Contract award

Saipem signs 500 million euro notice to proceed with Sonatrach

By Staff Writer  |  15 August 2026

Saipem has signed a limited notice to proceed with Sonatrach worth approximately 500 million euro, covering the first phase of the Projet Phosphates Integre in Algeria ahead of a full engineering, procurement and construction contract.

The agreement was signed on 12 August 2026. It follows a letter of intent under which Saipem was selected by Sonatrach as engineering, procurement and construction contractor for the first phase of the project.

The industrial complex to be built will include phosphate mining infrastructure in the Bled El Hadba area, process units and auxiliary facilities for fertiliser production in the Oued El-Kebrit area, and the related logistics and service infrastructure. Once operational, the company said the project will contribute to the development of Algeria's agricultural and industrial value chains and strengthen the country's position in the global fertiliser market.

The limited notice to proceed allows preliminary activities to begin while the full contract is negotiated. The scope of those activities includes completion of the front end engineering design and detailed engineering, procurement of long lead items, and preliminary project mobilisation and organisation, pending the negotiation and finalisation of the engineering, procurement and construction contract.

The full contract is to be based on a contractual framework allowing both parties to share risks and rewards during execution, including during the limited notice to proceed period.

Saipem said it will involve leading Algerian national companies as construction partners, so that the project supports the growth of local skills and industrial capability. The company was awarded a competitive front end engineering design contract on the project in June 2025, and describes the selection as marking its return to Algeria.

What the practitioner should take from this

A limited notice to proceed is a familiar instrument on large process projects and a recurring source of dispute. It authorises defined preparatory work and a defined sum, while the substantive contract remains unagreed. Everything turns on what the instrument actually says.

Four questions decide the position. What is the authorised scope, and is it capped by value, by activity or by date? What happens to work performed if the full contract is never concluded, and on what basis is the contractor paid for it? Who owns the design produced during the period, and can the employer use it with another contractor? And which law and which dispute resolution procedure govern the notice itself, as distinct from the contract it anticipates?

The procurement of long lead items inside a preliminary agreement deserves particular care. A contractor placing orders on the strength of a notice to proceed carries the exposure if the full contract does not follow, unless the notice says otherwise. Where the notice is silent, the contractor is left arguing about a reasonable sum for work done rather than enforcing a price.

Risk and reward sharing, stated here as the intended basis of the full contract, is a description of a commercial ambition rather than a mechanism. In execution it has to be reduced to a target cost, a defined cost, an agreed method for adjusting the target, and a share range. Where those four elements are not written down with the same precision as a lump sum, the parties have agreed to disagree at a later date.