Algeria’s state-owned energy company Sonatrach has signed a US $5.4bn production sharing agreement with Saudi Arabia’s Midad Energy North Africa to explore and develop oil and gas resources in the Illizi Basin, marking one of the largest foreign investments in Algeria’s energy sector in recent years.
The 30-year contract, which includes an option for a 10-year extension, covers the Illizi South perimeter, located about 100 kilometers south of In Amenas, near the Libyan border. The agreement provides for a seven-year exploration phase, fully financed by Midad Energy, with US $288M allocated to exploration activities.
According to Sonatrach, total production by the end of the contract period is projected to reach approximately 993 million barrels of oil equivalent, comprising 125 billion cubic meters of natural gas and 204 million barrels of liquid hydrocarbons including 103 million barrels of liquefied petroleum gas (LPG) and 101 million barrels of condensate.
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The project aims to deploy advanced digital and environmental technologies to optimize resource extraction while maintaining compliance with Algeria’s environmental standards. It builds on a Memorandum of Understanding (MoU) signed between Sonatrach and Midad Energy in March 2024, which focused on accelerating gas field development in southeastern Algeria.
This agreement highlights the deepening energy cooperation between Algeria and Saudi Arabia, which have also signed multiple bilateral deals this year spanning energy, trade, and industry. For Algeria, the partnership reinforces its strategy to attract foreign investment, modernize infrastructure, and expand energy production capacity amid growing global demand for reliable gas supplies.
The move comes as Algeria positions itself as a key energy supplier to Europe, seeking to fill the gap left by reduced Russian gas flows. The North African nation, which plans to invest US $60bn in its energy sector over the next five years, is simultaneously finalizing agreements with ExxonMobil and Chevron for shale gas exploration.
In addition to Saudi Arabia’s Midad Energy, international firms such as China’s Sinopec and Zhongman Petroleum and Natural Gas Group (ZPEC) have recently secured exploration contracts, signaling renewed global confidence in Algeria’s hydrocarbon sector.
Overall, the Illizi Basin partnership underscores Algeria’s long-term vision to strengthen its OPEC standing, boost production capacity, and diversify foreign partnerships while giving Saudi Arabia an expanded footprint in North Africa’s evolving energy landscape.
