April 24, 2019 / 3:50 PM / 3 months ago

UPDATE 1-Algeria won't extend crude-for-products deal with Vitol beyond April - sources

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By Ahmad Ghaddar and Lamine Chikhi

LONDON/ALGIERS, April 24 (Reuters) - Algerian state energy company Sonatrach has decided not to extend its crude-for-oil products deal with trading house Vitol that ends this month, two sources with direct knowledge of the matter said.

The move comes as Sonatrach's 175,000 barrel per day (bpd) Italian oil refinery, which it acquired from U.S. major Exxon Mobil last year, returns from maintenance, sources said.

The maintenance began on Feb. 21 and is scheduled to last for 45 days.

The refinery will cut OPEC member Algeria's fuel import bill, giving it more access to petroleum products such as gasoline and gasoil.

The Vitol deal, which started in February last year and was due to end in December, was extended until the end of April.

Under the agreement, Vitol takes up to 2 million barrels of crude per month from Sonatrach and provides refined products to the Algerian firm.

Vitol declined to comment.

Sonatrach has made a big downstream push in recent months to achieve self sufficiency as its growing population drives demand for petroleum. The Augusta refinery acquisition was such a move.

But the company's future strategy could face changes due to the political upheaval in the country.

Mass protests which forced out long-time president Abdelaziz Bouteflika three weeks ago continue, with calls for the removal of the elite that has governed Algeria for decades.

Algeria's interim president sacked Abdelmoumene Ould Kaddour as Sonatrach chief executive on Tuesday, replacing him with its head of production and exploration, Rachid Hachichi.

The move has created uncertainty for foreign investors who had started to return to the oil and gas producer in recent months, and it remains unclear whether Sonatrach will go ahead with a trading joint venture with a foreign partner.

Vitol was one of the four companies that Sonatrach had shortlisted for the project. Swiss trader Gunvor, France's Total and Italy's ENI were also in the running.

Sonatrach also held talks with Gunvor about buying a stake in the trading house.

Last year Sonatrach signed a $1.5 billion deal with Total to build a polypropylene plant in Algeria.

"There will be very likely continuity in terms of strategy, and priorities with a focus on petrochemicals as the extra money will come from there," a source said of Hachichi's appointment.

Algeria's produces around 1 million barrels per day of crude and around 135 billion cubic metres of gas per year, according to Sonatrach's figures. (Additional reporting by Julia Payne in London; Editing by Dale Hudson and David Evans)

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