Medgaz Sonatrach and Endesa sign an LNG Sale agreement ...

Market News
June
2006 - N° 27
Marketing Activity Newsletter
O
Oil Outlook
by Imen-Nidhal Boudinar
il prices have shown a
sustained volatility during
May reflecting the impact of
increasing investment funds on
the commodity markets with
a marked downward trend
resulting from several combined
factors:
• The US government decision to
suspend crude oil supplies to its
strategic Petroleum reserves and
data about US Environmental
Protection Agency possible
granting of derogations on the
new gasoline specifications.
• Increasing gasoline inventories in
the USA throughout the past three
weeks reassuring the operators as
regards future supplies during the
driving season.
• EIA's forecast of World oil demand
for 2006 adjusted downward by nearly
200.000 B/d given the impact
of higher prices on global energy
demand.
• Forecast of an accelerated
inflation in the USA and in the
Euro Zone due to high energy
prices.
The base index, excluding high
volatility of energy, has progressed
by 2.3%/ year in April in the USA
against 1.5% in the Euro Zone.
• Increased OPEC offer in April
following the starting up of
production from new fields in Nigeria
and increased exports from Iraq.
• Normalization of diplomatic
relations between Libya and the USA.
Brent prices have declined by
more than 2 $ / Bbl by the end of
May further to the US proposal
to launch negotiations with Iran
on the nuclear program, provided
that Iran suspends immediately
its nuclear activities.
This nuclear issue remains the
main concern over the market
added to the fears of a decline
of production, in case of
international sanctions or even
military action against a
country that covers 5% of the world
crude oil offer.
(to be continued
on page 2)
Medgaz
Sonatrach and Endesa sign an LNG Sale agreement
Sonatrach and the Spanish company Endesa concluded on 22 May 2006,
an LNG sale agreement of 0.96 billion cm/year to be conveyed through
the Medgaz sub-sea gas pipeline linking Algeria directly to Spain.
T
he agreement concluded with
Endesa which holds a share
of up to 12 % in the project,
is to be added to the agreements
signed with Cepsa and Iberdola
on 17th and 21st December 2005,
respectively.
The Medgaz project will enable
the delivery of an annual volume
of 8 billion cm of natural gas to
Europe via Spain by 2008 .
This capacity could be doubled at a
later stage.
The commercial relationship between
Sonatrach and Endesa, the major
Spanish power producer dates back
to 2001 with the signing of a long
term LNG sale contract for a
volume 1 billion cm/year.
Sonatrach and Endesa are also
shareholders in the Reganosa
regasefication terminal located North
of Spain.
This agreement will enable Sonatrach
to reach its export target of
85 billion cm/year by 2010.
W
ithin the framewok of the
Gassi Touil Rhourde Nouss
integrated Project, a signing ceremony
for the setting up of the company
El Andalous LNG SPA, between
Sonatrach (20%) and the Spanish
consortium Repsol-YPF -Gas Natural
(80%), took place on 23 May 2006, in
Arzew.
El Andalous LNG plant will be located
in the industrial area of Arzew and will
be in charge of liquefying natural gas
supplied by the Gasi Touil Rhourde
Nouss deposits on behalf of the
Sonatrach/Repsol-YPF- Gas Natural
joint venture.
The liquefaction unit will have a
liquefaction train with a nominal
capacity of 4 million tons/year able to
process nearly 6.5 billion cm of
gas / year, and could be amplified
with the construction of two trains.
Moreover, this agreement will
strenghten Sonatrach position
as a reliable and long-lasting
supplier for the Spanish market.
For Endesa, this agreement will
Terminal de Isle of Grain
guarantee the diversification of
its gas import sources in
order to reinforce its activity and
presence both in the power and
gas sectors.
Worldwide, Endesa is present
in many European and Latin American
countries where it operates
in power generation and natural
gas distribution.
Last year, its turnover reached 18.3
billion US $.
Integrated Gassi Touil Gas Project
Setting up of a liquefaction company " El Andalous LNG SPA"
El Andalous main missions include:
• Constructing a liquefaction unit.
• operating with up-to-date methods
and technical tools.
• Management according to
performance contracts.
As a reminder, the shareholders
agreement for the setting up of
the Sonatrach and Repsol-YPF-Gas
Natural joint venture took place on 14
March 2006. Both Mrs Chakib Khelil
Minister of Energy and Mines and Mrs
Mohamed Meziane Sonatrach
CEO attended the ceremony.
on page 2 " Gas outlook"-
a new Market News column

Market News
Marketing Activity Newsletter
Oil outlook
hIGHLIGHTS
(continued from page 1)
Saudi Arabia
• Saudi Aramco signs Memoranda
of Understanding with Total and
ConocoPhillips in the downstream
sector.
