Algeria: After denying any desire to withdraw, TotalEnergies slips away secretly from Arzew project

TotalEnergies has abandoned the polypropylene plant project at Arzew, located on the Algerian coast, near Oran. However, no official announcement has been made by the French group. It was until May 18 that the British oil services company Petrofac revealed that STEP Polymers SPA (a 100% subsidiary of the Algerian state company Sonatrach) had awarded it the contract to build the Arzew plant. If the document also indicated the names of the two companies associated with Petrofac in the project, the French major was not mentioned at any time.

TotalEnergies confirmed to Africa Intelligence news outlet that it had actually sold its shares in the project and specified that “as part of the strategic cooperation between the two companies, TotalEnergies has offered Sonatrach to provide it with its technical expertise in the execution of the project as well as its commercial skills in marketing polymers on the European market”.

TotalEnergies held 49% of the Arzew project alongside Sonatrach. Africa Intelligence had revealed, as early as August 22, 2022, the French group’s intention to leave the project imminently. The context was particularly sensitive at the time, with French President Emmanuel Macron due to visit Algiers four days later to consolidate the bilateral relationship. TotalEnergies did not wish to comment on the information at the time, before denying any withdrawal via Reuters.

This discreet departure from Arzew is not likely to strengthen relations between TotalEnergies and the Algerian state. In 2019, the refusal of the authorities to validate the acquisition by TotalEnergies of the Algerian assets of Anadarko – acquired by Occidental Petroleum (Oxy) – had already strained relations with Sonatrach.

The abandonment of Arzew is not only linked to this particular context. The signing by TotalEnergies, on December 15, 2022, of an agreement for the construction of a polypropylene plant in Jubail, Saudi Arabia, also contributed to condemning the Algerian project. Totaling $11 billion, this larger investment helped eclipse Arzew, which was much less profitable, and whose projected construction costs had skyrocketed by almost 50%.

The contract awarded to Petrofac, announced by the AI outlet at the end of April, will be around 1.5 billion dollars. The company has beaten the Koreans of Samsung and the Spaniards of Técnicas Reunidas. Initially, the cost of building the plant was to be closer to a billion dollars.