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Doing business in Algeria: The development of natural resources

Petroleum-based economy yields windfall of cash

The development of natural resources – including petroleum and natural gas – is the backbone of Algeria’s economy. Increasingly, the country is cited as a more secure source of energy and an alternative whenever the ongoing Russia-Ukraine gas dispute disrupts European supplies in winter.

As a result, pipelines such as Medgaz, led by oil firm Sonatrach, continue to build momentum. The 210 km deepwater Medgaz pipeline from Algeria to Spain has secured more than £420m from the European Investment Bank.

Meanwhile, Galsi backers are expected to make a final investment decision on the 900km pipeline between Algeria and Italy next year, with initial transportation capacity to be about 8 bn cu m per year.

Sonatrach is also leading the development of hydrocarbon deposits in the El Merk basin. Several contacts for the construction of related oil and gas infrastructure in this area have been issued recently. Orascom Construction Industries was awarded design-and-build contracts for construction work on the El Merk Central Processing Facility, which will serve as a production hub in the Berkine Basin about 250 km south east of Hassi Messaoud.

In addition, OCI has worked out a deal with Petrofac International, which was awarded the principal EPC contract for civil and structural steel works on the facility. The required steel structures and platforms will be supplied by National Steel Fabrication, a subsidiary of OCI, from their production plants in both Egypt and Algeria.

Algeria also holds great potential for concentrating solar thermal power plants. Spain’s UTE Aberer Hassi R’Mel Construction recently began work on an integrated thermal solar power facility at the Hassi R’Mel natural gas field. The project will consist of two 40 MW gas-fired turbines, one 80 MW steam turbine and two parabolic trough solar fields with a generating capacity of 25 MW.

John Kjorstad is features editor at Infrastructure Journal. See for more information on projects in this region.

Country facts - Algeria

Capital: Algiers

President: Abdelaziz Bouteflika, re-elected in April

Population: 35 million, most of which lives in the Tell, along the Mediterranean coast

Religion: Islam

Land: 85 per cent desert. Northern part of the country prone to seismic activity

Resources: It has the eighth largest reserves of natural gas and the fourteenth largest oil reserves in the world.

Language: Arabic, French. English not widely spoken

History: Gained independence from France in 1962

Economy: Average annual growth rate is 5 per cent

Currency: Algeria Dinars. £1 = 119 DZD

Major projects in Algeria

ProjectDetailsScopeEstimated value £bnStatus
East-West motorwayLinks with Morocco and Tunisia in north of country1,216km highway6.72Due to complete end 2009
Dounya Park, AlgiersParkland and mixed-use real estate development6.6 sq km including park, equestrian centre, golf course, residential and commercial buildings3.06Land price negotiations have delayed construction but due to begin soon
Algiers MetroThree-line light rail network10-station, 9 km line with two extensions, two further lines with 15 and 11 stations3.06Main line one section to begin shortly, extension is under way and second extension to be awarded this month
Alger MedinaBusiness and retail centre in Pins Maritimes between city centre and airportBusiness towers, hotels, shopping mall, marina, water park, convention centre1.22Scheduled to finish in 2012. Now on hold but developer insists it will go ahead
Quartier d’Affaires d’Alger70 sq km business development in Bab EzzouarBusiness towers, hotels, 7 sq km park, conference centre and shopping mall0.6 to 1.22Nearing completion

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