Saipem SpA's engineering unit Snamprogetti SpA and Chiyoda Corp. won a 277 billion-dinar ($4.5 billion) contract to build a liquefied natural gas plant in Algeria, replacing Petrofac Ltd.

The plant will produce 4.7 million tons of LNG a year within 48 months, and construction will start ``right away,'' Abdelhafid Feghouli, vice president at state-owned oil company Sonatrach, said yesterday.

``This project will increase our production by 30 percent to 30 million tons by 2012,'' Feghouli said.

Petrofac and its Indonesian partner IKPT were awarded the contract earlier this month. It was canceled after the U.K.- based oil and gas services provider failed to guarantee it could raise annual production capacity to 4.3 million tons of LNG from the original requirement of 4 million tons.

The value of the contract increased 15 percent from 241 billion dinars since it was awarded to Petrofac on July 13.

Sonatrach initially awarded the project to Spain's Repsol YPF SA and Gas Natural SDG SA. It canceled the contract in September, blaming them for a three-year delay, and took control of the development. The project involves tapping the fields of Gassi Touil, Rhourde Nouss and Hamra in the east of Algeria and transporting the gas for export to the port of Arzew in the west.

Algeria, Africa's largest gas producer, is seeking to increase LNG exports by a third to 85 billion cubic meters a year by 2012. LNG is gas that's cooled to a liquid to allow its transportation on tankers.