Algeria signs with ExxonMobil, Baker Hughes as Europe's gas demand soars

Algeria signed two hydrocarbon deals with US companies Thursday, potentially boosting the North African country’s energy sector increasingly seen an alternative to Russian gas in the European market. 

The state-owned oil and gas firm Sonatrach and American oil giant ExxonMobil signed a memorandum of understanding to study the development of hydrocarbon resources in Algeria’s Ahnet and Gourara basins. The two entities will focus on technological innovation as well as best sustainability practices and the environment, Sonatrach said in a press release.

Both the Ahnet and Gourara basins are located in Algeria’s vast desert.

Also on Thursday, the US oil services company Baker Hughes was awarded a contract by Sonatrach in the Hassi R’Mel gas field, Algeria’s largest. The deal is part of a larger one between Sonatrach and a consortium consisting of Baker Hughes and the Italian engineering firm Maire Tecnimont. Per the deal, Baker Hughes will provide 20 compression trains to be installed at three stations in the field, the company said in a release.

Compression is a part of the natural gas production process where the pressure is increased so it can pass through pipelines and be transported.

Why it matters: Algeria is among the 10 biggest producers of natural gas in the world and is seeking to further develop the sector amid increased European demand. Since the Russian invasion of Ukraine in early 2022, Europe has been looking to import more gas from the North African country in an effort to reduce dependence on Moscow.

The higher demand is continuing into 2024. Late last month, Algerian Foreign Minister Ahmed Attaf told the World Economic Forum in Riyadh that Europe has asked Algiers to increase its gas supply.

“We are asked by our partners in Europe more and more to deliver additional quantities of gas,” he said, reported the Saudi news outlet Arab News.

In February, Sonatrach signed a deal with the German gas trader VNG Handel & Vertrieb GmbH. The agreement marked the first time Germany has sought Algeria’s gas. A month earlier, Sonatrach inked an exports deal with the United Kingdom’s Grain LNG.

Algeria’s natural gas production was 136 billion cubic meters in 2023, up from 132.7 the year prior, according to the King Abdullah Petroleum Studies and Research Center in Saudi Arabia. Algeria exported 52.4 billion cubic meters of gas in 2023, compared to 49.3 in 2022, the energy publication MEES noted in a January report.

The North African country was already a major supplier to Europe before the Ukraine war, with France, Italy and Spain accounting for nearly 50% of Algeria’s liquified natural gas exports in 2021, according to the US Energy Information Administration.

Know more: Algeria has also strengthened its ties to the East. Late Iranian President Ebrahim Raisi visited Algeria in March for the Gas Exporting Countries Forum’s Summit, during which Iran and Algeria signed an understanding on oil and gas cooperation.