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Italian energy major Eni SpA (E - Analyst Report) and its partner, the Algerian state company Sonatrach, have commenced gas production from its Menzel Ledjmet East (MLE) field in Algeria. The cost for the development of the MLE project, including the construction of a treatment plant and pipelines, is estimated at about $1.3 billion.

Located in Block 405b, around 1,000 km from Algiers, the plant is jointly operated by Eni and Sonatrach. The project has been commissioned nearly four years after Eni acquired its block owner First Calgary Petroleum.

The gas plant has a daily yield of 9 million cubic meters of gas, 12,000 barrels of liquid petroleum gas and 15,000 barrels of oil and condensate. With the production start-up at the field, Eni’s equity production from Algeria has increased to 100,000 barrels of oil equivalent per day (Boe/d) from its earlier yield of 80,000 Boe/d. The Italian major was the leading producer in the region last year.

Eni’s presence in Algeria dates back to 1981. The company has interests in 24 exploration and development licenses in the region that are currently in production. It also participates in 8 permits, which are under development. Algeria is a key source of gas and is responsible for the export of a quarter of Europe's natural gas.

The production start-up follows the deadly hostage attack last month when Islamist gunmen (believed to be from Libya) performed a hostage-taking attack on In Amenas, one of the country's largest wet gas field, leaving 37 foreigners dead. The site is operated by BP plc (BP - Analyst Report), Norwegian major Statoil ASA (STO - Analyst Report) and Sonatrach. Production from the region has fallen in recent years in view of the increasing security concerns.

Eni holds a Zacks Rank #4, which is equivalent to a Sell rating. However, another stock in the oil and gas sector, Total SA (TOT - Analyst Report) holds a Zacks Rank #1 (Strong Buy) and is expected to perform better.

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