Earlier this month, Chinese manufacturer Astronergy secured contracts to supply solar modules for six major projects in Algeria, including the 220 MW Biskra plant. Once completed, the Biskra plant will generate 400 million kWh of clean energy annually, reducing carbon emissions by 330,000 tons. The initiative is part of Algeria’s solar construction plan led by state-owned utility Sonelgaz, which aims to build 15 solar plants across 12 provinces. With most of these projects being developed by Chinese companies, Algeria continues to attract sizable foreign investment across its energy value chain.
Current Investment Climate
Algeria’s growing GDP – estimated to increase by 3.8% in 2024 – highlights its strong fiscal health and status as an emerging-market economy. President Abdelmadjid Tebboune projects the country’s GDP could reach $400 billion by 2027, driven by a revamped regulatory framework aimed at attracting foreign investment – particularly in the energy sector, which contributes 25% of GDP, over 90% of exports and 40% of government revenues.
In 2019, a new hydrocarbons law was introduced in Algeria, featuring tax reforms favorable to foreign investors and a more flexible contractual regime for hydrocarbon exploration and production. The law reintroduced two types of contracts: production sharing and risk services, designed to increase oil and gas production by promoting the use of advanced technologies to extract greater resource volumes from existing fields.
Algeria further introduced a simplified joint stock company in 2022 exclusively for certified start-ups, and for the first time, established free zones to attract high-quality foreign direct investments. These legislative changes have not only opened doors for multinational energy companies to expand their activities in the market, but also for independent and local players to engage in the country’s oil and gas sector.
IOCs Accelerate Investment
Beyond its investor-friendly legislative framework, Algeria stands out for its vast hydrocarbon resources. The country ranks 16th globally in proven oil reserves and 10th in natural gas reserves, as well as holds the world’s third-largest untapped shale gas resources. Additionally, its proximity to Europe – just one day by cargo – and two key gas pipelines, the Medgaz Gas Pipeline to Spain and the Trans-Mediterreanean Peipline to Italy, have drawn significant European interest, especially amid the energy crisis triggered by the Russia-Ukraine conflict.
Last year, Algerian national oil company Sonatrach signed several MOUs with international oil companies, including Italy’s Eni and Norway’s Equinor, to explore Algeria’s southwest In Salah and In Amenas regions. Sonatrach also partnered with France’s TotalEnergies to develop gas resources in the Timimoun region, and extended a two-million-metric-ton-per-year LNG supply agreement with the energy major through 2025.
In May 2024, Sonatrach signed an oil exploration agreement with ExxonMobil to develop hydrocarbon resources in the Ahnet and Gourara basins, followed by a deal with Chevron to develop the Berkine field in Ouargla. These agreements signal the entry of two U.S. majors into the Algerian market. In 2023, American company Baker Hughes secured a $2.3-billion EPC contract to develop Algeria’s largest gas field, Hassi R’Mel.
Toward Renewable Energy
At the same time, Algeria is actively working to diversify both its economy and energy matrix. This month, President Tebboune reaffirmed his commitment to continuing a hydrocarbon-focused energy strategy, while also investing in the expansion of renewable energy. The country aims to derive 27% of its electricity from renewable sources by 2035, primarily through solar power. Algeria boasts some of the highest solar irradiance levels globally, with the capacity to generate between 1,850 and 2,100 kWh per m2 and features up to 3,500 hours of sunlight per year in its desert regions.
Chinese companies are currently leading the solar sector in Algeria, having developed nine projects under Sonelgaz’s 2,000 MW solar construction plan, totaling 1,550 MW. PowerChina has launched construction of a 220 MW solar PV power plant in Biskra Province in northern Algeria, while a Chinese-led consortium has started building a 80 MW project in the Ouled Djellal Province, just south of Biskra.
Additionally, Algeria’s 1,300-km Mediterranean coastline, with wind speeds exceeding eight meters per second, makes it a particularly attractive destination for green hydrogen development. Last October, Germany signed a $22-million agreement to fund a 50 MW green hydrogen pilot project in the city of Arzew, focusing on developing infrastructure for large-scale production and export to Europe. The project is one of four pilots expected to be launched in Algeria by year-end. Algeria’s green hydrogen potential has also attracted the attention of Turkey, with Turkish steel manufacturer Tosyali signing a MOU with Sonatrach last month to jointly explore green hydrogen production to be utilized in the manufacturing of green steel.
