The Algerian Petrochemical Sector Is Open To Foreign Investors.

Algeria's petrochemical sector, producing a wide range of chemicals for local use and export, is to expand in partnership with foreign companies. Some of the existing ventures are to be privatised. Liberalisation of this sector is to be speeded up.

In recent years, government spending has gone mainly to upstream ventures to raise income from oil and gas exports (see Oil & Gas Market Trends of this week). The first steps towards petrochemical joint ventures began in 1990. JVs were formed with Spanish, Italian and French companies (see below).

Slow Progress: MEED on Oct. 27, 2006, reported senior "project sources" as saying the integrated and state-owned petroleum company Sonatrach was scaling back its ambitious plans to develop a series of worldscale petrochemical plants. The publication said Sonatrach had decided to focus on just two of the seven greenfield projects originally tabled for development.

According to MEED, Sonatrach was unlikely to award concessions on the remaining projects, two of which - an integrated purefied terephthalic acid (PTA) and polyethylene terephthalic (PTA) complex and a linear alkyl benzene complex - had already been shelved due to lack of interest from bidders, and a further three have been "deprioritised".

MEED quoted a spokesperson for Sonatrach as saying: "The ethane cracker... and the methanol plant are the most important of the schemes. It is possible that these two are the only ones that will go ahead".

Six technical bids had been received for the concession to take an equity stake in a 1 million tons/year ethane cracker, understood to be from: a team of Europe's Basell and Saudi Arabia's Zamil Group, with Stone & Webster, part of the US' Shaw Group; aA consortium of Total of France and Sonatrach refining arm Societe Nationale de Raffinage de Petrole (Naftec); ExxonMobil Corp of the US; Saudi Basic Industries Corp (SABIC); and LG International of South Korea.

Sonatrach had received six technical proposals for the 1 million t/y methanol plant, understood to include SABIC and Orascom Construction Industries of Egypt. Commercial bids were originally due in July, but a revised bidding schedule was to see selected companies invited to a second round of technical clarifications in late 2006, after which prices were to be submitted. Contracts were set to be awarded in the first quarter of 2007.

Negotiations were to continue on the three other live projects - for a naphtha/condensate steam cracker and a fuel oil catalytic cracker at Skikda and an integrated propane dehydrogenation (PDH) and polypropylene (PP) plant at Arzew.

By late October 2006, Sonatrach had suspended plans to have a 300,000 b/d grassroots refinery built at Tiaret in order to carry out a detailed review of the project's economic and technical viability. The decision put on hold an international tender for a 35% stake in the development. The future of the tender depended on the conclusions of a pre-feasibility study into the project carried out jointly by the UK office of the Jacobs Consultancy of the US and HSBC. The study report was to be submitted to Sonatrach in late 2006.

International companies were invited to bid in late 2005 for the concession to take a 35% stake in the $3,000-4,000m development, designed to produce white products for the domestic and export markets. The concession covered an engineering, procurement and construction (EPC) element as well as responsibility for offtake agreements. Commercial bids were originally due to be submitted in July 2006, but the proposed inland site for the facility had deterred potential investors. The lack of available water supply for cooling at the plant was a major obstacle to the technical and financial viability of the project. Although the study was expected to confirm the project was of marginal commercial viability, MEED on Oct. 27 quoted sources close to the project as saying the political will behind the venture meant that it may still go forward in some form. MEED quoted a Sonatrach spokesperson as saying: "The choice of the inland site is very important. It is designed to create jobs and stimulate services in the region in order to create more of an economic equilibrium across the country".

After the submission of the study, Sonatrach was to make a decision whether to continue to look for a developer or to invite bids for more detailed feasibility and engineering studies and seek a technology licensor for the plant. MEED said Sonatrach was more likely to go ahead alone with the project rather than seek to form a joint venture (JV).

The six-month study was part of a wider contract awarded in June 2006, under which the team was also providing assistance to Sonatrach on feasibility studies and the selection of developer partners for five greenfield petrochemicals complexes.

MEED reported on Oct. 27, 2006, that Naftec had received a mixed response to tenders for contracts to revamp two of its ageing refineries. The tenders for the contract to upgrade Arzew refinery received encouraging interest, while a poor response for the Skikda upgrade has left the project in danger of being shelved. Five companies had submitted bids for the estimated $40-50m, 24-month, engineering, procurement and construction (EPC) contract to upgrade atmospheric distillation and gas plant units and control systems at Arzew. They were: Saipem and Techint, both of Italy, Paris-based Litwin, Germany's MAN Ferrostaal and China Petroleum Engineering & Construction Corp (CPECC). In contrast, MEED added, just three bidders had purchased bid documents for the much larger contract to upgrade Skikda, estimated to be worth at least $300m. Of the three, Technip and Entrepose of France had declined to bid, with only CPECC expressing intent to proceed.

Bidding regulations stipulated that tenders must be cancelled if fewer than three bids were received by a Nov. 17 deadline. Naftec had received eight bids for the $40-50m contract to rehabilitate electrical systems at Arzew. The bidders were: Cegelec and Areva T&D of France, Siemens of Germany, the Milan office of Europe's ABB and local companies EMI, SNCF, Relec and GMI. Bids were due by Nov. 17 for an equivalent contract at Skikda, worth at least $100m. Tenders were to be issued by early November for the upgrade of similar facilities at the Algiers refinery.

