Libya, Algeria award $1.8bn of gas infrastructure contracts(3)

Citadel Capital-backed gas distributor TAQA Arabia won a $165m contract in Libya to build a gas distribution network linking the country’s three major cities. In Algeria, Japan’s JGC and a joint venture between Swiss engineering firm ABB and Algerian oil and gas construction firm Sarpi won contracts totalling $1.6bn for gas gathering, metering and pipeline facilities.

Two neighbouring North African countries with small but growing private sectors have awarded nearly $1.8 billion worth of construction contracts for gas infrastructure to private sector developers.

Libya awarded an €118 million ($165 million) contract to build the infrastructure for a gas distribution network linking 370,000 households across the country’s three major cities of Tripoli, Benghazi and Misurata. TAQA Arabia, a gas distributor backed by Egypt’s Citadel Capital, a private equity firm, won the contract.

We believe that this contract will be the launching pad for more Libyan projects for TAQA

Marwan Elaraby

Algeria, Libya’s gas-rich western neighbour, awarded two development contracts for gas infrastructure collectively worth 116 billion Algerian dinars ($1.6 billion; €1.125 billion).

Japanese engineering and construction firm JGC Corporation won a contract for engineering, procurement and construction services for gas processing, gathering and pipeline facilities in the country’s Gassi Touil field, JGC said in a statement.

The term of the contract is 42 months and covers 54 wells in seven Touil fields, Sonatrach, Libya’s state-owned oil and gas firm, said in a statement. The contract is worth 100 billion Algerian dinars, Sonatrach said.

A consortium of Swiss engineering firm ABB and Algerian oil and gas construction firm Sarpi won a second contract to build gas gathering and metering facilities in the country’s Haoud Berkaouni region. The contract is worth 16 billion Algerian dinars and has a term of 32 months, Sonatrach said.

The contract awards hint of an increasing role for the private sector in Libya and Algeria, neither of which has a large private sector or a long track record of private investment in infrastructure. Libya has had no private sector investments in infrastructure reach financial close between 1990 and 2007, while Algeria has only had 19 projects close, according to the World Bank’s Private Participation in Infrastructure Database.

The contract awards also come as Algeria prepares to ramp up its gas exports by 30 billion cubic meters in the next five years, the country’s Energy and Mines Minister, Chakib Kheli, told a local televeision station. Kheil credited the volume increase to new pipelines connecting Algeria with Spain and Italy and said the volume increase will generate revenues of about $5 billion per year, according to the Algerian Press Agency.

The Libyan contract award also marks a first in the country for TAQA, which already holds gas distribution contracts across Egypt, Qatar, the United Arab Emirates, Syria and Jordan.

“We believe that this contract will be the launching pad for more Libyan projects for TAQA,” Citadel managing director Marwan Elaraby said in a statement.

Citadel Capital invested $84.3 million of equity into TAQA in June 2006 as part of a regional industry roll-up investment strategy, according to a summary of Citadel’s portfolio.

The firm also plans to make a big push into the Iraqi oil and gas sector, according to remarks made by Ahmed Heikal, the firm’s chairman and founder, at PEI Media’s Emerging Markets Private Equity Forum in March.