Sonatrach Extends Enel Contract for 10 Years (Update)

(Adds details from Algerian press)

Algerian state exporter Sonatrach has extended its gas supply contract with Italian generator Enel for another 10 years, it said June 26. It would otherwise have expired this year. Algerian press said the contract was for 3bn m³/yr.

The deal is the latest in a series of extensions with Italian buyers that will help it face up to competition not just from the ubiquitous LNG market, but also the first flows to Italy are due to start through the Southern Gas Corridor next year.

Enel however said that the contract was firm for only eight years and renewable by mutual agreement for a further two. It also said the new contract terms enable Enel to make its gas supply portfolio more diversified, competitive and flexible, providing security of supply to the Italian system. Sonatrach is its biggest gas supplier.

It did not give details of either the volume or the new terms, but the take-or-pay commitments and the oil indexation pricing, embedded in the present contract, are likely to have given way to spot pricing, and possibly to more flexibility on the annual volume.  

Following a similar extension with Eni for 9bn m³/yr that covers about 15% of Italy's gas imports, the Algerian company's position as a major gas supplier to Italy is secure, Sonatrach said. 

It also renewed this month its contract with Portugal's Galp for 2.5bn m³/yr for ten years, without giving a start date, and last year it renewed contracts with Spanish Naturgy for 8bn m³/yr and with Turkish Botas for 5bn m³/yr.