ANNUAL REPORT2010

Sonatrach

Sonatrachs results for 2010 were positive with a substantial growth across all the companys activities.The targets set were met and, in some cases, exceeded. In the markets, our efforts took advantage from the surge in oil prices which experienced a strengthening with an annual average price of 80.1 $/bbl in 2010 for the Sahara Blend, up 29% over the previous year.

This trend was somewhat thwarted by the natural gas market prices which remained depressed. In this context, we consolidated the sound financial position of Sonatrach, thus strengthening Sonatrach Groups contribution to the national economy.

Our exports turnover thus stood at US $ 56.1 billion in 2010, increasing by 26% over 2009, with a net positive result of DZD 705 billion, a significant 148% rise over 2009.The oil tax paid by Sonatrach to the Treasury rose from DZD 1983 billion in 2009 to DZD 2 520 billion, or a 27% increase over the previous period.

Primary hydrocarbons production stood at nearly 214 Mtoe, of which 55.3 millions tons of crude oil and 145.8 billion cm of natural gas.

The sales volumes of liquid and gaseous hydrocarbons, for the domestic market, confirm the growing sustained trend of the countrys domestic demand with an increase of + 3% compa-red to 2009 and the highest priority we attach to supply the domestic market.

In 2010, a record of twenty-nine (29) hydrocarbons discove-ries was achieved, thus invigorating the initiated process of reinforcing and expanding our reserves base in Algeria. Twen-ty-seven (27) discoveries were made by Sonatrach individual-ly and two (02) in partnership.

Regarding investment in Algeria, Sonatrach multiplied its ef-forts in 2010 compared to 2009. We recorded an investment level of more than 11% in physical terms value with achieve-ments of around US $14.4 billion equivalent.The core of the investment program was achieved in the Upstream (69%), including namely the drilling of 242 explora-tion and development wells, 148 of which carried out by Sona-trach individually.

The implementation of the established investment program continued during 2010 including major projects such as the implementation of Hassi Messaoud LPG unit , the deve-lopments of Gassi Touil gas field, Rhourde Nouss Quartzites of Hamra deposits and also of El Merk in partnership with Anadarko, Menzel Ledjmet East in partnership with ENI, the ongoing implementation of two mega LNG trains in Arzew and Skikda and the rehabilitation projects of Northern refineries.

2010 also witnessed the reinforcement of our treatment, transportation and processing capacities through the commis-sioning of several significant projects for the optimisation and operation of fields and hydrocarbon production facilities,

Message from the Chief Executive Officer

04 Annual Report 2010

Mr. Nordine CherouatiChairman and Chief Executive Officer of SONATRACH

including Hassi Messaoud South Crude Processing Unit, phase II of Hassi RMel Boosting, Alrar Early Production Faci-lities , Rhourde Khrouf gas reinjection unit (in partnership with Cepsa), phase II of TFT Boosting ( in partnership with To-tal and Repsol), phase III of Moctaa Douze Beni Saf GZ4 gas pipeline projects, which will supply the Medgaz, Hassi RMel Arzew LZ2 LPG transportation pipeline, and the Three LPG Trains and Nitrogen Storage and Conditioning Centre projects in Arzew.

The high level of investments recorded during 2010 also in-cludes funding to support the cost of new projects, demons-trating Sonatrachs desire to lay solid foundations for the fu-ture.

Among major projects initiated in this regard, I can mention the rehabilitation of Rhourde Nouss 100 & 300 LPG trains, the FEED for the development of Timimoun gas fields (in par-tnership with Total and Cepsa) and in Touat (in partnership with GDF-Suez) to which I would include the project for the Rehabilitation and Adaptation of Algiers refinery facilities in respect of which an EPC contract worth almost 970 million dollars equivalent was signed.

Our international activities recorded continued success: a se-cond hydrocarbon discovery was made in Libya following the one achieved in 2009 on Block 65 where Sonatrach is opera-ting through its subsidiary SIPEX.In Peru, on the Cashiriari Field, Blocks 88 and 56, in Camisea, in which Sonatrach holds stakes, 29.5 millions of liquid hydro-carbon barrels and 12.18 billion m3 of natural gas have been produced.

