Algeria has entered into a significant $5.4 billion production-sharing agreement with Saudi Arabia's Midad Energy to explore and develop oil and gas reserves in the Illizi Basin, with full funding from Midad.

This deal involves a 30-year contract, including a seven-year exploration phase funded by Midad with $288 million allocated, and has an option to extend for an additional 10 years.

The project aims to produce approximately 933 million barrels of oil equivalent, encompassing natural gas, hydrocarbons, and condensates, with targeted outputs of 125 billion cubic meters of natural gas and 204 million barrels of liquid hydrocarbons.

The exploration targets include significant quantities of natural gas and hydrocarbons, which are crucial for both regional markets and export ambitions.

Most of Algeria's gas exports are directed to Europe, as the continent seeks to diversify away from Russian supplies amid geopolitical tensions.

Algeria is close to finalizing shale gas exploration deals with U.S. giants Exxon and Chevron to boost exports and reduce reliance on Russian pipeline gas.

In addition to the Saudi partnership, Algeria's Sonatrach is actively pursuing foreign collaborations, including an $850 million contract with China's Sinopec, as part of a broader $60 billion investment in its energy sector.

Other international firms, such as China's Zhongman Petroleum and Natural Gas Group (ZPEC), are competing in Algeria's gas exploration sector, alongside European companies like TotalEnergies, Eni, and Equinor.

ZPEC recently secured a contract to explore the Zerafa II gas block in Algeria's central region, winning against European competitors in a competitive bidding process.

The Illizi South perimeter, near the Libyan border, is a key hydrocarbon-rich area that aligns with Algeria’s strategy to modernize its energy infrastructure and attract foreign investment.

This energy agreement occurs amid regional tensions involving Algeria, Morocco, and the strategic interests of Washington and Moscow, with Saudi Arabia maintaining a neutral stance while expanding its influence in North Africa.

Overall, the deal signifies strengthening economic and energy cooperation between Algeria and Saudi Arabia, following earlier agreements in energy, trade, and other sectors.