ALGERIA - The External Subsidiaries.

Sonatrach has more than 30 subsidiaries and affiliated companies operating within Algeria and abroad, many of them in partnership with foreign companies. The main units abroad under Sonatrach International Holding, and other investments are the following:

Sonatrach Petroleum Corp. (SPC), based in London, is a trading unit which has a staff of over 30, including traders. It is to set up other overseas trading units, with staff to be drawn from Sonatrach headquarters. Each of these units is to be self-sufficient. At present SPC handles the purchase, marketing and sale of up to 15m t/y of crude oil, refined products and LPG. About 70% of this is produced in Algeria and the rest purchased from non-Algerian sources and sold to SPC customers. SPC's areas of trading include East and West Europe, the Mediterranean, Africa, the US and Latin America. A marketing unit of SPC has been set up in the US.

In late 1994 SPC opened a trading unit in Singapore to handle the Asian market for LPG and other products. It may expand and have a unit in Tokyo for the Far East. It may establish units in Latin America to market LPG and low sulphur fuel oil. SPC is wholly owned by Sonatrach. Sonatrach's LPG export planners have been targeting markets east of Suez in competition with GCC exporters.

In October 1991, a strategic co-operation agreement was signed between Sonatrach and Itochu, one of Japan's trading giants, whereby Algerian LPG production capacity would reach 12m t/y by 2002 - thus making it the world's second biggest supplier of the butane/propane mix next to Saudi Arabia. Algerian officials then hoped Itochu would invest up to $5 bn in this and other gas-related projects. (Itochu has been involved in Algeria since the early 1970s, both as a contractor and as a buyer of oil, condensates and LPG. Work on expanding the Jumbo GP1Z plant, near Arzew, has involved a Japanese consortium of IHI and Itochu under a $368m contract awarded by Sonatrach in early 1994. Marubeni is another Japanese trading giant involved in Sonatrach projects. Itochu has won several other contracts in partnership with JGC Corp for Sonatrach projects in Algeria).

Sidem is a wholly owned Sonatrach engineering unit. In November 1998 Sidem and JGC Corp., working in Sonatrach's gas plants for more than 30 years, formed an engineering JV to operate in Algeria and abroad. Based in Algiers, the JV has operational offices in Hassi Messaoud and a presence in other oil and gas producing areas. The JV is providing turnkey services for the industry. It was created in order for Sidem to acquire advanced technology and experience in working outside Algeria.

Sonatrading Amsterdam, wholly owned by Sonatrach, is a trading and marketing company for natural gas and LNG. It handles the European market and has a US unit for the American LNG market. The work of this company so far has not been as successful as that of SPC, because of the difficulty in gas trading in the West which is handled by large firms. But in West Europe its image is gaining considerably from the loss of credibility of Gazprom, the huge Russian monopoly which intends to dominate the European gas market. Gazprom's image as a reliable gas supplier suffered a great deal in Europe early last month when it stopped exports to its neighbour Georgia. This raised questions in Europe, which depends on Gazprom for 42% of its gas imports. European demand for gas is now expected to rise from 324m t/y of oil equivalent in 1999 to 458m t/yoe in 2020.

Sotal Energy Ltd. is owned 50% by Sonatrach and 50% by TotalFinaElf. It markets LPG in Europe, North Africa and other areas. The LPG is produced by Total in Algeria. Total's production of LPG and condensates is set to rise considerably from the major TFT group of fields (see OMT 6). Similar JV companies to market LPG and condensates in Europe are under discussion with Cepsa and Repsol which are producing oil in Algeria.

In Salah Gas, based in The Hague, is a JV of Sonatrach and BP set up in April 1997 to market gas in Europe from large In Salah fields which BP is developing in the Algerian desert (see Gas Market Trends 6). In April 1997, ISG signed its first sales deal with Enel of Italy, a significant client as the new company was targeting the power generation market in southern Europe. ISG's second deal was signed in April 1999 with Italy's rapidly expanding gas and power utility Edison (see Gas Market Trends 7).

MedGaz, created in August 2000, is a JV of Sonatrach and Cepsa of Spain promoting a direct 450-km marine pipeline for Algeria's north-western port of Beril Saf to Almeria in southern Spain. MedGaz has invited BP, Endesa, ENI, Gaz de France (GdF) and TotalFinaElf (which holds 45.3% in Cespa) to assist in a feasibility study for this venture. The five companies were invited to take a 12% share each in the venture, with Sonatrach and Cespa each to hold 20%. The pipeline is to be extended to reach other European markets. It's first capacity of 8 BCM/y by 2003 could be quickly extended to 10 BCM/y or more. Apart from Spain, a fast-growing-growing gas consumer, markets which MedGaz will eventually reach are Portugal, France, Germany, Holland, Belgium, Denmark and Sweden. The gas will come from the remote In Salah, with the first gas expected in 2003. The link to MedGaz will be a 48-inch pipeline to run 550 km from In Salah to Hassi R'Mel.

