Eni and Sonatrach extend gas supply deal

Image: Wall Street Journal

Italian multinational oil and gas company Eni announced on Thursday that it had signed agreements with Algerian state-owned Sonatrach to extend its gas supply pact.

Covering nearly 15 percent of all gas imported to Italy, the agreement extends the 40-year partnership until 2027, with the option of extending an additional two years to 2029. The agreement also defines gas transportation arrangements via the Trans-Mediterranean pipeline from Algeria, which holds a capacity of 90 million cubic meters per day.

“I am particularly pleased with the renewal of the gas supply contract and the level of the strategic partnership with Sonatrach, which spans from the exploration and production sector, to gas marketing and transportation, to renewables,” said Eni CEO Claudio Descalzi.

According to data from S&P Global Platts Analytics, total Italian gas imports were 64 billion cubic meters (Bcm) in 2018, with the recent agreement accounting for approximately 9.6 Bcm per year. Last year, Italy imported a total of 16.8 Bcm of gas from Algeria, with the country serving as one of Italy’s key gas supply sources.

The deal is representative of Eni’s recent shift toward establishing market alignment in its long-term gas contracts with suppliers such as Sonatrach, and away from oil-indexed contracts to help mitigate losses incurred from its gas and power business.

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