Algeria’s state-owned energy group Sonatrach has begun commercial production of ethanol-blended gasoline at its Augusta refinery in Sicily, marking a significant step in the company’s European energy transition strategy.
The refinery, operated by Sonatrach’s Italian subsidiary, Sonatrach Raffineria Italiana, shipped its first tanker of E5 gasoline fuel containing up to five percent ethanol on January 14, the company said in a statement. Ethanol blending is designed to reduce the carbon intensity of transport fuels and align with European Union directives that gradually mandate biofuel incorporation.
“Sonatrach Raffineria Italiana has reached a major milestone with the start of production of gasoline containing ethanol (E5),” the company said, adding that the move contributes to the group’s broader energy transition objectives in Europe.
A Key European Asset
The Augusta refinery, acquired by Sonatrach in 2018 from Esso Italiana, a subsidiary of U.S. oil giant ExxonMobil, is one of the Algerian group’s largest industrial assets outside its home country. At the time of purchase, the facility had an annual crude processing capacity of roughly 10 million tonnes.
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The acquisition was controversial in Algeria, particularly over the US$720 million purchase price and the state of the refinery’s equipment. Local media questioned refurbishment costs and the potential profitability of the overseas investment. In September 2022, three Sonatrach executives were arrested amid a related investigation.
Since taking control of Augusta, Sonatrach has reportedly carried out maintenance and modernization projects. The company said in its 2023 annual report that it continued investing to improve operational reliability at its international facilities, without disclosing specific details about the Italian site.
Aligning With EU Biofuel Regulations
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The production of ethanol-blended fuel comes as the European Union implements regulations requiring gradual incorporation of bio-components into road fuels. E5 gasoline, which contains up to 5% ethanol, is already sold in several EU countries and is part of broader EU efforts to cut transport sector emissions. By producing bio-component fuels in Italy, Sonatrach aims to position itself as a supplier that meets evolving European environmental standards while maintaining operational competitiveness.
Industry observers note that the move strengthens Sonatrach’s presence in the European market, diversifies its product portfolio, and underscores Algeria’s interest in energy transition beyond its domestic borders. Ethanol blending also supports the company’s strategy to reduce the environmental footprint of its refining operations, a growing consideration for global oil and gas companies under tightening climate policies.
Looking Ahead
The Augusta refinery is expected to continue producing ethanol-blended fuels as part of Sonatrach’s long-term European strategy. Analysts said the success of the initiative will depend on market demand, compliance with EU regulatory frameworks, and the company’s ability to optimize operations at the Italian site.
By investing in sustainable fuel production abroad, Sonatrach is signaling its commitment to energy transition while maintaining a foothold in a key European market. The company’s efforts at Augusta also reflect the increasing global pressure on oil and gas producers to adapt to climate-related regulatory changes and the growing market for lower-carbon fuels.
The development comes as the European transport sector accelerates the adoption of biofuels, electric vehicles, and other low-emission technologies to meet emissions reduction targets set under EU climate policies.