On 21 and 24 May, the Saudi company
Aramco, has signed Memoranda
of Agreements with Total and
ConocoPhillips relating to the
development of two refinery projects in
Joubail and Yanbou, with a capacity
of 400.000B/Day mainly for export.
Indeed, both state-of-the-art,
full conversion heavy crude
refineries will process heavy crude
( Arab Heavy) for the production of
refined products that meet the most
stringent market specifications. Joubail
refinery targets the Asian markets,
namely China and India, whereas Yanbou
aims to supply the European and
American markets.
The refineries will be put on steam
in 2011 with a unit cost estimated
at 5-6 G$.
Venezuela
• Oil tax nearly doubled on the
Orinoco oil Belt.
Venezuela has recently announced a new
" extraction oil tax" (33.3%) and the
$/Bbl
74
72
70
68
66
64
62
60
58
56
54
52
50
48
46
44
42
40
Upward trends
Downward trends
increase by 30 up to 50 % of its oil
tax for the pumping of extra-heavy crude
made by all foreign companies
operating on the Orinoco River.
Four consortia, namely: Sincor (Total,
PdVSA and Statoil), Hamaca
(ConocoPhillips, Chevron, PdVSA), Cerro
Negro (ExxonMobil, PdVSA, BP) and
Petrozueta (ConocoPhillips, PdVSA )
among which PDVSA is a minor
shareholder and whose production
reaches 620.000 B/d, will have to
comply to those new measures.
Brent Prices in May
-Rise of oil products stocks in USA for the third
consecutive week
-Downward review of 2006 world oil demand by IEA
-Increase of OPEC offer in April
- Sustained inflation in the USA and Euro Zone due to
high energy prices
-Significant sales on commodity market
- Normalisation of diplomatic relations between USA
and Libya
1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26 30 31
June 2006
- Increase of US GDP by nearly 5.3 % in the
first half 2006 on a yearly basis
- US Government Forecast of an intensified
hurricane activity in the Atlantic Basin
- Upsurge of tensions between Iran- UNO
June 2005
• Project to implement a new
refinery technology.
The Venezuela's state oil company PDVSA
is to launch the construction of a heavy
oil reprocessing plant in the Venezuelan
Basin on the Orinoco Oil Belt, permitting
the transformation of 800.000 B/d of
heavy crude into lighter crude. This
project is in line with Venezuela target
to expand its refining activities in order
to develop the huge potential of the
Orinoco with recoverable reserves
reaching 235 GBbls.
Gas outlook
North Europe
by Othmane Irain
In May 2006, natural gas prices in the
UK have registered downward
tends due to climatic factors.
Indeed, because of early May mild
weather, "Day Ahead" spot prices
have shown a downward trend with
the lowest score on 11 May, namely,
28 pence/th. This trend has been
inversed end of May with the
significant decline of temperatures
leading to an average increase by
10 pence/th , reaching 40 pence/th
on 22 May. Thus, "Day Ahead"
prices rose by nearly 35 pence/th.
( "First Month" Price) has shown a
stable trend around 37 and 40 pence/
th, namely a difference of 3 pence/th
compared to NBP.
Currently, the interconnector operates
from Bacton to Zeebrugge. Forward
prices (winter 2006/2007) are high and
stand at 98 pence/th for the IPE
contract of January 2007.
USA
In May 2006, natural gas prices in the
USA have shown a downward trend
mainly driven by a mild weather and
high record of inventories .
"First Month" prices (June 2006
supplies) have shifted from 6.80 $/
MMBtu early month to 5.93 $/MMBtu
by the end of the month, namely the
lowest level since 18 February 2005.
Stock Market
The exchange rate £/$ has registered
a rebound since the beginning of May
2006, shifting from 1.8394 to 1.8907,
then progressively declining to finish
at 1.8712 on 30 May 2006.
Gas - UK and US price evolution
In Zeebrugge market, prices have
shown a similar trend with a slight
margin estimated at 0.7 pence/th,
whereas "First Month" prices have
steadily declined shifting from 38.50
pence/th early May to 30.55 pence/th
by the end. This downward trend is
mainly due to the scheduled shutdown
of the gas interconnector for 15 days,
as of 5 June. (Yearly maintenance).
UK: Pence/th
NBP (Day Ahead)
NBP (first month)
Nymex (first month)
US: USD/MMBtu
The re-opening date of Rough storage
site being postponed from 3 to 13
June, has accentuated the decline
because of the potential natural gas
surplus during the interconnector
shutdown period. Zeebrugge market,

Market News
Marketing Activity Newsletter
Events
OPEC
Ceiling production unchanged
at 28 MB/d.
F
urther to the meeting held
on 1 June 2006 in Caracas,
Opec has decided to maintain
unchanged its ceiling production
and confirmed its determination to
help prices to moderate towards
reasonable levels and renewed its
readiness to take all necessary
steps to preserve the country
members interests for the short and
long terms.