Sonatrachs Human Resources are deeply committed in the success achieved in 2010 which recorded a dynamic process of continuous qualitative improvement involving recruitment and training operations namely in core businesses.

The Companys permanent workforce remained almost stable with 47 963 employees in 2010, or a less than 1% increase, and 17 455 persons benefited from training.

The significant results achieved during the past year demons-trate the real capabilities of our Company and the tremendous potential it holds.

They confirm our determination to stay the course. We are continuing our efforts in 2011 to undertake ambitious pro-jects up to Sonatrachs missions and to our abilities to meet challenges, improve management at all levels and strengthen the steering of the Group.

For this purpose, an important program for the intensification of efforts was set up in order to consolidate our reserves base and, in this respect, a strategy was defined for the exploration of our shale gas potential. Other challenges will be addressed through the management and implementation of large-scale projects. We do indeed want to build a project engineering and management capacity consistent with our strategic goals.

These efforts must obviously be coupled with the alignment of our organization and our procedures to the supply chain and contract management improvement imperatives, together with reinforcing our capacities in the training and develop-ment our human resources.

To this end, and as has always been in the past, I know that we can rely again on the commitment and dedication of Women and Men in Sonatrach.

05Annual Report 2010

06 Annual Report 2010

The General Meeting

Mr. Youcef YOUSFI, Minister of Energy and Mines Chairman

Mr. Mohamed LAKSACI, Governor of the Bank of Algeria Member

Mr. Karim DJOUDI, Minister of FinanceMember

Mr. Abdelhamid TEMMAR, Minister of Prospective Planning and Statistics Member

Mr. Houari KHACHAI, Representative of the Presidency of the RepublicMember

07Annual Report 2010

The Board of Directors

Mr. Mustapha HANIFI, Representative of the Ministry in charge of HydrocarbonsMember

Mr. Abderrahmane Raouya, Representative of the Ministryin charge of Finance Membe

Mr. Hadji BABAAMI, Representative of the Ministry in charge of Finance Member

Mr. Ali TOUATI, Representative of the Bank of Algeria Member

Mr. Youcef OURRADI, Representative of the Ministry in charge of HydrocarbonsMember

Mr. Noureddine BOUTERFA, Appointed for his competence in the field of hydrocarbons Member

Mr. Nordine CherouatiChairman and Chief Executive Officer of SONATRACHChairman of the Board

08 Annual Report 2010

Mrs. Yamina HAMDI, Vice- President, Marketing Activity Member

Mr. Said SAHNOUN, Vice- President, Upstream Activity Member

Mr. Allaoua SAIDANI, Vice- President, Pipeline Transportation Activity Member

Mr. Abdelkrim MAHIEDDINE, Employee RepresentativeMember

Mr. Abdelkader BENCHOUIA, Vice- President, Downstream Activity Member

Mr. Mansour KECHCHAR, Employee RepresentativeMember

09Annual Report 2010

The Executive Committee

Mrs. Yamina HAMDI, Vice- President, Marketing Activity Member

Mr. Said SAHNOUN, Vice- President, Upstream Activity Member

Mr. Allaoua SAIDANI, Vice- President, Pipeline Transportation Activity Member

Mr. Akli REMINI, Executive Director, Subsidiaries and Holdings

Mr. Abdelkader BENCHOUIA, Vice- President, Downstream Activity Member

Mrs. Fatma Zohra BENOUGHLIS, Executive Director, Strategy, Planning and Economy

Mr. Nordine CherouatiChairman and Chief ExecutiveOfficerMember

10 Annual Report 2010

Mrs. Naima BOUTEMEUR, Central Director, HSE (Health, Safety and Environment)

