Vitol signs first deal with Algeria to refine oil abroad

Algeria’s state-run energy producer Sonatrach signed an agreement with oil-trading Vitol Group to ship crude to Italy to be processed and sent back as refined products, in the first deal of its kind to trim the country’s $2 billion annual bill for imported fuel.

Sonatrach selected Vitol, the world’s largest independent oil trader, from among five companies that participated in a tender to ship its crude outside the country and have it sent back as refined fuel, Chief Executive Officer Abdelmoumen Ould Kaddour told reporters on Tuesday during a trip to Algiers from a natural gas field south of the capital. Officials signed the agreement on Monday, he said. A Vitol media official in London declined to comment.

Algeria will start by shipping a 1 million-barrel cargo through Vitol to a refinery in Italy in February, according to a person familiar with the situation, who asked not to be identified because the information hasn’t been made public. The number of future shipments will vary according to Algeria’s needs, the person said.

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“We don’t want to continue to import $2 billion of fuel per year,” Ould Kaddour told reporters. Separately, the North African country is also looking to buy a stake in a refinery overseas, he said, without giving more details.

Algeria depends heavily on oil and gas sales and is seeking to strengthen an economy squeezed by falling crude revenue. The OPEC nation’s oil production dropped to 1.03 million barrels a day by the end of last year from 1.27 million barrels a day in January 2012, according to data compiled by Bloomberg. Algeria is the ninth-biggest producer among the 14-member Organization of Petroleum Exporting Countries.

Algeria’s gas exports were unchanged last year at 55 billion cubic meters, Ould Kaddour said. The country will focus on boosting gas output as OPEC countries pursue a strategy, along with other global suppliers, to limit crude production to counter a global glut, he said in September.