L&T’s Algeria project derailed after BRICS ‘snub’

: A failed bid by Algeria to join the Brics grouping has impacted a $1.5 billion oil and gas project between the country’s state run Sonatrach and Indian conglomerate Larsen & Toubro Ltd, three people aware of the development said. Despite the engineering multinational in a favourable position to bag the contract, the award did not go through and the tender was cancelled.

In response to a mailed query, Subramanian Sarma, whole time director and senior executive vice president for energy at L&T, confirmed the cancellation of the tender by Sonatrach and said that the project was only at the evaluation stage, even while emphasizing that L&T had completed another project for the company recently, and was in the race for several other upcoming projects “We had submitted a bid for one such large contract and were placed favourably as per the public bid opening proceedings.

However, as per our understanding, after further evaluation of the project’s economic viability based on the submitted prices, the client has decided to cancel the tender," Sarma added. He said the project was only at the evaluation stage and isn’t part of the company’s order book announced till date.

Queries emailed to Sonatrach, the ministry of external affairs and the Algerian Embassy in New Delhi remained unanswered at press time. According to the three people cited above, Algeria’s inability to secure membership in Brics led to diplomatic tensions with India, which had a spillover effect on Indian businesses looking to expand their presence in the Algerian energy sector.

Prior to the Brics leaders’ summit in New Delhi in August, Algeria had expressed an interest in joining the grouping. Algerian media reported that the country was eyeing increased economic opportunities and was interested in contributing to the Brics bank. “We officially applied to join the Brics group, we sent a letter asking to be shareholder members in the bank...Algeria’s first contribution in the bank will be $1.5 billion," Algerian President Abdelmadjid Tebboune was quoted as saying by the country’s media.

The Brics grouping initially comprised Brazil, Russia, India, China and South Africa. In August 2023, six countries were invited to join—Argentina, Saudi Arabia, the United Arab Emirates, Egypt, Iran and Ethiopia. Algeria was not invited. Barring Argentina, which declined, the other five countries joined the Brics grouping as full members on 1 January.

Earlier, in November, L&T announced the commissioning and handover of three gas plants in Algeria as part of the South West Gas Fields Development (SWGFD) project of Sonatrach. It was L&T’s maiden oil and gas venture in partnership with Sonatrach. The project involved the comprehensive execution of engineering, procurement, construction, and commissioning for gas treatment units at three processing facilities in central Algeria.

L&T had won the bid in 2019. L&T has been an active EPC (engineering, procurement, construction) player in the energy space in Algeria, in line with its global presence across 50 countries..