Sonatrach, Saipem settle differences

20 February 2017, Week 07, Issue 727

Algeria’s Sonatrach and Italian services company Saipem have formally settled their past differences by signing an agreement to end their legal disputes over four gas projects in the North African country. The settlement, which involves a US$150 million-plus payment from Saipem, is expected to pave the way for new projects, according to Sonatrach.

A February 14 statement from Saipem said the agreement would end litigation concerning four contracts. These were for the construction of a gas liquefaction plant in Arzew; building a gas and production unit in the Menzel Ledjmet field; developing the 24-inch LZ2 LPG pipeline and station in Hassi R’Mel, and finally installing three LPG trains, an oil separation unit and condensate production units in Hassi Messaoud. 

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“This agreement is the result of constructive dialogue and represents an important step forward in relations between the two companies,” said Saipem, adding that the litigation was detrimental to both parties. 

Quoted by Reuters on February 14, Sonatrach’s CEO, Abdelmoumen Ould Kaddour, said the Italian company would pay between US$150 and US$200 million to solve the disputes, and the settlement will tee up a new joint offshore project. “Saipem is a specialist in the offshore, we may start offshore before the end of this year,” Kaddour said, without elaborating. 

Saipem said on December 24 that it has been ordered by the ICC International Court of Arbitration to pay Sonatrach US$135 million in compensation for the loss of production at an LPG pipeline project in Algeria. Resolutions to the other three disputes were incorporated into the February 14 agreement, according to sources quoted by Reuters who provided no further details. 

After his appointment to the top Sonatrach job in March 2017, Kaddour has prioritised the resolution of several disputes with foreign majors, which have cited the country’s inflexible investment environment as a key reason for stepping back from oil and gas investment. Sonatrach and France’s Total said in December 2017 that they wanted to work on new projects after solving earlier disputes.

Edited by

Ed Reed

Editor

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