Landmark Hydrocarbon Agreement Signed in Algiers
Algeria's national oil company, Sonatrach, and Saudi Arabia's Midad Energy North Africa officially signed a significant $5.4 billion production-sharing agreement on October 13, 2025. The deal, formalized at Sonatrach's headquarters, focuses on the exploration and development of hydrocarbon resources within the Illizi South perimeter in Algeria. This area is situated approximately 100 kilometers south of In Amenas, near the Libyan border.
The signing ceremony was attended by high-ranking officials, including Algeria's Minister of State for Hydrocarbons and Mines, Mohamed Arkab, and Saudi Arabia's Ambassador to Algeria, Dr. Abdullah bin Nasser Abdullah Al-Busairi. Sonatrach Chairman and CEO Rachid Hachichi and Midad Energy North Africa Chairman and CEO Sheikh Abdulelah Bin Mohammed Bin Abdullah Al-Aiban inked the agreement.
Scope and Investment Details
The comprehensive contract spans 30 years, with an option for an additional 10-year extension, and includes an initial seven-year exploration phase. Midad Energy North Africa will fully finance the entire project, committing approximately $5.4 billion, with $288 million specifically allocated for research and exploration activities.
The agreement operates under Algeria's Hydrocarbon Law No. 19-13, which allows foreign companies to participate in exploration and production while Sonatrach maintains majority control. This framework ensures that foreign partners finance exploration and development, with production shared based on cost recovery and profit oil mechanisms.
Projected Output and Strategic Importance
The Illizi South perimeter is projected to yield substantial production over the contract's lifetime, estimated at 993 million barrels of oil equivalent (boe). This includes:
- 125 billion cubic meters of marketable gas
- 103 million barrels of liquefied petroleum gas (LPG)
- 101 million barrels of condensate
This partnership represents one of Algeria's largest energy collaborations in 2025 and underscores the nation's commitment to advancing its hydrocarbon sector through international cooperation. For Saudi Arabia, it signifies a continued strategy of expanding its upstream footprint across North Africa. The deal follows a Protocol of Agreement signed between Sonatrach and Midad Energy North Africa on March 3, 2024.
Commitment to Sustainable Practices and Local Content
The exploration and exploitation program will adhere to Algeria's stringent environmental regulations, incorporating cutting-edge technological and digital solutions. Furthermore, the contract emphasizes local content, prioritizing national suppliers and subcontractors to boost Algeria's economy.
Midad Energy, a subsidiary of Saudi Arabia's Al Fozan Holding Company, was established in 2007 as a trading arm for oil and gas. This agreement highlights Algeria's ongoing efforts to attract foreign investment and modernize its energy infrastructure, aligning with its broader plan to invest $60 billion in the energy sector over the next five years.
5 Comments
Leonardo
It's understandable that Algeria wants to leverage its natural resources for development, yet signing a 30-year hydrocarbon agreement raises serious questions about its energy transition strategy in a changing world.
Matzomaster
Another massive fossil fuel deal? We're ignoring the climate crisis!
KittyKat
30 years of oil and gas? This is a step backward for the planet.
eliphas
International cooperation like this strengthens our position globally. A win-win!
paracelsus
The $5.4 billion investment is undeniably good for the Algerian economy and infrastructure, but we must also consider the environmental footprint of extracting nearly a billion barrels of oil equivalent over decades.