Algeria scraps energy contract with Spanish firms "for nationalism"

Sep 4, 2007, 11:04 GMT

Madrid - Algeria has rescinded a 5.2-billion-euro (7- billion-dollar) natural gas project with the Spanish companies Repsol YPF and Gas Natural, Spanish media reported Tuesday, placing the decision in the context of a nationalist search for energy control.

Repsol and Gas Natural announced Monday that the state-owned Algerian energy company Sonatrach had cancelled a contract granted to them in 2004 to exploit, produce and liquefy reserves from the Gassi Touil gas fields.

The project, in which the Spanish firms had already invested some 600 million dollars, was described as the only large-scale energy venture controlled by foreign partners in Algeria.

Repsol and Gas Natural said the move was illegal and pledged to seek damages through international arbitration.

The Algerian decision was seen as a big blow to the Spanish companies, which are seeking to secure supplies after energy nationalizations in Venezuela and Bolivia.

The Algerian decision was also placed in a nationalist context by Spanish analysts, though Algiers has justified it by accusing the Spanish companies of delays in building a new gas terminal.

Spain and Algeria have also differed over gas prices, and their political relations have been affected by disagreements over the Western Sahara conflict.

Repsol had a 39 per cent, Sonatrach a 35 per cent and Gas Natural a 26 per cent stake in the Gassi Touil joint venture.

A new Algerian energy law, however, requests the state company to hold at least 51 per cent of ventures in the energy sector.

Rising energy prices had given Sonatrach the possibility of doing without foreign partners at a time when oil and gas have become nationalist concerns in many producing countries, the daily El Pais commented.