Algeria is an important producer and exporter of oil and gas and supplies a significant portion of Europe's energy requirements. Natural gas and petroleum dominate the economy; in 2003, estimated exports of hydrocarbons were valued at more than 90% of total exports, and around 30% of gross domestic product (GDP). In the 1950s, natural gas was found in the east, near the Libyan border, and at Hassi R'Mel in the Sahara. Algeria's proven natural gas reserves are among the world's ten largest, totaling an estimated 4.5 trillion cu m (158.9 trillion cu ft) as of 2002. Algeria produced 82 billion cu m (2.9 trillion cu ft) of natural gas in 2000. A 500-km (310-mi) main pipeline connecting Hassi R'Mel to Arzew (between Oran and Mostaganem) was opened in 1961, and branch lines to Oran and Algiers were completed four years later. Since then, six other pipelines have been constructed, including the first trans-Mediterranean gas pipeline (Transmed) to Europe via Sicily, built at a cost of $3 billion. The Transmed consists of three segments, linking Algeria, 550 km (342 mi); Tunisia, 370 km (230 mi); and the Mediterranean to Sicily, 154 km (96 mi) underwater. In 2001, Algeria's total LNG export capacity amounted to over 6 billion cu m (212 billion cu ft) per year. The $2.3-billion Gazoduc Maghreb-Europe pipeline to Spain and Portugal via Morocco began operating in November 1996. Total exports of natural gas amounted to an estimated 53.8 billion cu m (1.9 trillion cu ft) in 1999. Algeria's total natural gas export capacity as of 2001 was 57 billion cu m (2 trillion cu ft).
Oil was discovered at Edjeleh and Hassi Messaoud in 1956 and at Al-Gassi in 1959; by 1969, the Franco-Algeria Cooperative Association (ASCOOP), a petroleum development company, had discovered eight major fields. Proved reserves of crude oil amounted to 9.2 billion barrels in 2002; crude oil production averaged 839,000 barrels per day in the first 10 months of 2002. There are four main pipelines linking the wellheads in the eastern Sahara with Algerian ports and a fifth with the Tunisian port of Sekhira; there are also several branch pipelines. In late 2002, Algeria's total refinery capacity was 450,000 barrels per day.There were four gas liquefaction plants in 2000, three at Arzew and one at Skikda, all operating well below capacity because of disrepair and lack of funds for spare parts. In 2000 Algeria was the world's second-largest exporter of liquefied natural gas (LNG); its exports, which went mainly to Western Europe, accounted for 19% of the world's total.
The Société Nationale pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbons (Sonatrach), founded in 1964 as the state-owned petroleum company, handles the distribution and transport of oil. On 24 February 1971, President Boumedienne announced the Algerian takeover of controlling interest in all French oil company subsidiaries and the nationalization of all pipelines and natural gas deposits. Holdings of all other foreign petroleum interests in Algeria were nationalized by the end of 1971. Subsequent agreements have generally treated foreign companies as minority partners in Algerian state enterprises. Contracts for sales of natural gas to Western Europe and the United States increased spectacularly in the 1970s but decreased in the 1980s as world energy prices fell, pushing Algeria into severe debt. By 1991, Sonatrach was reversing its monopolistic policy, and forming joint ventures for new exploration contracts. The company plans to invest $20 billion through 2004 to develop Algeria's oil and gas fields, focusing on wet gas field development, enhanced oil recovery techniques, pipeline expansion, exploration, and dry gas field development. In April 2000 Sonatrach announced a $500 million joint venture with Amerada Hess to develop the el-Gassi, el-Agreb, and Zotti oilfields, with the goal of increasing production to 45,000 barrels per day by the end of 2003.
In 2000, net electricity generation was 23.5 billion kWh, of which 99.6% came from fossil fuels, and the rest from hydropower. In the same year, consumption of electricity totaled 21.8 billion kWh. Total installed capacity at the beginning of 2001 was 6 million kW.
In 1996, Algeria signed a nuclear cooperative agreement with China, which built the two nuclear reactors in Algeria. Algeria claims that these reactors are for research and the peaceful exploitation of nuclear power. Algeria has signed a cooperative agreement with the International Atomic Energy Agency and has opened its reactor facilities to agency inspectors.