China to Invest $490 Million in Joint Oil Drilling Operation in Algeria
© AP Photo / Anis BelghoulSkikda oil refinery, 350 kilometers east of Algiers, Algeria (File)
© AP Photo / Anis Belghoul
The contract, which will last for over two decades, will see a Chinese energy company maintain, upgrade and extend the existing infrastructure at one of Algeria's oil fields.
China’s Sinopec Oil & Gas Limited (SOOGL) has signed a 25 year contract with Algerian oil company Sonatrach for joint exploration and development.
Under the contract, both sides expect to extract some 95 million barrels of oil from the Zarzaitine oil field located in the Illizi Province, south-eastern Algeria. SOOGL is due to invest $490 million in the joint operation to upgrade six existing wells, as well as drill an additional 12 and maintain and service the facilities.
The investment agreement has been in the works for little over a year, since the two companies signed a memorandum of understanding on 20 May 2021.
The half-billion-dollar deal comes as the oil market undergoes a major transformation amid growing prices, OPEC+ opting to maintain output levels and western sanctions against Russian crude. The US and several other countries banned Russian crude imports, while the EU is currently attempting to negotiate a similar measure in response to Moscow’s special military operation in Ukraine.
According to a recent Bloomberg report, these moves and the threats of additional measures have already prompted Moscow to redirect its ESPO crude mix to China. The news agency claims that during May, Russia sent some 1.1 million barrels per day on average to China. According to the data gathered by Vortexa Ltd analysts, 20 out of 21 oil tankers which received their cargo during May in the Russian port of Kozmino sailed to Chinese ports.
The Kremlin, in turn, has claimed to have many options for redirecting its oil exports, stressing that banning Russian crude and gas will only harm the countries and citizens applying the measures, as they will face energy and fuel price hikes.
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