Eni, Sonatrach ink oil production contract for Algeria's onshore Berkine basin

Eni has signed a new oil exploration and production contract covering acreage in Algeria's gas-rich, onshore Berkine basin, where the Italian energy major is a long-standing producer.

The contract, which is the first-ever signed under Algeria's new oil law, covers an area of 7,880 sq km in the southern part of the Berkine basin, encompassing land close to the company's current production assets operated by the joint venture with state-run Sonatrach.

The contract, signed by heads of Eni and Sonatrach in Algiers, commits to creating "an ambitious exploration and development program" in the area. In the first phase, the project envisages the fast-tracked development of reserves estimated at 135 million barrels of oil equivalent, with a start-up of production expected by the end of 2022. This project will enhance synergies with existing plants.

"Today's agreements are testimony to the commitment of Sonatrach and Eni to continue the shared strategy of accelerated project development, and to pursue the decarbonization objectives within our common commitment to achieve carbon neutrality," Eni CEO Claudia Descalzi said in a statement.

Eni is already a major player in the Berkine basin in southeast Algeria and operates the Berkine Nord gas project, comprising the Ourhoud-2, Sif Fatima-2 and Zemlet El Arbi fields.

In December, Eni and Sonatrach signed a memorandum of understanding designed to allow the companies to draw up a road map for new hydrocarbon contracts in the basin against the background of Algeria's new hydrocarbon law. The hydrocarbons law -- first announced in late 2019 but as yet unimplemented -- offers much improved fiscal terms for investors.

Sonatrach also signed an MOU with the US' Occidental Petroleum, Eni and France's TotalEnergires on new opportunities at the producing 404 and 208 blocks in the Berkine basin at the end of January.

Energy transition

Eni said it also signed a memorandum of understanding with Sonatrach to cooperate on energy transition initiatives.

The agreement covers an assessment of joint opportunities in the fields of renewables, hydrogen, the capture, use and storage of CO2, bio-refining, and many other initiatives in line with the companies' respective decarbonization objectives, Eni said.

"This agreement is in line with Eni's commitment to achieving carbon neutrality by 2050, consolidating the partnership with Sonatrach for a sustainable development and to jointly tackle the energy transition challenges," Eni said.

Eni has been present in Algeria since 1981 where it is the operator of various upstream permits. With an equity production in the country of 95,000 b/d of oil, Eni is the biggest international company operating in the country.