Home World Africa After withdrawal of TotalEnergies, Algeria turns to Petrofac for its Arzew project

After withdrawal of TotalEnergies, Algeria turns to Petrofac for its Arzew project

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After withdrawal of TotalEnergies, Algeria turns to Petrofac for its Arzew project

Announced in mid-May, following the official withdrawal of TotalEnergies, the awarding of the contract to build the new petrochemicals complex at Arzew to the Sino-British consortium Petrofac-HQC was confirmed on 11 June in Algeria.

An EPC (Engineering, Procurement, Construction) contract was signed by Boutouba Baatouche, chairman of the board of directors of STEP Polymers, a Sonatrach subsidiary, and Petrofac’s director of operations, Roberto Bertocco.

While the French oil giant withdrew due to an “increase in project costs”, the Petrofac-HQC joint venture has undertaken to deliver the 88-hectare Arzew complex, near Oran, within 42 months.

Estimated at $1.5bn, the construction of Algeria’s first petrochemical plant, which has been running behind schedule since 2018, should enable the country to produce 550,000tn of polypropylene a year.

A strategic challenge

For the time being, Algeria imports 100% of its polypropylene requirements, an essential element for the pharmaceutical and agricultural industries, as well as for the textile, transport and infrastructure sectors.

The commissioning of the Arzew site will help to meet national demand, estimated at 120,000tn a year, and generate foreign currency income by exporting the surplus to African, European and Asian markets.

Its reputation has been tarnished by methods deemed complex and deliberately opaque.

“This project is of major importance for the development of natural resources,” said Algeria’s Minister of Energy and Mines Mohamed Arkab in a statement reported by the official Algerian news agency, APS.

According to local authorities, the complex’s construction phase will create 6,000 direct jobs. The operational phase, scheduled for 2027, will guarantee 450 jobs and 2,000 indirect jobs.

Corruption

In association with the Chinese company HQC, a subsidiary of the China Petroleum Engineering group, Petrofac is reaffirming its interest in the Algerian market.

The British group has been present in Algeria for almost 25 years, and was at the helm of the construction of the gas compression centre at the Tinrhert fields for $600m.

In September 2022, it was also awarded the EPC contract to build the separation and decarbonation units at Alrar and the multiphase pump station at Rhourde Chegga-Hassi Messaoud.

However, the reputation of Petrofac, which is listed on the London Stock Exchange, has been tarnished due to its methods, deemed “complex and deliberately opaque”, which allegedly led to the payment of bribes on projects in Iraq, Saudi Arabia and the United Arab Emirates, according to the British justice system.

In 2021, the group – under investigation by the UK’s Serious Fraud Office (SFO) – was ordered to pay £77m (around $97m) for bribery on contracts in the Middle East. A year later, the group’s net debt had risen from $144m to $349m by 2022.

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