NEO: Will Algeria Increase Gas Supplies to Europe?

DISCLOSURE: Sourced from Russian government funded media

By Vladimir Odintsov, with New Eastern Outlook, Moscow

First published 22 April 2022

Algeria is estimated by the EU to be the fifth largest supplier of gas to the EU at around 45 bcm, representing 12% of EU countries’ natural gas needs, but this has fallen since 2016 (when it reached 55 bcm per year). Algeria’s share is far behind that of top-ranking Russia (135.75 bcm in 2020, according to Gazprom).

In addition to LNG (there are a couple of hubs in the PDRA), gas from Algeria to the EU comes through two branches. One goes under the Mediterranean Sea to Italy, while the other passes through neighboring Morocco.

The US has famously decided to “help” Europe get rid of the “unbearable” burden of the allegedly high price of Russian gas and find “alternative sources of gas supply” for its geopolitical partner. And here Washington recalled earlier information about an allegedly explored 5 trillion cubic meters of gas in Algeria.

Therefore, an American delegation flew to Algeria at the end of March to ask for the valve to be opened and for the supply of gas through the Moroccan pipe to be resumed. US Deputy Secretary of State Wendy Sherman met with Algerian President Abdelmajid Tebboune and tried to convince the Algerian authorities to offset Russian gas flowing to Europe by reopening the Maghreb-Europe (MGE) pipeline linking Algeria to Spain via Morocco, whose production capacity is 13.5 bcm of gas a year. Algeria was also visited by US Deputy Assistant Secretary of Defense for African Affairs Chidi Blyden, who met with Algerian General Qais Junaidi and discussed regional security issues, while also trying to pressure Algeria on the “gas issue.”

However, the Americans left Algeria empty-handed, as Algeria has linked increased gas supplies to the settlement of the border conflict with Morocco and the disputed territories, which, in the current circumstances, has no resolution. As is well-known, Algeria announced the severance of diplomatic relations with its western neighbor on August 24, 2021 and, as a consequence, the Maghreb-Europe (MGE) gas pipeline, which was launched in 1996, ceased operation on October 31, 2021, when the relevant agreement expired.

But despite all the material benefits Algeria could receive from Europe seeking to reduce its dependence on Russian gas, its refusal to offset Russian gas supplies was also politically motivated. This North African country has decided not to betray its ally since the Soviet times and not to stab it in the back. Incidentally, it was because of solidarity with Russia that Algeria abstained from voting on a US resolution in the UN Security Council condemning Moscow’s military special operation to denazify Ukraine, which was put forward at a special session of the UN General Assembly on March 2, 2022.

Algeria’s refusal was an outright slap in the face to the United States, which had hoped to hit Russia with it. This prompted Washington to throw off the mask of friendliness and start blackmailing Algeria, with Spain’s involvement in supporting Morocco’s position on the Western Sahara issue.

However, despite Spanish and American attempts to pressure Algeria with Western Sahara, the UN position quickly brought them down to earth: according to the Spanish newspaper El Mundo, the UN rejected the Spanish government’s initiative to support Morocco’s autonomy plan for Western Sahara.

In an apparent reaction to such insidious action by Spain, Tawfiq Hakkar, director general of the state-owned Algerian oil and gas company Sonatrach, told the Algérie Presse Service (APS) that the PDRA authorities did not rule out a revision of the price of gas exported to Spain. In particular, he noted that hydrocarbon prices have exploded since the start of the crisis in Ukraine. Under these circumstances, Algeria has decided to maintain the contractual rates, but not all partners will be affected.

“A recalculation of prices with our Spanish client is not out of question,” said the head of Algeria’s Sonatrach. He noted, however, that it was possible for Algeria to increase its hydrocarbon exports to Europe, but that the available volumes would not and could not be an alternative to gas from Russia. “Algeria currently has some billions (of additional cubic meters) that cannot replace Russian gas,” added Hakkar.

Against this background, Italian Eni nevertheless recently managed to sign an agreement with Sonatrach on the possibility of increasing gas supplies by 9 bcm/y in 2023-2024. The current share of Russian gas imports to Italy is more than 40% (29 bcm/y); Algeria supplies around 21 bcm/y.

However, statements by PDRA officials about a possible increase in gas exports to Europe raised fears among Algerian producers. Local experts believe that the North African state is unable to secure additional supplies in the medium term; Algeria’s gas fields are at risk of depletion if the authorities venture to enter into new agreements with EU countries. In this regard, Algerian economist Mustafa Makediş has ruled out the possibility of increasing gas supplies to EU states such as Germany and Austria in the medium term because of a lack of natural resources.

At the same time, analysts believe Europe knows that the North African state’s capacities are limited. The former director general of the state-owned hydrocarbons company Sonatrach said on condition of anonymity that the North African state could export at best 20 to 30 bcm of gas to Italy, about 12 bcm to Portugal and Spain, with even smaller quantities going to France, Turkey, Greece and other countries.

For his part, Algerian economic expert Hussein Boukara said that the PDRA could not replace energy from Russia on the grounds that domestic production was insufficient to cover the entire supply.

“Russian pipelines supplying gas to Europe have a large throughput capacity. In addition, production rates in Russian fields are much higher than in Algeria,” said the analyst.

The situation is similar in the oil sector. Algeria could not even meet the OPEC production threshold of 980,000 barrels. Former Minister of Energy Abdelmajid Attar also warned of a decline in the country’s capacities to produce and export fossil fuels. Under these circumstances, the current aim of the PDRA is to honor existing commitments and not to make new ones.

Vladimir Odintsov, political observer, exclusively for the online magazine “New Eastern Outlook”.