It has also been reported during
the conference that although
oil markets are adequately supplied
with crude oil and oil stocks
are at comfortable levels, crude
prices volatility is essentially fuelled
by concerns over a deficient refining
capacity and the refiners' ability
to satisfy short term demand
in addition to the geopolitical
developments and speculation
on future markets.
Given the uncertainties over the
oil markets throughout 2006,
OPEC countries have agreed to
monitor the developments of oil
market and consider convening
an extraordinary meeting should
the situation require that.
Carbon emissions
The European Commission
releases results for 2005
T
he European Commission released
on 12 May 2006, the 2005
results on carbon dioxide emission
of its State members for the first
trading period 2005-2007 covered by
the EU Emissions trading Scheme.
Out of 25 Member States, 4 countries
have not fulfilled their obligations,
namely, Portugal, Cyprus,
Luxembourg and Malta.
The Transactions are checked for
irregularities at EU level by the
Community Independent Transaction
Log ( CITL) which is the database
of all the transactions undertaken
by the European registries.
According to the report, the total
amounts emitted by the 21 countries
do not exceed the "assigned amount".
The differences between allowances
and emissions represent 44 million
tons ( MT).
Although emissions are below
allowances, some countries (6) show
significant excess such as:
( continued page 4)
American LNG market
Repsol YPF and Irving launch the construction of a 10 Gm 3
terminal on the Canadian Eastern coast
C
anaport LNG,
a joint venture
between
Repsol YPF and
Irving Oil, has
a n n o u n c e d
winning EPC
CANADA
contracts for its
Montreal
LNG import
St-John
terminal in St-
John (Saint-Jean)
in the New
Brunswick, on
U S A
the Canadian
Eastern coast.
SNC-CENMC has
Boston
New-York
Atlantic
Ocean
been entrusted with the onshore construction works (a partnership between SNC-
Lavalin and Saipem) and Kiewit- weeks-Sandwell Partnership will be in charge of
the offshore works. The terminal is located near Irving refinery, some 100 km
off the US border. LNG will be supplied to the Canadian and US markets. Canaport
LNG will receive LNG tankers with a capacity of 200.000 Cm and will be operational
in 2008 with an initial capacity of 10 Gm 3 /year.
Shipping
Opening Ceremony of the "technical offers" relating to
AtlanticMax tankers acquisition
T
he Commission of the opening of technical Bids responsible for
supervising the International open call of tenders N° 20/ Sonatrach -Hyproc
S.C./2006, related to the joint acquisition of an LNG tanker, AtlanticMax,
Very large carriers ( 1+1 optional) held its meeting on 6/6/2006 at
the Hyproc shipping Company head office in Oran.
Twelve companies have collected the procurement documents of this call
for tenders. The deadline was set on 5 June 2006. 5 offers have been considered
as valid by the Commission and will be submitted to the Technical offers
Evaluation Committee ( CEOT).
Hassi R'Mel Hybrid power station
The Spanish company ABENER wins the project
R
enewable energy development
and use is one of the objectives
of the national policy. Pursuant to the
provisions of the law N° 02-01 dated
5 February 2002 related to both
electricity and distribution of gas
by pipe, it has been considered to
use 5 % of renewable energy in the
energy balance sheet by 2015.
For this purpose, the company New
Energy Algeria (NEAL), an affiliate
of the Group Sonatrach has set out
its development scheme which aims to
the construction of infrastructures
promoting renewable energy.
A call for tender has been launched
for the construction of a hybrid power
station ( natural gas and solar energy)
from Hassi R'Mel to Laghouat.
The Spanish tenderer "Abener" has
been selected for the realisation of this
unit, further to the public ceremony
bids opening, which took place on 28
May 2006. An association between
Abener with a 66 % share of the capital
and Neal and a bank consortium with
34 % will be in charge of the project.
The whole production will be allocated
to Sonatrach through Sonelgaz
network and distributed in Hassi R'Mel
and other parts of the country.
This unit will produce 150 MW
according to the following processes:
• Classical combined cycle gas turbine
120 MW.
• Combined cycle steam turbine 30
MW.
The energy required for the boiler to
produce steam heated at 400 °C and
a 70 atm pressure will be recovered
from:
-1 the energy released by exhaust gas
of the gas turbine
-2 the solar energy recovered by the
solar panels and transmitted to the
water steam cycle through an oil
circuit. Steam condensation will be
produced by aero-refrigerants.

Market News
Marketing Activity Newsletter
CO 2
emission
The European Commission releases results for 2005
- The United Kingdom (33 MT)
- Spain ( 19 MT)
- Italy ( 8 MT)
- Ireland (3 MT)
France and Germany have also
registered outstanding results with
amounts exceeding the projected
allowances.
According to some analysts, this
could be explained by some
European governments overallocating
quotas or by an over
estimation of the emissions by
the companies involved in the
process.
