Econostrum | Economic News in the Mediterranean

Engie and Sonatrach extend their gas supply agreement

Written by Frédéric Dubessy on Thursday, July 7th 2022 à 17:00 | Read 518 times

Sonatrach and Engie have defined a contractual selling price for gas delivered from Algeria (photo: Sonatrach)
Sonatrach and Engie have defined a contractual selling price for gas delivered from Algeria (photo: Sonatrach)
ALGERIA / FRANCE. Sonatrach and the French energy group Engie have concluded, on Thursday 7 July 2022, an agreement for the purchase and sale of natural gas, said a press release from the Algerian national hydrocarbons company.

The two partners have been linked since 2011 and the commissioning of Medgaz (GZ4). Algerian natural gas arriving in France is delivered by this submarine pipeline via the Mediterranean Sea and Spain. With a capacity of 10 billion cubic metres per year, Medgaz is co-owned by Sonatrach and Medina Partnership, which is 50% owned by the Spanish company Naturgy and 50% by the American company BlackRock.) 60% of the gas arriving through this pipe is destined for Spanish consumption and 40% for export.

Since the quarrel with Spain because of Madrid's bias towards Rabat on the thorny issue of Western Sahara followed by the rapprochement between the two kingdoms, Algiers had suggested closing this pipeline. But in April 2022, Abdelmadjid Tebboune, the Algerian president, indicated that Algeria "would never renounce its commitments to supply gas to Spain, whatever the circumstances". The contract with Medina Partnership runs until 2032 anyway.

Extension of the partnership to LNG

This renewed agreement with Engie defines the contractual sales price applicable over a three-year period. It commits the two partners until 2024, "to take into account market conditions", says the press release. This means a re-evaluation of tariffs justified by the disruption of supplies since the invasion of Ukraine by Russia and the European Union's (EU) request to its member states to boycott Russian gas.

As early as February 2022, Toufik Hakkar, CEO of the Algerian hydrocarbon company, assured the EU that "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."

The communiqué also indicates "an intention" of both parties to "extend their partnership on LNG (Liquefied Natural Gas) and natural gas". Sonatrach will thus strengthen "its share in Engie's supply portfolio, enabling both groups to continue their diversification and contribute to the energy security of European customers". The French and Algerian companies also plan to "work together to reduce their carbon footprint and evaluate new opportunities, in particular on the development of hydrogen".

Sonatrach is also to renegotiate its partnership with Spain and Portugal. The company had already announced, in April 2022, after the signing of a new gas agreement with the Italian group ENI, an increase in gas exports to Italy.

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