Banks provide financing for Algeria chemicals plant

15 June 2023

Banks have provided financing to fund 70 per cent of the cost of the planned $1.5bn STEP petrochemicals project in Algeria, allowing the country’s national oil and gas company to go ahead with the project without France’s TotalEnergies, which had originally agreed to take a 49 per cent stake in the project.

“Financing has been key to this project progressing without TotalEnergies,” said one source. “Technically, this project is very easy for Sonatrach to develop, but without TotalEnergies different funding arrangements had to be made.”

Banque Nationale d'Algerie was the lead arranger on the financing deal, according to industry sources.

Earlier this month, Sonatrach's chief executive, Toufik Hakkar, spoke to domestic media outlets about why TotalEnergies is no longer associated with the project.

He said: "We worked together to refine the project, through market studies and feasibility studies, as well as the first engineering studies."

He went on to say that TotalEnergies ultimately decided that the project "did not correspond to its financial aspirations" and it withdrew as a result.

Hakkar said that TotalEnergies worked with Sonatrach on the project from 2017 to 2022 and maintained a cooperative relationship with Sonatrach despite no longer participating in the project.

Earlier this month, UK-based engineering company Petrofac signed the engineering, procurement and construction (EPC) contract.

Petrofac has partnered with China Huanqiu Contracting & Engineering Corporation, a subsidiary of China National Petroleum Corporation, for the project, which is due to be developed in the Arzew Industrial Zone to the west of Algiers.

The contract was signed with Step Polymers, a wholly-owned subsidiary of Sonatrach.

The contract signing came less than a month after Petrofac announced that it had been selected for the contract award.

The project’s scope includes designing and building two major integrated processing units.

It includes the delivery of a new propane dehydrogenation (PDH) unit and polypropylene production unit, as well as associated utilities and infrastructure for the site.

It is expected to produce 550,000 tonnes of polypropylene a year.

Petrofac has been active in Algeria since 1997, when it opened its first office in Algiers. The company has since developed some of the country’s most significant oil and gas assets.

Polypropylene, a thermoplastic, is used for many industrial applications, such as consumer goods, medical supplies and parts for the automotive industry.

Last year, MEED revealed that bids had been submitted for the contract before the deadline of 20 July 2022.

Four international contractors were understood to have submitted commercial bids for the project’s EPC work.

In August last year, UK-based Wood Group announced it had won the project’s front-end engineering and design contract.

In the PDH process, propane is selectively dehydrogenated to create propylene. Industrial implementation of PDH is complicated owing to side reactions such as deep dehydrogenation, hydrogenolysis, cracking, polymerisation and coke formation.

Algeria is seeing an uptick in interest in its oil, gas and petrochemicals sectors as Western countries look to North African suppliers to replace imports from Russia amid the ongoing war in Ukraine.

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Wil Crisp
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