Sonatrach Relaxing Gas Sales Monopoly, Hints Eni

Eni CEO Claudio Descalzi hinted, on a 2Q results analysts call July 27, that his company’s agreement last week with Algerian state producer Sonatrach will relax the latter’s gas sales monopoly.

Under last week’s deal, it was agreed with Sonatrach to combine all Eni's upstream activities in the country in order to realise cost savings, said Descalzi, adding that plan is now being put into effect.

Signficantly, he said that it was also agreed with Sonatrach that Eni will be allowed to export any gas, going forward, that it discovers in a deep level below its BRN and MLE oilfields. “That will be important in terms of the quantity of gas that we can deliver,” he told analysts. 

Descalzi added that, in addition, any gas freed up from the domestic market – through the development and launch of Eni’s solar renewables project being built in Algeria with Sonatrach – would also be allowed to sold by Eni either on the export or domestic markets.

This sounds like a partial end of Sonatrach’s exclusive marketing of gas, which would mark a major change in the Algerian state company’s strategy. Hitherto, Sonatrach has remunerated partners for any produced in Algeria with equivalent amounts of liquids (mainly oil) for export.

Sonatrach CEO Abdelmoumen Ould Kaddour said October 2017 in London that he was thinking of allowing foreign firms, through joint ventures with Sonatrach, to begin marketing Algerian gas.

At Eni’s March 2017 strategy presentation, Descalzi said that Eni was angling for such a deal: he stressed then how Eni intends to maximise the future value of equity gas, in its overall gas import portfolio, by reducing or phasing out long-term gas purchase contracts as they expire – but that that need not mean excluding Algerian gas imports in the 2020s.