Algeria’s state-owned energy company Sonatrach has advanced plans for a base oil unit producing API Group II and III base oils at its Arzew refinery, prequalifying four engineering companies to bid for design, technology licensing and project management work, reported the Middle East Economic Digest.
The project fits Algeria’s broader effort to process more hydrocarbons domestically. The government announced a $7 billion petrochemical investment program for 2025-29, aiming to raise the share of hydrocarbons converted into higher-value products from 32% to 50%. The program covers multiple investments and does not represent the budget for the Arzew base oil project.
Sonatrach operates a Group I base oil at Arzew, with capacity of 50,000 metric tons per year. The state-owned company is now pursuing plans for a new plant designed to produce higher-grade base stocks, although its capacity, cost and start-up date have yet to be disclosed.
Sonatrach began advancing the proposed Group II and III project through a contractor prequalification process launched in August 2025. By October 2026, four engineering firms had qualified to bid: China HuanQiu Contracting & Engineering Company, Egypt’s Engineering for the Petroleum and Process Industries, Spain’s Técnicas Reunidas and Wood Group.
No contract winner had been announced in the reporting available.
New Group II and III production could supply Algerian lubricant blenders and create export opportunities around the Mediterranean. Its effect on regional supply will depend on the plant’s capacity, technology, operating costs and intended export volumes. Sonatrach has yet to publish those details.
Algeria consumed about 150,000 tons of motor oil in 2024, according to a January 2025 report citing Rachid Nadil, chairman of the Hydrocarbons Regulatory Authority. That was a 14% increase from 2023.