Mr. Farid BOUKHALFA, Executive Director, Finance

Mr. Samy TOUNSI, Executive Director, Engineering & Development

Mr. Younes HEGUEHOUG, Executive Director, Human Resources

11Annual Report 2010

Organigramme

Chief Executive Officer

SIHC

SIP

12 Annual Report 2010

Group Coordinating DirectionsEngineering & Development

Finance Human Resources

Strategy, Planning & Economy Subsidiaries & Holdings

Central Activities

Project Review Committee International Projects Coordinating Committee

Direction of Public Relations

Upstream Activity Pipeline transportation Activity

Holdings

SPP

AIE

SGS

RCH

SVH

13Annual Report 2010

Central DirectionsLegal AffairsAudit Group MarketsHealth, Safety & EnvironmentManagement of Associations

Executive CommitteeEthics CommitteeEstablishment Internal Security

Downstream Activity Marketing Activity

14 Annual Report 2010

Introduction

2010 was characterized by a context marked by the strengthening of the Sahara Blend prices with a buoyant growth at an annual average of $ 80.1 /bbl compared with $61.9/bbl in 2009, or an increase of + 29%. The Sahara Blend prices, closing at $ 92.1/ bbl in December 2010, had a positive effect on the activity of Sonatrach.

At the national level, the sales volumes of liquid and gaseous hydrocarbons, intended for the domestic market, recorded an increase of + 3% over 2009 and confirm the growing trend of the country's needs.

Corporate bodies activities

Throughout 2010, the Board of Directors of Sonatrach Spa held seven meetings where he had to assess and de-cide on some twenty case files related to the management and the development of the Company; 25 resolutions have been adopted.

15Annual Report 2010

Production of hydrocarbons

The primary production of hydrocarbons, all products combined, amounted to 213. 9 million toe, including 55.3 million tons of crude oil and 145.8 billion m3 of natural gas.

The regions of Hassi Messaoud and Hassi R'Mel account for 75% of the production of Sonatrach in own effort and 54% of the total primary production.

The primary production of oil in 2010 consists of 64% of natural gas, 26% of crude oil, 6% of condensate and 4% of LPG.

The production of fields operated by Sonatrach alone to-taled 154.8 million TOE.

Sonatrachs share in the production represents 72% of global primary production. The principal regions inputs are located in Hassi R'Mel, Hassi Messaoud and Rhourde Nouss with a total of 64% of the primary production.

The production in partnership reached 59.1 million toe in 2010.

The production in partnership accounts for 28% of the total primary production; the main poles are Ourhoud & Berkine contributing up to 9% of the total production.

Crude oil production in partnership represents 52% of the total oil production while natural gas production in par-tnership accounts for 18% of the total production.

The production share taken pursuant to the Exceptio-nal Profits Tax (TPE) for 2010 stood at 2.62 million toe against 2.53 million toe in 2009.

The production of natural gas reached 145.8 billion m3, 82% under the production of natural gas from fields ope-rated by Sonatrach individually.

The production of condensate (including condensate reinjected into crude) amounted to 11.2 million tons. As regards fields operated by Sonatrach alone, the pro-duction of condensate stood at 9,02 million tons and accounts for 80% of the total production.

The production of LPGs (including butane & propane fractionated in the South) amounted to 7.2 million tons. The production of LPG by Sonatrach alone accounted for 71% of the total LPGs production.

As for pressure maintenance, the volume of water in-jected into the oilfields reached 63.2 million m3. Gas vo-lumes intended for injection totaled 89.1 billion m3.

The volumes of natural gas cycled at Hassi R'Mel are close to 38.2 billion m3, representing a 44% cycling rate of gas primary production from the reservoir.

18 Annual Report 2010

19Annual Report 2010

A corporate citizen serving the cause

of national development

Subsidiaries and Holdings in AlgeriaNational Subsidiaries Results for 2010:

U: DZD MillionCapital Turnover

Net income

Investments Staff (incl. temporary)

