Algeria’s state-owned energy company Sonatrach has signed a $5.4 billion production-sharing agreement with Saudi Arabia’s Midad Energy to explore and develop hydrocarbon resources in the Illizi South Basin. The deal marks one of Algeria’s largest foreign energy investments in recent years and is expected to strengthen economic ties between Algiers and Riyadh. The agreement includes a 30-year term with a potential 10-year extension, featuring a seven-year exploration phase valued at $288 million, as reported by Reuters.
Under the arrangement, Midad Energy North Africa will fully finance the investment and oversee exploration activities. The Illizi South perimeter lies about 100 kilometers south of the town of In Amenas, near the Libyan border. By the end of the contract period, the project aims to produce up to 993 million barrels of oil equivalent, including 125 billion cubic meters of natural gas, highlighting its potential to bolster Algeria’s energy output, Reuters added.
Sonatrach emphasized that the partnership aligns with Algeria’s broader strategy to modernize its energy sector, boost upstream production, and attract more foreign capital. The deal follows similar energy investments, including an $850 million agreement with China’s Sinopec, underscoring Algeria’s commitment to revitalizing exploration and production across its southern regions, World Energy News reported.
Energy analysts describe the agreement as a strategic win for both nations. For Algeria, it brings fresh capital and technological expertise to sustain its export capacity, while Saudi Arabia deepens its footprint in North Africa’s hydrocarbon market. Experts, however, note that the project’s success will depend on stable regulatory conditions and effective management of security challenges in the Illizi region, as highlighted by World Oil and World Energy News.