Euro/Tonne CO 2
33
28
23
18
13
8
Carbon prices evolution
Following the announcement of
the results, CO2 prices for end
2006 and 2007, have registered
on 12 May 2006 a drastic
decline and stood at 9.43 Euro/t
and 9.83 Euro/t, respectively
compared to 30 Euro/t at the end
of April 2006.
This downward trend has started
earlier further to information
anticipating an excess of allocated
allowances.
Prices for December 2008 contract
(Phase II) have stood firm at
17.43 Euros/t.
02/01/06
09/01/06
16/01/06
23/01/06
30/01/06
06/02/06
13/02/06
20/02/06
27/02/06
06/03/06
13/03/06
20/03/06
27/03/06
03/04/06
10/04/06
17/04/06
24/04/06
01/05/06
08/05/06
15/05/06
22/05/06
29/05/06
Spot Déc-06 (phase 1) Déc-07 (phase 1) Déc-08 (phase 2)
(continued from page 3)
Allowances Emissions
(Ton/year) Stage 1 :
Differences
2005-2007 (2005)
Austria 32.674.905 33.372.841 -697.936
Belgium 59.853.575 55.354.096 4.499.479
Czech Republic 96.907.832 82.453.727 14.454.105
Denmark 31.039.618 26.090.910 4.948.708
Estonia 18.763.471 12.621.824 6.141.647
Finland 44.587.032 33.072.638 11.514.394
France 150.500.685 131.147.905 19.352.780
Germany 495.073.574 473.715.872 21.357.702
Greece 71.135.034 71.033.294 101.740
Hungary 30.236.166 25.714.574 4.521.592
Ireland 19.238.190 22.397.678 -3.159.488
Italy 207.518.860 215.415.641 -7.896.781
Latvia 4.054.431 2.854.424 1.200.007
Lithuania 11.468.181 6.603.869 4.864.312
Netherlands 86.439.031 80.351.292 6.087.739
Portugal 36.898.516 36.413.004 485.512
Slovakia 30.364.848 25.237.739 5.127.109
Slovenia 8.691.990 8.720.550 -28.560
Spain 162.111.391 181.063.141 -18.951.750
Sweden 22.530.831 19.306.761 3.224.070
UK 209.387.854 242.396.039 -33.008.185
Total 1.829.476.015 1.785.337.819 44.138.196
Publication des chiffres
par la CE (12/05/2006)
In brief
• Chile: Endesa to invest
4 billion US $ in four power stations
with a capacity of 2400 MW.
Endesa and Chile's electricity utility
Colbùn have signed an agreement for a
joint development, financing and
operating of the Aysen project covering
the construction of 4 hydro-electric
power stations with an installed
capacity of 2400 MW, , some 1700 km
south of Santiago. The first unit will
start operating in 2012, and the second
unit will come on stream in 2018.
Endesa and Colbùn consider the setting
up of a joint company with shares of 51
and 49 %, respectively.
• China: 15 % increase for
gasoline and diesel prices in
January-May 2006.
The Chinese Government has increased
gasoline and diesel prices by 15 % for
the period January-May 2006. In China,
the retail prices are still regulated,
making the local refiners' situation
difficult. The recent increase
corresponds to a crude price of nearly
55 $/Bbl.
• South Korea/UAE :
Memoranda of Agreement for crude
oil storage. The United Arab Emirates
and South Korea have concluded a
series of agreements by the end of May
of which a Memorandum of Agreement
for the storage of Crude oil. This
agreement will open to the UAE a route
towards the North-East Asian fast
growing market. The Memorandum of
Agreement has been signed between
the North Korean National Oil Company
( KNOC) and Abu Dhabi National Oil
Company( ADNOC).
• Saudi Arabia: gasoline price
reduced by a third
The Saudi government has reduced by
a third the retail price of gasoline and
diesel in order to improve the citizen
standard of living, cut transport costs
and support national agriculture.
• Indonesia : Kerosene exports
stopped
The Company Pertamina has announced
that will cease kerosene imports as of
May 2006, considering the levels of
inventories (41 days consumption) and
its own refineries output able to ensure
the supplies of Indonesia. Imports fell
from 2.4 MBD in September 2005 to 0.6
MBD in 2006.
• Brazil: Golfinho field on
stream
Petrobras has announced the first oil for
the Golfinho field in the Espirito Santo
Basin. With an initial output flow of
15000 B/D of light crude, it will reach a
full capacity of (100.000 b/d) by the end
of 2006.
Market News is a monthly Publication of Sonatrach Marketing Activity
Djenane El Malik - Hydra - Alger -
Contact: Cellule Communication - email : cid.com@sonatrach.dz - Fax : 021 54 86 04 - tel: 021 54 70 00 - 54 80 11 - 54 90 22