Entreprise Nationale de l'Industrie Petrochemique (ENIP), a unit of Sonatrach in charge of the petrochemical sector, has had projects worth over $10 bn to be built by 2010. Algiers hoped foreign investors would provide much of the financing.

In late 2004 ENIP shortlisted the French office of Foster Wheeler, ABB and Shaw International for the project management consultancy (PMC) on the rehabilitation of the Skikda ethylene complex and the Arzew methanol plant, both being inefficient and producing much below capacity. The job was to include front-end engineering and design (FEED) studies as well as preparation of tender documents for the EPC contract.

A $1.3 bn ethylene cracker in Skikda based on naphtha to be supplied by the Skikda oil refinery (see DT No. 6) has been the subject of protracted talks between Sonatrach and Petronas of Malaysia since the autumn of 2003, when a joint feasibility study on this was done by the two companies. The project, based on a study made by JGC Corp. of Japan, is to include plants to produce polyethylenes (PE), polypropylene (PP), ethylene glycol (EG), PVC, and acrylonitrile. It was agreed that, while most of the output would be needed locally with some to be marketed in Europe, Petronas would take the EG.

Sonatrach and the Malaysian Int'l Trading Corp. (MITC), the petrochemicals marketing arm of Petronas, have also been studying the possibility of having a fertiliser plant built in Skikda. But since late 2003 no progress on these two projects has been reported.

The state fertiliser firm Asmidal (50%), in partnership with Firtzwerder of Germany and Transammonia of the US, has a 1,850 t/d plant at Arzew on stream since 2003. The plant has cost about $350m.

Helium JV: Algiers has shown intent to become a major producer and exporter of liquid helium, a rare derivative of natural gas found in a few countries such as Algeria, Russia, Poland, Qatar and the US. There has been strong demand for helium (see down7AlgPetchFeb14-05).

Linde of Germany and Sonatrach have a 600 MCF/y plant built at Skikda's LNG complex. This has been on stream since 2005 as a JV owned 51% by Linde and 49% by Sonatrach. The helium is extracted from LNG. Linde, importing its helium needs from the US, takes 50% of the output. The rest is sold to Europe, the US and Japan. Linde and Sonatrach have a 140 t/d nitrogen plant built there as a 51/49 JV.

The first helium JV in Algeria, Helios, is between Sonatrach (51%), L'Air Liquide of France and Air Products & Chemicals Inc. (APCI) of the US. It has a 16 MCM/y helium plant within the GL2Z LNG complex at Bethioua, near Arzew (see Gas Market Trends), as well as units to produce up to 33,000 t/y of liquid and gaseous nitrogen.

Helios, which cost less than $100m, came on stream in the autumn of 1994. It uses APCI's process, recovering and retreating residual gases from the LNG trains which until 1996 used to be flared. (The gas supplied to GL2Z and other Algerian LNG plants contains about 10% helium and 45% nitrogen).

The nitrogen products are sold to the domestic market and to neighbouring countries by a company established in October 1990 by Sonatrach and Entreprise Nationale des Gaz Industriels (ENGI).

Societe Mediterranenne des Polymeres (Polymed), a JV of ENIP and Repsol/YPF of Spain, has a 130,000 t/y high-density polyethylene (HDPE) complex at Skikda on stream since 2000. Work on this finally began in May 1998, after seven years of delay (see background in Vol. 60, DT No. 7).

Repsol and ENI of Italy have a JV in Madrid, Alcudia Trading, marketing part of the HDPE in the EU.

Societe Maghrebine de Resines (Enisa), another ENIP-Repsol JV, was formed in 1991 and has a 10,000 t/y polyester resins plant built at Arzew at the cost of about $40m.

The government's investment agency APSI in 1996 boosted the privatisation drive by offering 134 state-owned companies for sale. Among these were eight small chemical plants. But thereafter very few plants were privatised.

New private projects were to benefit from incentives under the Money and Credit Law promulgated in March 1990. Under that law the authorities approved the formation of Compagnie Generale de Petrochimie (CGP), a private Algerian firm to build a complex to produce 1.6m t/y of methanol and 100,000 t/y of ammonia in partnership with the Swiss-Swedish group Asea Brown Boveri (ABB).

State-owned Banque de Developpement Local, formed in 1991, was to be a partner and main borrower of a $5 bn loan for which Prudential Securities of the US was nominated as a broker and adviser. The loan was to finance CGP's purchase of oil products and gas feedstocks from Sonatrach over a three-year period. The complex was to cost $3.5 bn, of which $1.8 bn was to be private capital. There has been no progress on this project, however, partly due to remaining political uncertainty.

The petrochemical plants in Algeria are run by Sonatrach and ENIP. Sonatrach and ENIP maintain a good working arrangement, consulting each other before either of them plans any new project. The following are profiles of the main plants run by ENIP and Sonatrach as well as their JVs with foreign companies: