BP takes the plunge in Algeria

Ethnic Berbers have been restive for the last four months

By North Africa correspondent David Bamford

Algeria has signed its first full partnership deal with a foreign corporation in a $2.5bn project to develop a second major Algerian gasfield, deep in the Sahara Desert.

The deal was signed in Algiers by the state gas corporation, Sonatrach, and BP Amoco, the joint British and American hydrocarbons enterprise.

The gasfield will be located deep in the Sahara

The new project, known as In Salah, is unlike the main gas reserves at Hassi R'mel, which the Algerians developed by themselves.

When BP and Amoco merged their companies in 1998, overnight they became the largest foreign investor in Algeria.

Business risk

This latest commitment - originally initialled a year ago - indicates that despite continuing political unrest involving Islamist insurgents and Berber activists, a major foreign corporation is prepared to take a big business risk in Algeria.

A BP spokesman said that the In Salah development ranked as one of the company's biggest three projects anywhere in the world.

Two hundred production wells will be built, together with a $1bn pipeline linking the gas reserves to the Algerian network and on to Europe.

Italy has already agreed to buy nearly half of the $9bn cubic metres of gas expected to come onstream by 2004.

Algeria already supplies one-quarter of Europe's gas needs.

And as the environmental debate continues following the breakdown of the Kyoto agreement, the Algerians are hoping that the growing demand for relatively clean natural gas as an energy source will help transform their economy.