Sonatrach may offer more flexible for shorter-term natural gas contacts to its clients as demand for the fossil fuel has dropped, Chief Executive Mohamed Meziane of the Algerian state-owned company told Dow Jones Newswires Monday.

Meziane said Sonatrach wouldn't change the "take-or-pay" system of longer-term contracts.

"Maybe for the future, for those [contracts] expiring in three or five years" there will be more flexibility, Sonatrach's chief executive told Dow Jones Newswires on the sidelines of a conference in the Italian city of Cagliari to discuss the Galsi gas pipeline project, which will link Italy and Algeria via Sardinia.

"The take-or-pay system for long-term contract sticks," Meziane said.

Gas demand among the most-industrialized countries has dropped due to an economic slump that has reduced consumption among industrial users. Western energy companies have contracted larger amounts of gas needed under the current market conditions.

The Galsi project, which will have an annual capacity of 8 billion cubic meters, is part of Sonatrach's strategy to sell gas directly in the European Union, said Meziane.

Meziane said the Algerian energy company is also looking at sales to central Europe.

Galsi, with a planned investment of about EUR3 billion, is scheduled to start up in 2014, with construction estimated to start in 2011 and end in 2013, while a final investment decision on the project forecast in 2010, said Roberto Poti, chairman of the consortium, at the same event.

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