No Spot-Market Prices for Gas Deals: Algeria

Algeria's Sonatrach said it would make its gas export contracts more flexible in response to falling demand but would not follow rivals in selling fuel delivered under contact at spot-market prices.

Abdelhafid Feghouli also said a judicial investigation of corruption allegations against Sonatrach CEO Mohamed Meziane and other senior executives had not disrupted projects or led to the suspension of contracts with foreign partners.

Feghouli was named as interim CEO last month after the investigation began. Meziane Meziane has been suspended as CEO pending the outcome of the probe.

Russian gas exporter Gazprom last week said it had decided to sell some of its gas to Europe at spot prices, after pressure from flagging demand forced it to break with the long-standing industry practice of oil-indexed pricing.

Asked if this would prompt Algeria to do the same, Feghouli said: 'No ... We have surplus capacity with regard to the contracts. From time to time we sell some cargoes at spot. But that does not mean that we are going to change our policy with regard to long-term contracts.”

'It is true that we are now going to adopt a position that is much more flexible, for us that is to go towards contracts which run for less time, so to have contracts of four or five years instead of 10 years or more,' he told reporters on the sidelines of an industry conference.

'That will give us flexibility to go back to the spot market if the situation on the market requires that.'

Sonatrach supplies about 20% of Europe's gas needs.

Feghouli said that despite the judicial investigation the firm was functioning as normal.

'We have observed no disruption either at the level of production or at the level of marketing or at the level of our relations with our foreign partners,' he said.

Asked whether Sonatrach had decided to suspend contracts with its foreign partners because of the investigation, he replied: 'Not at all.'

Feghouli said Sonatrach's revenue in 2009 were about US$43 billion, against US$76 billion in 2008. The figure was in line with expectations after world prices for oil and gas fell to about half their 2008 peaks. – Reuters, Trade Arabia