with Sharikat Kahraba Hadjret en-Nouss SpA, which is 51% owned by Algerian Utilities International Ltd and 49% by three state-owned companies, Sonatrach, Sonelgaz and AEC. The shareholders in Algerian Utilities International are SNC-Lavalin (51%) and Mubadala Development Company (49%). Mubadala Development is wholly owned by the state of Abu Dhabi.

SNC-Lavalin in mid-2006 explained that the project was to be financed by a mix of the US$265m of equity subscribed by the shareholders in Shariket Kahraba Hadjret en-Nouss and commercial bank loans from Algerian banks. Once completed, the power plant will be operated by the Canadian company, and its electricity output will be sold to Sonelgaz under a 20-year contract.

Alstom has built a 300 MW plant at F'Kirina, 520 km east of Algiers commissioned in October 2004 under a 123m ($137m) fast-track contract signed on Aug. 14, 2003. The plant consists of two GT13E2 gas turbines and the generators. Alstom has also provided high voltage substation and the electro-mechanical auxiliaries, plus civil work, erection, commissioning and testing services.

Alstom in October 2004 completed a 300 MW plant at Ain Beida in Oum el-Bouaghi province in the north-east of Algeria under a 50m ($58m) fast-track EPC contract awarded on June 23, 2003 by Sonelgaz.

Red Electrica of Spain, which operates a marine cable system under the Strait of Gibraltar connecting the power grids of Morocco and Spain, in November 2001 signed a protocol with Sonelgaz for the two companies to have a similar cable between Algeria and the Spanish market. This will run along a marine gas pipeline being built from Algeria to the Almeria region in Spain. In December 2001, Sonelgaz signed an agreement with an Italian network company called Gestore della Rete di Trasmissione Nazionale (GRTN) to jointly operate a marine cable that will run along a gas pipeline being built to Italy through Sardinia.

The Kahrama venture between AEC (20%) and Kansas-based Black & Veatch (80%) has the country's first independent water desalination and power project (IWPP) in Arzew close to the GL2Z gas liquefaction complex. This has a $400m power plant of 314 MW and 88,000 CM/d plant built by a Japanese partnership of Itochu and Ishikawajima-Harima Heavy Industries under a $260m EPC contract signed at the end of 2002. These plants became operational in April 2005. GE Power Systems has provided the gas turbines.

AEC supplies the plant with gas and buys the power output under 25-year take-or-pay (ToP) contracts. Under another 25-year contract, with a 100% ToP clause, Sonatrach buys the water output for use in the Oran region. This area has been acutely short of water. AEC is having several water desalination plants built based on reverse osmosis (RO).

In March 2001 AEC signed a contract with Enelpower, a unit of Italian power utility Enel, on co-operation in power generation, transmission and distribution as well as in gas marketing in Algeria and abroad. Under a 12-month Sonelgaz contract signed in late 2001, Enelpower has erected 410 km of high-tension power lines in two sections, one between Touggourt and Biskra and the second from the Hassi Ameur power plant to the Moroccan border.

A 400 MW gas-fired two-turbine combined cycle plant at Hamma, a coastal suburb of Algiers, was built for Sonelgaz by Ansaldo Energia, which also built a 220-kV substation, under a contract signed in March 1999. The first turbine was commissioned in January 2002 and the second started up in June of that year. The plant meets additional demand in the region and has replaced an earlier proposal to build two 300 MW units at Ras Djinet (see Vol. 60, No. 5).

Sonelgaz in December 2006 was evaluating technical bids from two companies - Ansaldo Energia and a US/Spanish partnership of GE Energy and Cobra - for two 26-month EPC contracts to build combined cycle power plants together worth about $1,000m consisting of a 1,200 MW station at Terga in the west of Algeria and an 800 MW unit at Koudiet Draouch in the east. The successful bidder for each contract will take a 25% stake in the plant. Commercial bids are expected in February or early March. These contracts will not include the ToP clause.

Technical bids were expected by end-January 2007 for the EPC contract to build a 500 MW open-cycle plant at Msila, south-east of Algiers. Companies have until March 19 to submit technical bids for two 260 MW plants, one to be at Relizane and the other at Batna, with each to have two 130 MW gas turbines.

In late 2006 talks were underway with GE for two EPC contracts to build 100 MW plants at the Port of Algiers and Annaba. The US company was the sole bidder for both contracts.

Several IPP projects announced in 1998 have been transferred to AEC. One of the delayed projects is a 1,200 MW CC plant at Jijel, to be known as Jijel-2, scheduled for completion in 2009/10. It will consist of two 600 MW units.

A 300 MW gas-fired plant at Hassi Messaoud came on stream in 1999 and was built by Nuovo Pignone under a contract awarded in 1995. A 200 MW gas-fired plant at Ain M'Lila built for Sonelgaz came on stream in 2002.

A 330 MW gas-fired plant in the oil-rich Hassi Berkine region built for Sonatrach was the country's first privately financed project partly completed. The first 110 MW unit went on stream in 2001 and the other two were operational in 2002. The $107m EPC contract for this was given to Nuovo Pignone.

Other power projects in Algeria include: a 300 MW gas-fired plant at Hassi Messaoud to be on stream in 2007/08 and to consist of three 100 MW units; and a 200+100 MW gas-fired plant at Tilghemt to be on stream in 2007/08.

On Dec. 7, 2000, Sonatrach and Conoco of the US signed a partnership agreement for a proposed integrated gas-to-power (GTP) project in which investment was to be about $3 bn. This was to include a 1,200 MW plant, development of gas reserves in the Berkine Basin and a pipeline from the field to the power plant. The venture was to sell power locally and in neighbouring countries. Conoco (now ConocoPhillips) was considering a large-scale water desalination plant adjacent to the power plant.