According to Oil and Gas Journal (OGJ), Algeria had 161.7 trillion cubic feet (Tcf) of proven natural gas reserves (the eighth-largest in the world) as of January 2007. Algeria's largest gas field is the super-giant Hassi R'Mel, discovered in 1956 and holding proven reserves of about 85 Tcf. Hassi R'Mel accounts for about a quarter of Algeria's total dry natural gas production. The remainder of Algeria's natural gas reserves center around associated (they occur alongside crude oil reserves) and non-associated fields in the south and southeast regions of the country. In southeastern Algeria, the Rhourde Nouss region holds 13 Tcf of known reserves. Also in southeastern Algeria, near the Libyan border, the In Amenas region includes the Tin Fouye Tabankort (TFT; 5.1 Tcf), Alrar (4.7 Tcf), Ouan Dimeta, and Oued Noumer fields. The In Salah region in southern Algeria holds smaller, less-developed reserves (5-10 Tcf).

The country produced 2.8 Tcf of natural gas in 2004, the eighth-largest in the world and the second largest among OPEC-member countries (behind Iran). Algeria consumed 0.68 Tcf of natural gas in 2004, some 24 percent of its production. In 1997, Algeria's natural gas production exceeded the country's crude oil production for the first time, though it has since fallen below oil production again. The Algerian government has encouraged the domestic use of natural gas, which represented 62 percent of the country's total energy consumption in 2004. The remaining natural gas is exported, with the majority going to Europe and some to the United States.

Sonatrach dominates natural gas production and wholesale distribution in Algeria, while state-owned Sonelgaz controls retail distribution. Algeria has increasingly allowed greater foreign investment in the sector, and foreign gas producers have entered into numerous partnership agreements with Sonatrach. There are also plans to allow foreign participation in the retail natural gas sector. Foreign operators in Algeria include BHP-Billiton, BP, Repsol, Statoil and Total.

Development of the In Salah region is crucial in Algeria's plan to increase its natural gas production. The In Salah Gas consortium, a partnership of Statoil, BP, and Sonatrach, was the first major natural gas partnership between Sonatrach and a foreign operator. The consortium has development rights for seven of the twelve existing fields in the In Salah region. In Salah Gas will appraise existing wells and explore for new natural gas reserves in the region. The fields controlled by the consortium contain proven reserves of 6 Tcf, with potentially 10 Tcf in total recoverable reserves.

Initial production at the In Salah fields began in July 2004, and once fully online, they should produce some 880 million cubic feet per day (Mmcf/d) of natural gas. Even prior to initial startup, the consortium had already signed natural gas supply contracts with European customers. In May 1997, In Salah Gas sealed its first natural gas sales deal with Italian electricity generator Enel. The deal enables In Salah Gas to take over an existing contract to supply Enel with 390 Mmcf/d of natural gas. In Salah Gas is also marketing natural gas to potential clients in Europe, Turkey and North Africa.

Additional Algerian natural gas projects have centered around three blocks in the Illizi province of southeast Algeria, near the Libyan border: Ohanet, In Amenas, and Gassi Touil. Ohanet, led by a consortium of BHP-Billiton and Sonatrach, is in Illizi on the northern edge of the Sahara desert. Production of natural gas, NGL, and liquified petroleum gas (LPG) at Ohanet began in October 2003. The Ohanet project includes a natural gas processing plant with capacity for 30,000 bbl/d of condensate, and 26,000 bbl/d of LPG.

In November 2004, Algeria awarded a tender to Repsol-YPF and Gas Natural for a natural gas project at Gassi Touil, a field containing 9 Tcf of proven reserves. The $2 billion integrated project will consist of 52 development wells, a 780-Mmcf/d natural gas processing facility, a 630-Mmcf/d natural gas pipeline, and a 500-Mmcf/d natural gas liquefaction terminal at Arzew. Initial production at Gassi Touil should begin in 2009, with the bulk of its gas destined for Spain and other European markets.

In June 2006, Sonatrach, BP and Statoil began producing natural gas at the In Amenas field. At peak production the field should produce around 900 Mmcf/d of natural gas, plus 50,000 bbl/d of condensate and LPG. The project includes construction of three pipelines to carry the hydrocarbons to the Sonatrach distribution system at Ohanet. In 2003, Statoil purchased 50 percent of BP's stake in the project.

