Technip S.A. Secures $908 Million Refinery Expansion Contract from Algeria's Sonatrach

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sonatrach SpA (Algiers, Algeria), Algeria's state-controlled energy enterprise, has awarded a $908 million contract for the refurbishment and augmentation of its Algiers refinery to engineering and technology company Technip S.A. (EPA:TEC) (Paris, France). The contract includes a capacity expansion of the refinery from 57,000 barrels per day (BBL/d) per year to 77,000 BBL/d. The expanded refinery will produce gasoline and other products as per European specifications.

The scope of the agreement includes design, construction, installation, commissioning and support services. The project, which will be executed by Technip's engineering center at Paris, is expected to be completed in 38 months. Technip also will design and build new utilities, a naphtha hydrotreating unit, and a water-drainage network.

Sonatrach is undertaking the expansion and augmentation of its existing refineries at Arzew, Algiers, Hassi Messaoud and Skikda, and is building a new refinery at Tiaret. The agreement with Technip is the first large contract awarded by Sonatrach after the company was embroiled in a corruption scandal in January. Eventually, the company's CEO and other senior executives were dismissed.

The feasibility study for the expansion of the Algiers refinery was completed by Jacobs Consultancy (Burlingame, California). Societe Nationale de Raffinage de Petrole S.p.A (Naftec) (Algiers) was selected to execute the front-end engineering and design activities. During the second quarter of this fiscal year, Sonatrach invited tenders for the engineering, procurement and construction contract for expansion of the Algiers refinery. Several companies, including Technip, Samsung Engineering Company Limited (SEO:028050) (Seoul, South Korea), GS Engineering & Construction Corporation (SEO:006360) (Seoul) and Hyundai Engineering & Construction Company (SEO:000720) (Seoul) participated in the bidding process. Although Technip was selected to execute the project in September, the investigation into the corruption allegations delayed the contract.

Earlier, Saipem SpA (BIT:SPM) (Milan, Italy) secured the oil center facility contract for the Hassi Messaoud refinery. Reports indicate that Technip also has secured an $18.5 million augmentation contract for the Arzew refinery. The company's engineering center at Rome will execute this project. The expansion will include a 4.5 million-ton-per-year liquefied natural gas (LNG) plant and three liquefied petroleum gas (LPG) facilities. Samsung Engineering is executing the $2.6 billion Skikda refinery expansion contract. The project, which will be completed in 2012, is expected to increase capacity of the refinery by 330,000 barrels per day. New facilities including benzene, isomerate and paraxylene processes, and a 4.7 million-ton-per-year LNG plant will be added. In 2005, the Skikda refinery had to be temporarily shut down after a fire explosion in the cooling tower. This refinery, which is considered to be Algeria's largest, accounts for nearly 68% of the country's refining output.

Algeria has the world's 14th-largest oil reserves and the eighth-largest gas deposits. The country is focusing on making large-scale investments in the hydrocarbons sector. Recently, the Algerian government invited participation from domestic and international firms to seek licenses for exploration of oil and gas fields. In a related development, Sonatrach recently announced the discovery of oil resources at the Ghadnis Basin in Libya. The company also has commenced operations of the 757-kilometer, 8 billion-cubic-meter-per-year Medgaz pipeline, which connects Algeria with Europe.

Sources have indicated that the refinery expansion projects are expected to boost Algeria's capacity by about 5 million tons per year. The boost in output is estimated to be about 120% of the country's petroleum and energy requirement in 2013. Government officials say that it will not be necessary for Algeria to resort to energy imports until 2019.

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