Repsol, along with consortium partners at Enel, French energy company GDF Suez and state-energy company Sonatrach, said it made a natural gas discovery in the Tihalatine South-1 in the Sud-Est Illizi block near the eastern border of Algeria.
Preliminary testing indicated gas flowed at a rate of 3.7 million cubic feet per day.
Four more wells were planned by the consortium now that gas has been discovered, said Repsol.
Algeria, a member of the Organization of Petroleum Exporting Countries, has the second largest natural gas reserves in Africa, behind Nigeria, the U.S. Energy Department's Energy Information Administration reports.
Last year, Italian energy company Eni added that it believed there was a significant amount of gas present there in shale deposits.
The discovery area is near the border with Libya. Repsol said it's producing around 50,000 barrels of oil equivalent per day from North Africa.
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