Today in Algeria a working meeting was held between Alexey Miller, Chairman of the Gazprom Management Committee and Nordine Cherouati, President and Chief Executive Officer of the Algerian State Oil and Gas Corporation (ASOGC) Sonatrach as part of the official visit by the Russian President Dmitry Medvedev to the People’s Democratic Republic of Algeria.

The parties addressed bilateral cooperation in the energy sector and updated the key directions of its further development. In particular, the work done by Gazprom and ASOGC Sonatrach within the joint venture at the El Assel field received high appreciation and agreements were reached on developing new joint projects, swap deals inclusive.

The parties shared the opinion that natural gas had excellent prospects as the “fuel of the 21st century” and that the established system of gas trading under long-tern contracts based on the price formula, price pegging to petroleum products and the “take-or-pay” principle had proven its viability and would remain the backbone of the global gas market.

Background:

Algeria’s proven natural gas reserves account for 4.5 trillion cubic meters (the country is the second largest reserve holder in Africa after Nigeria with its 5.15 trillion cubic meters). The bulk of reserves are situated in the country’s central and eastern regions.

Algeria’s proven oil reserves make up 1.68 billion tons (third largest in Africa after Libya and Nigeria). In the national energy mix natural gas accounts for 62.5 per cent, oil – 34.5 per cent, coal – 2.5 per cent and hydropower – 0.5 per cent.

The Algerian State Oil and Gas Corporation Sonatrach is involved in oil and natural gas exploration, transportation and marketing, and controls most of gas production and wholesale gas trade.

On August 4, 2006 Gazprom and ASOGC Sonatrach signed the Memorandum of Understanding. The document identified the following key areas for cooperation deepening: geological exploration, production, transportation, gas transmission and distribution systems development, asset swaps, processing and marketing of oil and natural gas in Algeria, Russia and third countries.

Gazprom EP International B.V. is Gazprom’s wholly owned subsidiary managing the Company’s international assets in the hydrocarbons exploration and production area.

Gazprom Group was announced the winner of the hydrocarbon exploration and development tender for the onshore El Assel area on December 13, 2008. Following the tender results, Gazprom signed the contract with Algeria’s National Agency for the Valorization of Hydrocarbons Resources (ALNAFT), which came into effect on May 3, 2009.

Gazprom EP International is the operator of the said project in partnership with the Algerian State Oil and Gas Corporation Sonatrach. Gazprom and Sonatrach hold a 49 and a 51 per cent stakes in the project.

In compliance with the obligations under the contract with the Algerian National Agency for the Valorization of Hydrocarbon Resources (ALNAFT) Gazprom EP International commenced in March 2010 drilling of the first prospecting well Rhourde Sayah-2 in Africa within the El Assel license area of Algeria’s Berkine basin. The well drilling is provided for in the minimum scope of geological exploration activities according to the terms and conditions of the tender for hydrocarbons exploration and drilling of four wells in the onshore El Assel area. Besides, Gazprom EP International carries out large-scale 3D seismic survey in other parts of the license area.

The El Assel license area is located in the Berkine Basin, 500 kilometers south of Algeria’s capital Algiers and 150 kilometers from the town of Hassi Messaoud, a gas production center.

By now, 3D seismic survey has been performed for 1,100 out of the projected 2,700 square kilometers.

Gazprom EP International is the project operator. The first well is 4,400 meters deep. The target horizons are the Triassic and Cambrian-Ordovician sandstones.