Holding SVH

NAFTAL (100%) 15 840 255 275 6 900 10 573 29 328

HYPROC S.C. (100%) 12 000 12 397 3 091 26 696 1 695

AEC (50%) 7 920 125,5 2 253 1,28 47

NEAL (45%) 200 362 100 986 33

SPP1 (14%) 864,36 En phase projet 6COGIZ (100%) 402,9 444 --- 581 52

Holding SPP

ENSP (100%) 800 8 960 1 820 1 200 2 087

ENAGEO (100%) 7 000 15 560 1 140 2 700 5 347

ENAFOR (30%) 14 800 23 589 3 330 2 700 4 716

ENGTP (100%) 6 390 17 070 130 3 500 9 163

ENAC (100%) 3 190 5 796 1 030 1 100 3 069

GCB (100%) 7 630 10 621 1 350 780 6 513

MI-ALGERIA (40%) 165,22 7 800 1009 400 729ALGESCO (24%) : rsultats provisoires

23,92 1 367 95 992 162

SAFIR (36%) 7 560 600 139 0 117

Holding SGS

TASSILI AIRLINES (100%) 9 000 3 248 -511 14 472 778

CASH (38,89%) 1 088,64 7 492 665 558 275

BAOSEM (50%) 0,5 164 43 37,67 68

34 Annual Report 2010

Capital TurnoverNet

incomeInvestments Staff (incl. temporary)

Holding SIP

OSPREC (49,5%) 19,8 0 -7,21 0 3SARPI (50%) 407,25 4 687 245,31 780 2 082

Holding RCH

ACTIM (100%) 40 465 0,4 0,62 952SP (100%) 0,1 1 656 165 8,87 3 176SOTRAZ (100%) 40 1 333 61 271 1 018MEDCO (100%) 50 181 8,9 5,38 71ISGA (16,66%) 0,13 99 3,02 4,92 33ENOR (48%) 925,44 2 120 -947 142 573HELIOS (51%) 1 742,46 2 072 732 27 53SOMIK (100%) 800 3 824 -60 99 2 207SOMIZ (100%) 40 3 035 237 63 2 006

SORFERT (49%) 20 454,46 En phase de projet

EL BAHIA FERTILIZER (49%) 2 278,50 En phase de projet

HELISON (49%) 1 742,46 714 -163 3 32SORALCHIN (30%) 1 344 6 085 -336 107 239

AOA (49%) 6 566 En phase de projet

Holding AIE

SKT (49%) 23 520 En phase de projetSKB (49%) 3 087 3 607 2 067 13 178 30SKS (30%) 3 861 11 491 4 787 0 20SKH (10%) 1 970 16 350 2 248 23,4 16SKD (49%) 26 304 En phase de projet

35Annual Report 2010

Participation rate Unit Turover Net income

Holding SPC BVI

SPC Trading 100% MM$ 5 004,00 112,60

NOSVL 100% MM$ 14,99 5,88

SPMC 100% MM$ 4,31 1,91

SPOTC 100% MM$ 11,72 2,79

ALTC 100% MM$ 10,92 4,42

HMTC 100% MM$ 10,92 4,57

RNTC 100% MM$ 10,19 3,19

SGCC 100% MM$ 11,40 2,49

SGTC 100% MM$ - 0,01Holding SPI BVI

Med LNG 50% - -

HeM 49% MM$ 19,72 1,59SPTC 100% MM$ 1,52 1,40TGP 21,18% MM$ 354,00 75,00TMPC 50% MM$ 54,12 11,91

Samco MMCHF 1,22 0,01

Holding SIPEX BVI (*)

Sonatrach PeruSIHC (20%) ; SIPEX (80%)

MM$ 235,7 78,39

Mauritania Ta1, 30, 31 & 35 SIPEX Mauritanie 100% - -Libya Block 65 SIPEX Libye 100% - -Niger Block Kafra SIPEX Niger 100% - -Mali Block 20 SIPEX Mali 100% - -Mauritania Ta7 - Ta8 SIPEX 20% - -Mali Block 4 SIPEX 33,33% - -Libya Block 95/96 SIPEX Libye 50% - -Numhyd SIPEX 50% - -Egypt El Dabaa SIPEX 20% - -Egypt Ras El Hekma SIPEX 20% - -

(*) Except for Sonatrach Peru, all SIPEX BVIs subsidiaries are currently in the research phase.

37Annual Report 2010

Headquarters - Chemin Djenane El Malik, Hydra, Algiers, AlgeriaPhone: 213 21 54 70 00 - Fax: 213 21 54 77 00

Website: www.sonatrach-dz.com - Email: sonatrach@sonatrach.dz

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