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Algeria's Sonatrach in talks to begin offshore drilling - source

By Lamine Chikhi | ALGIERS ( Reuters)

Algeria's Sonatrach wants to start offshore oil drilling and has begun discussions with U.S. operators Exxon Mobil Corp (XOM.N) and Anadarko (APC.N) as well as Italy's Eni (ENI.MI), a source at the state energy company told Reuters on Sunday.

The North African OPEC member nation has struggled to attract oil investment in recent years because of tough terms that have made foreign companies wary.

Sonatrach last year began a more flexible approach to bilateral talks with foreign partners.

Low oil prices have also pressured Sonatrach, prompting it to focus on developing production at more mature fields in the southern Sahara and bringing online delayed gas projects. Offshore drilling could offer another area for growth.

"Seismic operations carried out by Sonatrach have shown an interesting potential in the areas including Bejaia and Oran," said the source, who asked not to be identified. Bejaia is an eastern port and Oran is a port city in western Algeria.

Algeria needs the know-how and expertise of major international firms to launch offshore drilling, the source said.

"Foreign partners, including Anadarko, Exxon Mobil and Eni were invited by Sonatrach to provide technical assistance given the experience they acquired in the Gulf of Mexico and deep water in Mozambique," the Sonatrach source said.

"The offshore is complementary to our operations in the south. It will also contribute to boosting our output," the source said.

The source did not give any information on the timing or scale of any offshore projects.

Such details, including when the drilling will start, are expected to be announced soon by Sonatrach's leadership, the source said.

Algeria's earnings from oil and gas fell to $27.5 billion in 2016 from $35.7 billion in 2015 and more than $60 billion in 2014.

Algeria's oil output was previously estimated at 1.1 million barrels per day (bpd) but it has cut production by 50,000 bpd under an agreement between OPEC and non-OPEC producers aimed at raising crude prices.

(Editing by Patrick Markey and Jason Neely)

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