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Algerian state-owned energy giant Sonatrach has said that it reduced the cost of it’s El-Merk project by almost half to US$3.2 billion from the initial figure of $6.5 billion.
“We will be executing the development of the project in 7 phases, and this helped us to slash the costs,” Belkassem Boumedian, vice president of the upstream activities at Sonatrach said.
The first phase of the project is expected to go on stream by the end of 2011, while the whole project is expected to be completed by 2012.
El-Merk will be located in Block 208. The block is 56 miles south of the Sonatrach/Anadarko-operated Hassi Berkine South (HBNS) facility. It will include a central processing facility, export pipelines, and field infrastructure.
It will serve as a production hub for the region, processing hydrocarbons from four fields: Block 208 (operated by the Sonatrach/Anadarko Association), Block 212 (operated by the Sonatrach/Eni Association), the unitized El Merk field (located on a portion of both Block 208 and Sonatrach/Burlington-operated Block 405a), and liquid-rich gas from HBNS.
The combined capacity of the oil and natural gas liquid processing facilities will be 108,000 barrels of oil per day, 55,000 barrels of condensate per day, and 75,000 barrels of liquefied petroleum gas per day.
The project will be develop by Sonatrach and foreign partners including the US Anadarko, Eni from Italy, ConocoPhillips from the US and Talisman and Maersk from Denmark.
Sonatrach and Anadarko are also locked in a dispute over the impact on the US Company of changes made to Algeria’s hydrocarbons law in 2006, which are also thought to be slowing the process. Among the changes introduced is an oil windfall tax.
Anadarko says the charges, which could cost the company as much as $450m a year, are unnecessary given the provisions covering excess profits in its contract.
