Algeria - Power Generation.

The power generating capacity in Algeria is over 9,500 MW. It should reach 14,000 MW by 2010 and 20,000 MW by 2015, from 7,077 MW in 2006. 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.

Sonelgaz in November 2008 signed service agreements with GE Energy. These will help to improve efficiency, output and reliability of 51 gas turbines installed in 13 power plants across the country. These include: An 18-year contractual service agreement (CSA) for the Koudiet Eddraouch power plant in el-Tarf province, 700 km east of Algiers. This agreement followed the June 10, 2008, announcement that GE Energy will supply three F-class gas turbines for this new plant. A six-year maintenance programme covers 48 gas turbines at 12 other Sonelgaz power plants across the country. The Koudiet Eddraouch plant is part of Sonelgaz's plans to boost its production capacity, to help meet Algeria's growing power needs. According to the Ministry of Energy and Mines, the country's need for power is surging more than 7% annually.

The national grid will come under further strain if plans go ahead to export 2,000 MW of electricity to Spain and 500 MW to Italy, alongside gas pipelines to the two countries.

MEED on Jan. 12, 2007, quoted Nadjib Otmane, head of the regulator CREG, as saying: "We have to move fast to build generation capacity. We want to increase capacity by about 900 MW a year".

The Larbaa open-cycle gas-fired plant, being built by Ansaldo in the Blida region, is due on stream by end-2009. The 560 MW plant forms part of a project to add 2,000 MW of gas-fired capacity by end-2009. Other plants are planned at Batna, Relizane, Algiers Port, Oran East, Annaba and M'sila.

Sonelgaz is rehabilitating the 336 MW Marsat el-Hadjadj plant near Oran, and plans to bring the 1,200 MW Hadjret Nouss combined cycle plant online in the first half of 2009. These will be followed by the 1,200 MW Koudiet Eddraouch and Terga plants in 2011-2012.

Sonelgaz has been trying to become self-sufficient financially. It began raising the tariff gradually in 1994. It has 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 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 were worth US$1.15 bn between them. The power plant was completed 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 $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 was to be operated by the Canadian company, and its electricity output to 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 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, 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.

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. 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. The first 110 MW unit went on stream in 2001 and the other two were operational in 2002.

Construction got under way in July 2007 on a 150 MW Hassi R'Mel hybrid solar/gas power plant. Some 25 MW of the plant's output will be generated by huge parabolic mirrors to stretch over 180,000m2. Solar power specialist Abener, part of Spain's Abengoa group, has a 66% share in the $425m project, alongside the state-owned New Energy Algeria (NEAL), set up by the government in 2002 to develop renewable energy projects. The technology is considered more efficient than the photovoltaic cells used in small-scale solar panels.

It was announced that NEAL was to build three more plants using the same hybrid technology, each with a capacity of 400 MW. But the cost of solar power still affects its commercial viability. NEAL Managing Director Tewfik Hasni then estimated the plant's solar generation will cost 25% more than gas and could require subsidy for ten years following its 2010 completion before the technology has improved enough to make it commercially competitive.

In mid-2008 it was reported that the government was to send a bill to parliament to regulate nuclear power generation. Algeria is to have a nuclear plant built in 10 years. Energy Minister Chakib Khelil on July 1, 2008, told the World Petroleum Congress in Madrid Algeria had the potential to generate 170,000 terawatt hour from solar energy, and 35,000 terawatt hour from wind energy. Algeria has found enough uranium deposits to fuel two nuclear power plants for 60 years. Algeria would also use nuclear power for water desalination. Algeria on June 9, 2007 signed a nuclear co-operation accord with the US to enable it to begin generating nuclear energy for civilian purposes. US nuclear experts have since worked with Algeria's Atomic Energy Commission to determine possible future projects of common interest.