Eni and Sonatrach cement $1.35bn upstream gas deal to secure European supply
Italy’s Eni and Algeria’s Sonatrach have expanded their strategic energy alliance with a $1.35 billion upstream agreement, cementing Algeria’s role as a critical gas supplier for Europe amid ongoing efforts to diversify away from Russian imports.
Italy’s Eni and Algeria’s Sonatrach are deepening their energy alliance through a $1.35 billion production-sharing agreement for the Zemoul El Kbar zone in the Berkine Basin. Signed in July 2025, the 30-year upstream deal marks a strategic evolution from a simple buyer-seller dynamic to long-term co-investment in Algerian reserves.
The contract includes a seven-year exploration phase with a possible 10-year extension. It targets an estimated 415 million barrels of oil equivalent, including 9.3 billion cubic metres of gas over its lifespan.
This upstream commitment supports Eni’s broader strategy in Algeria, where total investments exceed $8 billion. The Italian energy major expects these projects to lift its gas production in the country to 5.5 billion cubic metres per year by 2028.
The partnership builds on a landmark April 2022 supply agreement signed by Sonatrach CEO Toufik Hakkar and Eni CEO Claudio Descalzi. Backed by then-Prime Minister Mario Draghi and Algerian President Abdelmadjid Tebboune, that initial deal committed the companies to increase TransMed pipeline deliveries to 9 billion cubic metres annually by 2023–24.
Italy executed this pivot rapidly following Russia’s invasion of Ukraine, which had previously supplied roughly 45 percent of the European bloc’s gas imports. By the end of 2022, more than 20 billion cubic metres of Algerian gas flowed to Italy, displacing significant Russian volumes and establishing Algeria as Italy’s foremost energy supplier.
The TransMed pipeline remains central to this strategy, offering a fixed annual capacity of roughly 32 billion cubic metres. This physical infrastructure provides a reliable transport route that is far less susceptible to disruption than seaborne liquefied natural gas trades.
Algeria now supplies approximately 11 percent of Europe’s imported gas, granting the state-owned producer considerable geopolitical leverage. As recently as March 2026, reports indicated Italy continues to seek additional Algerian volumes to offset tightening global supply and disruptions in other producing regions.
For investors, the Sonatrach-Eni axis demonstrates how established pipeline infrastructure and state-backed partnerships can secure long-term energy flows. Market participants should monitor future upstream awards in the Berkine Basin and potential pricing formula renegotiations as European benchmark rates evolve.
