Construction has officially commenced on Algeria’s US $5.4 billion Illizi South Gas Project, marking a major step forward in one of the country’s largest upstream energy developments. The project is expected to play a key role in expanding natural gas production, strengthening export capacity, and supporting Algeria’s long-term energy strategy.
Situated approximately 100 kilometres south of In Amenas near the Libyan border, the Illizi South block is being developed through a production-sharing agreement between Sonatrach and Saudi Arabia’s Midad Energy. The Algerian government approved the development agreement earlier this year, paving the way for field activities to begin.
Under the agreement, Midad Energy will finance the entire project without direct public funding. The contract covers an initial 30-year period and includes an option for a further 10-year extension. Before full-scale production begins, the development will undergo a seven-year exploration and appraisal programme.
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Scope of work
Early construction activities are focused on preparing the site and establishing the infrastructure required for future production. Initial works include access facilities, exploration installations, supporting infrastructure, and groundwork for processing and production systems. An estimated $288 million has already been committed to exploration and appraisal during the project’s first phase. The development will also incorporate advanced digital technologies to improve operational efficiency across both construction and production stages.
Sonatrach has stated that all project activities will be carried out in accordance with Algeria’s environmental standards and Hydrocarbon Law 19-13, legislation introduced to encourage international investment while enhancing the competitiveness of the country’s upstream oil and gas sector. Once fully operational, the Illizi South development is expected to produce approximately 125 billion cubic metres of marketable natural gas over the life of the contract. Total production is projected to reach around 993 million barrels of oil equivalent, including an estimated 204 million barrels of liquid hydrocarbons such as condensates and liquefied petroleum gas.
The additional output is expected to strengthen Algeria’s position among Africa’s leading natural gas producers while supporting both domestic energy demand and export commitments to international markets. The project also reflects expanding energy cooperation between Algeria and Saudi Arabia. Their collaboration began with a memorandum of understanding signed in 2024 before progressing into the current long-term production-sharing agreement.
As construction advances, the project will generate demand for engineering services, civil works, logistics, industrial equipment, utilities, processing facilities, gathering networks, and other supporting infrastructure. These activities are expected to create opportunities for contractors, specialist suppliers, and technology providers throughout the project’s development.
Illizi South forms part of Algeria’s wider programme to increase hydrocarbon production through new upstream investments. It complements ongoing projects such as the modernization of the Rhourde El Baguel oil field, where Sonatrach continues to expand production and gas-processing infrastructure to enhance the country’s long-term energy capacity. With construction now underway, the Illizi South Gas Project represents another significant investment aimed at reinforcing Algeria’s energy security, attracting international capital, and supporting sustainable growth in the country’s hydrocarbons sector.
