Algerian state-owned group Sonatrach has signed an agreement with French company TotalEnergies, strengthening their cooperation in liquefied natural gas (LNG). The memorandum of understanding provides for LNG deliveries to France through 2025, under a revised contractual framework. This agreement comes as Europe seeks to diversify its energy supply to replace Russian volumes.
Strengthening gas commitments to Europe
The deal extends the duration of previous commitments and adjusts volumes and prices according to market conditions. Deliveries will be shipped from the Arzew liquefaction complex on Algeria’s western coast. According to Sonatrach, this partnership confirms Algeria’s role as a key supplier for Southern Europe. Shipments to France are expected to exceed 2 million tonnes per year.
TotalEnergies also stated that the contract aligns with its strategy to secure flexible LNG volumes for the European market. The French company is already one of the main buyers of Algerian gas, alongside Italian and Spanish firms.
Strategic positioning amid geopolitical tensions
Algeria has progressively increased its production and export capacity since 2022, with rising investment in gas fields and transport infrastructure. In parallel, the company has redirected part of its flows to Italy via the TransMed pipeline, while LNG shipments remain the preferred option for other European markets.
The resurgence of diplomatic tensions with Morocco and instability in the Sahel region have led Algeria to prioritise reliable European partners. In this context, the agreement with TotalEnergies secures outlets while strengthening the bilateral energy relationship.
Upstream expansion and joint resource development
Beyond the LNG component, the memorandum also provides for increased cooperation in gas exploration and production in Algeria. TotalEnergies is already a partner in several exploration permits in the country’s south. The two groups indicated they aim to accelerate the development of certain fields, particularly in the Illizi basin.
The stated objective is to maximise volumes available for export while ensuring domestic supply. Sonatrach has announced an increase in its investment budget to 41 billion DZD ($300mn) to modernise gas infrastructure and develop new wells.
Contractual adjustments in a changing market
The deal comes in a context of high gas price volatility and rapid changes in contractual terms. As many long-term contracts in the Euro-Mediterranean region reach expiration, several players, including Sonatrach, are seeking to renegotiate price indexation and volume commitments.
Increased use of LNG offers greater commercial flexibility, with destinations adjustable based on demand. For Algeria, this strategy helps to better monetise its resources on the spot market while maintaining strong contractual relations with long-term partners.
