Econostrum | Economic News in the Mediterranean

Algeria's Sonatrach and Spain's Naturgy reach agreement on gas prices

Written by Frédéric Dubessy on Friday, October 9th 2020 à 16:50 | Read 903 times

Algerian gas is delivered to Spain via the Medgaz facilities (photo: DR)
Algerian gas is delivered to Spain via the Medgaz facilities (photo: DR)
ALGERIA / SPAIN. An agreement, signed in Algiers on Wednesday October 7, 2020 between Toufik Hakkar, CEO of Sonatrach, and Francisco Reynés CEO of Naturgy, and unveiled the next day, puts an end to a four-month dispute between Algeria and Spain over gas tariffs.

The dispute concerned the price of gas and Toufik Hakkar had announced on 12 June 2020 that if the negotiations did not lead to a consensus "by July, we do not fear recourse to international arbitration". Naturgy was also considering this recourse to obtain a reduction in the selling price of natural gas.

The agreement consists precisely of new amendments concerning the downward revision of the Algerian gas price in the sales contracts between the two companies. No details have filtered out.
Both shareholders of Medgaz, the 210 km gas pipeline linking the towns of Beni Saf (Algeria) to Almeria (Spain), the Algerian Sonatrach (51% since May 2020 and the takeover of Cepsa's shares) and the Spanish Naturgy (49%) have had commercial relations since the 1970s.

Sonatrach also owns 4% of Naturgy's shares.

Long-term relationships

In Spain, Naturgy supplies gas to 80.7% of the 1.5 million customers covered by the regulated gas tariff (TUR). According to the Spanish press, the final price of gas for domestic consumers is the second highest in Europe due to the high cost of taxes for using the network. However, the cost of the raw material has fallen by 25.3% in 2019, with repercussions on the TUR of around 12.6%. The company also wants to negotiate price reductions for its supply contracts with Russia, Nigeria and the United States.

"The oil and gas industry has been heavily impacted by the Covid-19 pandemic. Sonatrach is working closely with its customers to overcome the effects of this pandemic on business activities. The agreement reached between Sonatrach and Naturgy reflects the strategic nature of the long-term and trusting relationship that binds them and by which they aim to consolidate their positions on the Spanish market," Toufik Hakkar emphasises. His Spanish counterpart Francisco Reynés speaks of a "strategic alliance that is essential for the supply of competitive and secure gas to the Spanish market, and therefore essential for the economic and social development of both countries".

As the press release states, the two companies are now considering "other possibilities for future cooperation" and intend to "expand their commercial relations".


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