Arzew polypropylene complex, Algeria’s ambitious petrochemical project to boost economy and create jobs

BY: Hana Saada

ALGIERS- Sonatrach, the state-owned oil and gas company of Algeria, is making significant strides in bolstering the national economy with its latest endeavor—the Arzew polypropylene complex. This petrochemical project, which had experienced delays over the past few years, has been relaunched with all constraints lifted. As Sonatrach’s most substantial project to date, the complex holds immense promise for the company and the country at large. The venture was initially initiated in collaboration with French oil company Total Energie, but after Total’s withdrawal, Sonatrach has taken the reins to drive the project forward.

Addressing the speculations surrounding Total Energie’s withdrawal, Mr. Toufik Hakkar, CEO of Sonatrach, shed light on the situation. He stated that in December 2016, Sonatrach and Total Energie signed a framework agreement for the construction of the polypropylene complex in Arzew. Extensive feasibility, market, and engineering studies were conducted jointly by the two companies. However, after evaluating the investment requirements and aligning them with their respective financial capabilities, Total Energie determined that the project no longer aligned with its expectations and made the independent decision to withdraw. Sonatrach, on the other hand, chose to continue the project, expressing gratitude to Total Energie for their support and willingness to assist Sonatrach in realizing the project.

Following Sonatrach’s call for expressions of interest, a prominent British-Chinese consortium comprising Pétrofac and HQC was selected as the project’s new partners from among 18 companies and groups that submitted applications.

The Arzew polypropylene complex represents a monumental undertaking, requiring an investment of $1.5 billion. Construction work is set to commence in July 2023 and is projected to last for 42 months. Spanning an area of approximately 90 hectares, the complex will be accompanied by an environmental investment—a pioneering initiative involving the planting of thousands of trees in Oran. The CEO of Sonatrach emphasizes the importance of timely completion, as the project holds immense significance for both the company and the national economy.

The financing for this ambitious project comprises 30% from Sonatrach’s own funds and 70% from the National Bank of Algeria (BNA).

Polypropylene, a versatile material, finds applications in various sectors. Speaking about its widespread utility, Mr. Toufik Hakkar highlighted that polypropylene is used across multiple industries and plays a vital role in stimulating industrial activity.

The complex is expected to produce nearly 550,000 tons of polypropylene per year, satisfying the national demand of around 80,000 tons annually (projected to exceed 100,000 tons per year within three years). Currently, Algeria imports all of its polypropylene requirements. The surplus production from the complex will be targeted for export, particularly to the African, Turkish, and European markets.

In line with the nation’s objectives, Mr. Mohamed Arkab, the Minister of Energy and Mines, affirms that over 120,000 tons per year of polypropylene will be allocated to meet domestic needs in sectors such as pharmaceuticals, textiles, hydraulics, construction, automotive, and shipbuilding. The construction phase alone is expected to create approximately 1,500 job opportunities, with 450 positions during the complex’s operational phase.

The Arzew polypropylene complex represents Sonatrach’s steadfast commitment to driving economic growth in Algeria while reducing dependence on imported polypropylene. With its ambitious scale, diverse applications, and strategic importance, the complex is poised to play a pivotal role in the country’s industrial development and enhance its position as a key player in the global petrochemical market.

The ambitious venture is expected to create over 10,000 jobs during construction and more than 5,000 positions once the complex becomes operational.

Speaking at the signing of the agreement, the Minister of Energy and Mines emphasized the significance of the project, stating, “This project is of capital importance both for Sonatrach and for the Algerian State and is part of the general policy aimed at promoting natural products, in particular hydrocarbons and mines. In addition, this kind of investment allows the creation of a complementary industrial fabric, many jobs in different fields, and the reduction of the import bill, in addition to the acquisition of modern technologies.”

Central to the endeavor is the production of polypropylene through the transformation of propane. However, Sonatrach has bigger plans in store. The company has outlined the construction of multiple petrochemical complexes, with the overarching goal of transforming more than 50% of the primary production of hydrocarbons. This represents a significant increase from the current rate of 32%. The expansion of the petrochemical sector will not only generate over 10,000 job opportunities but also pave the way for a surge in the export of finished petroleum products.

Algeria’s petroleum industry is poised for a major shift with these strategic investments. The country’s exports of finished petroleum products, which currently stand at around $3 billion, are expected to nearly double to $5 billion once the new facilities are fully operational. This surge in exports will not only boost Algeria’s economy but also strengthen its position in the global market.

Furthermore, the development of the petrochemical sector will have a profound impact on the value chain in terms of production and processing. The added value in these areas is projected to increase fivefold, signifying a substantial leap forward for Algeria’s industrial capabilities. By adopting modern technologies and leveraging the expertise of the workforce, the country is positioning itself as a regional leader in petrochemical production.

Beyond the economic benefits, the project aligns with Algeria’s broader objective of promoting natural products and reducing dependency on imports. By expanding the domestic production and processing of hydrocarbons, Algeria aims to enhance its self-sufficiency and strengthen its energy security. This approach not only stimulates economic growth but also ensures a sustainable future for the nation.

The petrochemical project by Sonatrach represents a significant milestone in Algeria’s pursuit of economic diversification and industrial development. With its focus on promoting natural resources and creating a robust industrial fabric, the project is poised to transform Algeria’s hydrocarbon sector. As the country moves forward, it is expected to witness a surge in job opportunities, an increase in the export of finished petroleum products, and a substantial rise in the value-added activities associated with production and processing. These advancements will undoubtedly contribute to Algeria’s economic growth and position the country as a key player in the global petrochemical market.

(Translated with adaptation: La Patrie News)