Amid shifting North African alliances and regional tensions, Algeria has signed a $5.4 billion production-sharing agreement with Saudi Arabia’s Midad Energy, partnering with state-owned Sonatrach to explore and develop oil and gas reserves in the Illizi Basin, Reuters reported.
The 30-year contract, with an option to extend for another 10 years, includes a seven-year exploration phase fully funded by Midad, with $288 million allocated specifically for exploration.
Focus on the Illizi Basin
The Illizi South perimeter, located approximately 100 km south of In Amenas near the Libyan border, holds significant hydrocarbon potential. The deal aligns with Algeria’s strategy to modernize its energy infrastructure, expand production, and attract foreign investment, while giving Saudi Arabia a long-term stake in North Africa’s energy sector.
Strengthening Bilateral Ties
The agreement highlights deepening economic and energy cooperation between Algeria and Saudi Arabia. Earlier this year, the two countries signed five agreements covering energy, trade, industry, tourism, and legal services.
Officials have discussed converting prior cooperation protocols into actionable partnerships, signalling a long-term commitment to collaboration.
Geopolitical Context
The deal comes amid heightened regional tensions, particularly between Algeria and Morocco, as both countries seek to secure strategic military support from Washington and Moscow.
Despite this, Saudi Arabia’s partnerships with both countries form part of a broader strategy to expand its presence in North African energy markets while maintaining a neutral stance in regional disputes.
For Algeria, the agreement underscores a pragmatic approach to attracting foreign investment and advancing economic diplomacy within a complex geopolitical landscape.
Energy Sector Modernisation
Sonatrach has actively pursued foreign partnerships to increase output. Earlier this year, it signed an $850 million contract with China’s Sinopec for hydrocarbon development and exploration.
Algeria plans to invest $60 billion in its energy sector over the next five years, focusing on upstream exploration and production, consolidating its position as a key OPEC member and energy supplier.
Regional Significance
The Illizi Basin project underscores the strategic importance of Algeria’s hydrocarbon resources. Beyond energy production, the partnership strengthens regional energy ties and positions both Algeria and Saudi Arabia as major players in North Africa’s evolving energy landscape.
