Algerian national energy company Sonatrach has seized Sunny Hill Energy’s 38.25% stake in the Ain Tsila gas field in south-east Algeria.

Sunny Hill Energy, formally Petroceltic International, held a contractual interest in the asset through its wholly owned subsidiary Petroceltic Ain Tsila.

Sonatrach terminated the contract without offering any compensation saying Petroceltic failed to fulfil the contractual obligations.

In response, Sunny Hill Energy said it will claim $1bn in compensation from Sonatrach as it has invested hundreds of millions of dollars in the project.

Sunny Hill Energy chairman Angelo Moskov said: “Sonatrach has acted in an aggressive and irrational manner. Their expropriation of our interest without compensation is the type of action expected in Hugo Chavez’s Venezuela and not from a country like Algeria that proclaims to respect the rule of law.

“This unwarranted action will be highly damaging to the attempts by Algeria to attract foreign investment into the country.

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“We have strong legal advice that this action by Sonatrach is without legal merit. We have fully met our contractual obligations including providing our full share of resources required for the operation of the joint venture with Sonatrach.”

The field development plan was approved in 2012 and was planned for commissioning in 2017.

It is estimated to have a production capacity of 10 million cubic metres per day of gas, 17,000 barrels per day of LPG and 11,500 barrels per day of condensate.

Sonatrach, however, plans to develop the project with target to commence production in November 2022.