Algeria signs agreement with Vitol to cut fuel import bill

TIGUENTOURINE/LONDON: Algeria’s state oil firm Sonatrach will exchange crude for refined products with the world’s largest oil trader Vitol, a Sonatrach official said of the rare move that aims to reduce a record fuel import bill.

Vitol would receive up to 2 million barrels a month of the Opec member’s light, sweet crude and would deliver gasoline and gasoil in return until the end of the year, sources familiar with the matter said. A spokeswoman for Vitol, which has a global refining capacity of 480,000 barrels per day (bpd), declined to comment.

Sonatrach, Algeria’s only domestic oil producer, produced about 1 million bpd of crude in December, according to the Reuters Opec survey.

The North African country, which needs to meet surging domestic fuel demand, paid $800 million for fuel imports in 2016 but that more than tripled in 2017 to a record $2.5 billion because of refining problems, a Sonatrach source said. This is the first time in decades that Algeria has done a deal that was arranged like a swap, the sources said. CEO Abdelmoumen Ould Kaddour said Sonatrach would pay processing costs before bringing refined fuel back to Algeria.

Two of the sources described the deal as a hybrid between a straight swap and a refinery processing agreement, whereby Sonatrach would pay a fee to process crude abroad. “Our goal is to reduce our imports of gasoline, they are too high,” Ould Kaddour told reporters on Tuesday.

He said the firm was also negotiating to buy shares in a foreign refinery, but did not give details. The deal is due to take effect in early February, according to a document seen by Reuters.

One of the sources familiar with the matter said Vitol would have the option to resell the crude on the open market as long as the products provided to Sonatrach met the contract’s specifications. Ould Kaddour was speaking on a visit to the gas complex of Tiguentourine, operated by Sonatrach, BP and Statoil. -