The MedGaz system could be expanded further to allow for other African gas exporters to reach European markets. This is being discussed by Sonatrach and Nigeria's NNPC, which will be supplying gas by pipeline to Niger and Mali, after an initiative to that effect was made in 2000 by Algerian Energy and Mines Minister Chakib Khelil (see Downstream Trends).

Sonatrach Petroleum Investment Corp. B.V., registered in Holland, is a finance and investment company owned 99.9% by Sonatrach and 0.1% by the Algerian foreign trade bank BACE. This company is helping Sonatrach consolidate and expand its overseas operations. Its role is in line with a plan to integrate Sonatrach's strategic subsidiaries overseas, which will include E&P ventures and associated logistics and services. One such unit, for example, is to explore for and produce oil in Senegal under an agreement between Sonatrach and Senegal's state company Petrosen.

International Petroleum Investment Partnership (IPIP) is a financial holding company specialised in portfolio management. It is 99.9% owned by Sonatrach with BACE holding 0.1%.

Trans-Mediterranean Pipeline Co. Ltd. (TMPC) is a 50-50 JV of Sonatrach and Snam of Italy. It owns and operates the marine section of the TransMed gas pipeline from Tunisia to Sicily. Its pipeline's capacity, from Hassi R'Mel, is 24 BCM/y. It is to be expanded to 30 BCM/y, with part of the gas to be supplied to Slovenia and other markets (see Gas Market Trends 7). Samco provides financial and administrative support to TMPC, owned 90% by TMPC, 5% by Sonatrach and 5% by Snam. Italy is the most important gas market for Sonatrach, which accounts for 40% of it energy imports. Agip, like Snam, is part of the ENI group and is Sonatrach's E&P partner both at home and abroad. The first overseas JV is in Yemen, where Agip operates Block 3 with a 60% stake and Sonatrach bought a 40% share in May 1999.

Societe d'Etudes du Gazoduc Ouest Maghrab/Europe (Omegaz) was a joint venture owned 19% each by Sonatrach, SNPP of France, GdF, Enagas of Spain and Ruhrgas of Germany, with SGP holding the remaining 5%, specialised in gas pipeline studies. In 1991 it did the feasibility study for the GME pipeline from Algeria to Spain. The pipeline went on stream in November 1996 with a capacity of 8 BCM/y. This is planned to reach 30 BCM/y by 2005/07. The involvement of GdF and Ruhrgas in Omegaz denoted their interest in expanding the pipeline to reach France, Germany and other markets. Spain is the second most important gas market for Sonatrach, which accounts for 60% of the country's energy imports. Sonatrach is to have equity in a 2.5 BCM/y LNG receiving terminal in the northern Spanish city of Ferrol in partnership with Spanish companies, to be on stream in 2004 and to take Algerian LNG. Sonatrach is also negotiating partnership in GTP ventures near the terminal. It is discussing investment in Portugal.

Propanchem is a DM420m JV of BASF (51%) and Sonatrach (49%). It will have a propane dehydrogenation plant in Tarragona, a port city in northern Spain, to produce about 350,000 t/y of propylene as from mid-2001, with Lurgi being the EPC contractor and UOP providing its Oleflex process. The propylene will be sold to Targor GmbH, a JV of BASF and fellow German chemicals group Hoechst. The plant will use 450,000 t/y of propane from Sonatrach's complex of Bethioua. Tarragona is the site of a 225,000 t/y polypropylene plant being built as a BASF-Hoechst JV to be on stream in mid-2001. Sonatrach and BASF are also negotiating a petrochemical JV to be built in Algeria. BASF Intertrade, based in Zug, has been a long-standing client of Sonatrach buying from it feedstocks for BASF and other firms.

Anadarko of Houston, in which Sonatrach has a stake, now is the world's largest independent oil and gas producer. In 2000 it bought Union Pacific Resources which enabled it to more than double output and reserves. As a result of this and high oil and gas prices, Anadarko's fourth-quarter 2000 net income rose from $28m to $454m on revenue up from $546m to $2.4 bn - eclipsing the growth of larger US rivals. On Feb. 12, 2001 Anadarko agreed to acquire Berkeley Petroleum of Canada by pledging to pay $777m in cash and assume a debt of $250m. This gave Anadarko 1.5m gas-rich acres in Canada. (Anadarko produces oil and gas in Texas, Louisiana, Kansas and Algeria. It has an aggressive exploration programme in Alaska, Texas and the Gulf of Mexico. It is to raise capital expenditure from $1.7 bn in 2000 to $2.5-3 bn this year). It is not yet clear how these acquisitions affect Sonatrach's stake in Anadarko, which in early 1999 was 10.2%. The stake was acquired in the 1980s as part of a settlement of an old LNG dispute with Panhandle. Anadarko is the largest investor in Algeria and by 2004 will become its largest oil producer (Bee Gas Market Trends No. 6). Sonatrach is also negotiating a planned stake in an oil refining venture in Canada in partnership with its term client Ultramar Diamond Shamrock.