Algeria's domestic pipeline system centers around the Hassi R'Mel natural gas field. The largest pipeline systems connect Hassi R'Mel to liquefied natural gas (LNG) export terminals along the Mediterranean Sea. A 315-mile, 4.38-billion-cubic-feet-per-day (Bcf/d) system connects Hassi R'Mel to Arzew, while a 360-mile, 1.98-Bcf/d system connects Hassi R'Mel to Skikda. A smaller pipeline (270 miles, 690 Mmcf/d) also runs between Hassi R'Mel and Isser, near Algiers. Hassi R'Mel is the center of Algeria's entire natural gas transport network, so pipelines connect to it from the country's major natural gas-producing regions. A 600-mile, 3.29-Bcf/d pipeline links the In Amenas region; a 330-mile, 774-Mmcf/d pipeline connects the In Salah region; and a 90-mile, 610-Mmcf/d system runs from the natural gas fields surrounding Gassi Touil.

There are two natural gas pipeline connections between Algeria and Europe (map). The 670-mile, 2.32-Bcf/d Trans-Mediterranean (Transmed, also called Enrico Mattei) line runs from Hassi R'Mel, via Tunisia and Sicily, to mainland Italy. Completed in 1983 and doubled in 1994, there are plans to construct an additional compressor station along the Transmed that could increase capacity to 3.48-Bcf/d. An international consortium, led by Spain's Enagas, Morocco's SNPP, and Sonatrach, operates the 1,000-mile, 820-Mmcf/d Maghreb-Europe Gas (MEG, also called Pedro Duran Farell). MEG, completed in 1996, connects Hassi R'mel with Cordoba, Spain via Morocco, where it ties into the Spanish and Portuguese natural gas transmission networks. In August 2001, Sonatrach awarded ABB a $93 million contract to build a natural gas compressor station on the MEG line in order to increase the line's capacity to 1.78 Bcf/d.

In July 2001, a consortium led by Spain's Cepsa (20 percent) and Algeria's Sonatrach (20 percent) agreed to build a natural gas pipeline linking Algeria and Europe: Medgaz. The 120-mile Medgaz will link Beni Saf, Algeria to Almeria, Spain, with an eventual extension to France. In September 2002, the consortium completed a study of the line's feasibility, and initial construction on the project should begin around June 2007. The $1.2 billion Medgaz, which should be completed by 2009, will have an initial capacity of 390 Mmcf/d, increasing to a maximum of 1.55 Bcf/d. There are also plans to run a parallel power cable. In November 2002, Cepsa said that it had signed a letter of intent to purchase 35 Bcf/y of natural gas via Medgaz, and in 2004, Iberdrola also agreed to purchase 35 Bcf/y from the line.

In 2002, Sonatrach signed a deal with Italy's Enel and Germany's Wintershall to form Galsi, a consortium to build a natural gas pipeline from Algeria to Italy. The pipeline will run from Gassi R'Mel to El Kal, Algeria, then an underwater section to Cagliari, Sardinia. This is to be followed by an onshore section to Olbia, Sardinia, then a final, offshore pipeline to C.D. Pescaia, Italy. The Galsi pipeline, which is currently under construction, will have initial capacity of 770-990 Mmcf/d, and, as with Medgaz, there are plans for a parallel power cable. The Galsi project could be completed by late 2009.

Sonatrach and the Nigerian National Petroleum Corporation (NNPC) formed the Trans-Saharan Natural Gas Consortium (NIGEL) in 2002. The NIGEL consortium aims to construct a 2,800-mile natural gas pipeline from Warri, Nigeria to Hassi R'Mel, via Niger. There are also plans to construct a road and fiber optic cable parallel to the pipeline. The NIGEL pipeline would utilize the proposed Medgaz and existing Transmed pipeline to carry Nigerian natural gas to European markets. A feasibility study on the Trans-Saharan pipeline is underway, but practical problems such as the immense length and possible sabotage are two deterrents to the project moving forward. The Algerian government would like to see the $10 billion pipeline functioning by 2015.

With the start-up of the Arzew GL4Z plant in 1964, Algeria became the world's first producer of liquefied natural gas (LNG). Algeria is the fourth largest exporter of LNG (behind Indonesia, Malaysia and Qatar), exporting around 13 percent of the world's total. The vast majority of Algeria's LNG exports go to Western Europe, especially France, Spain and Turkey. Sonatrach has LNG export contracts with Gaz de France, Belgium's Distrigaz, Spain's Enagas, Turkey's Botas, Italy's Snam, and Greece's DEPA. During 2005, Algeria exported 97 Bcf of LNG to the United States, some 15 percent of total U.S. LNG imports for that period. Algeria's largest LNG export terminal is the Arzew facility, whose three facilities produce a combined 2.47 Bcf/d of re-gasified LNG. Other important terminals include Skikda and Algiers.