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Algeria ready to increase its gas deliveries to Europe


Written by Frédéric Dubessy on Tuesday, March 1st 2022 à 10:30 | Read 346 times



Algeria is also counting on the transport of LNG by its tankers to increase its supplies to the EU (photo: Sonatrach)
Algeria is also counting on the transport of LNG by its tankers to increase its supplies to the EU (photo: Sonatrach)
ALGERIA / EU. "Sonatrach is a reliable supplier of gas to the European market and is willing to support its long-term partners in case of difficult situations." Toufik Hakkar, CEO of the Algerian state-owned hydrocarbon company, wanted to make known, on Sunday 27 February 2022 in the columns of the Algerian daily Liberté and on its website, its ability to substitute, in part, for Russian deliveries in these countries by increasing its supplies of natural gas or liquefied natural gas (LNG). Hammered by the CEO and Algerian officials for several months, this message is timely.
A Council of European Energy Ministers is meeting on Monday 28 February 2022 in Brussels, with the forthcoming difficulties of Member States in obtaining gas supplies on the agenda.

The invasion of Ukraine, through which a network of gas pipelines from Russia passes, and the indefinite postponement of the opening of the Nord-Stream2 gas pipeline, have shuffled the cards in energy supply. This project, led by Russia's Gazprom in partnership with Europe's OMV, ENgie, Wintershall Dea, Uniper and Shell, has already cost more than €9bn. It links Russia to Germany via the Baltic Sea over 1,230 km, with a capacity of 55 billion cubic metres per year.

German Chancellor Olaf Scholz decided on 22 February 2022 to block the certification process of the company operating it as an "independent operator". Although the valves of Nord-Stream1, which has been in operation since 2012, have not yet been closed, Russia remains the EU's main supplier of natural gas, and the TurkStream pipeline (inaugurated in January 2020 and transporting Russian gas to southern Europe via Turkey and the Black Sea) continues to operate, the Algerian offer offers some insurance if the conflict drags on.

The Italians already in Algiers to discuss

For the time being, the level of underground gas reserves in the various EU member states and the milder climate should make it possible to cope with the situation at least until the autumn of 2022. Even if the EU-27, since the conflictual relations with Russia, and therefore the drop in deliveries, are drawing more and more on their stocks. Gazprom indicated at the beginning of January 2022 that the EU had already consumed 41% of its gas reserves in 2021. The association representing the interests of gas infrastructure operators in the EU, Gas Infrastructure Europe (GIE), stated that as of 12 January 2022, these reserves were 49.33% full, compared with almost 65% in 2021 and 83% in 2020. At the beginning of February 2022, they were only 31% full (26% for France, 40% for Italy and 58% for Spain), the lowest level ever recorded at this time of the year. This explains the surge in gas prices.

Algeria can transport more gas via the Transmed pipeline linking Algeria to Italy. Its export capacity (32 billion cubic metres per year) has not been reached. According to Abdelmajid Attar, Algerian Minister of Energy, there are still some 10 billion cubic metres available. Luigi Di Maio, Italian Minister of Foreign Affairs, and Claudio Descalzi, CEO of the Italian hydrocarbon giant Eni, were in Algiers on Monday 28 February 2022 to discuss this issue. "We will discuss the strengthening of bilateral cooperation, in particular to meet the needs of European energy security, in light of the conflict in Ukraine," said the minister on his arrival. His country imports about 95% of the gas it consumes and already in 2021, Algerian gas deliveries have increased by 109%. compared to 2020.

The increase in deliveries depends on domestic needs

The other pipeline, Medgaz (GZ4), which has been supplying Spain directly (60% for domestic consumption and 40% for export) via the Mediterranean Sea since March 2011, was not mentioned by the Algerians. On the other hand, liquefied natural gas in Algeria - where 'the liquefaction units on site are only used to 50 to 60% of their capacity', according to the minister - can also arrive in the bunkers of Sonatrach's fleet of six LNG carriers. Its production capacity currently amounts to more than 50 million cubic metres of LNG.

As for the Maghreb-Europe gas pipeline (GME linking Beni-Saf to Almeria), Algeria has decided not to renew its contract, which expires on 31 October 2021 and has been running since November 1996. It must be said that it passes through Morocco - which benefited for this transit from the possibility of taking 97% of its needs at preferential prices - a country with which it has broken off all relations. Spain took over, at the beginning of February 2022, to deliver to Morocco.

However, Abdelmadjid Attar points out that Algeria alone will not be able to "compensate for the drop in Russian gas supply. He estimates that he will be able to supply the European Union, to date, with between "two or three billion cubic metres more." To date, Algeria has embarked on a vast programme of investment in all directions. Between 2022 and 2026, this country will devote $39 billion (€34.7 billion) to the hydrocarbon sector (70% of which will be spent on exploration and development) in partnership with foreign groups, including ENi and TotalEnergies, which are very present in Algeria. It will therefore be able to increase its exports.

For the year 2022 alone, Sonatrach plans to commit $8 billion in "development projects for gas and oil fields, such as Touggourt, Hassi Bi Rekaiz and Berkine Sud for oil, and Isarene, TFT and the fields of the South-West for gas, as well as the development of refining capacities", reveals Toufik Hakkar. However, as he points out, the compensation of Russian gas by Algerian gas will depend on "the availability of surplus volumes after satisfaction of the demand of the national market", - in permanent increase - but also on "contractual commitments" already taken with its foreign customers.

A gas pipeline project supported by NATO

If Algeria cannot totally substitute itself for Russia, other options do exist. Firstly, with gas from Tunisia and Libya (via Greenstream, connecting western Libya to Sicily since October 2004). Italy, which is close by, could once again take on the role of negotiator to substitute, if not other supply routes for the European Union, at least an increase in deliveries from these two countries. The Trans-Adriatic Pipeline (TAP), which transports gas from Azerbaijan to Europe, mainly to Turkey but also to Italy and Greece, to mention only the Mediterranean countries, could also contribute. Similarly, in the longer term, the EastMed project, which in 2025 will link the European network, bypassing Turkey, to the offshore fields discovered in Israel, Cyprus and Egypt.

The North Atlantic Treaty Organisation (NATO) has been working since 2019, with an intensification in 2022, to create a new gas connection between Spain (which has 30% of European LNG storage capacity) and Germany, via France, at an estimated cost of €400m. The aim is already to reduce Central Europe's dependence on Russian gas. This network would also have the advantage of passing green hydrogen. This project is on the agenda of the NATO General Assembly to be held in June 2022.

Occupying the eleventh place in the world in terms of conventional natural gas reserves (excluding shale gas) with 159,000 billion cubic feet (4,502 billion cubic metres) at the end of 2021, Algeria currently provides 11% of gas imports to the European continent, a "natural market of choice", according to the CEO of Sonatrach. Its main European client in this area is Italy, to which it supplies 60% of its needs, compared with 20% for Spain (but it was still its main supplier in 2021 and accounted for 42.7% of its imported gas), 12% for Portugal and 6% for Slovenia. The European Union consumes 450 billion cubic metres of natural gas per year.



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