Algeria's Sonatrach, Sinopec sign $490 mil production sharing agreement for Zarzaitine

Algeria's state-owned Sonatrach and its Chinese partner Sinopec have signed a production sharing agreement for the Zarzaitine oil field that will see the recovery of some 95 million barrels as the OPEC producer seeks to woo foreign investments to its energy sector.

Under the agreement, Sonatrach and Sinopec will revamp the natural gas lift unit, drill 12 new wells, work on six existing wells, recover flared gas and lower carbon emissions, according to a May 28 statement from the Algerian company.

The signing of the agreement comes nearly a year after the two companies agreed to extend their joint work on the Zarzaitine oil field beyond the 2023 expiry of their original contract.

Sinopec has been a partner in the Zarzaitine field since 2003 under an agreement to increase its recovery rate from 28,000 b/d to 50,000 b/d by 2023.

Zarzaitine is located in Algeria's far east, near the border with Libya.

Algeria pumped 1 million b/d of crude in April, within its quota under a supply accord between OPEC and its allies, according to the latest Platts survey by S&P Global Commodity Insights.

Algeria in late 2019 passed a new hydrocarbons law aimed at restoring the attractiveness of its stagnating upstream sector with improved fiscal terms for investors.