In 2021, Russia accounted for 43.5% of the European Union’s natural gas imports. The African country Algeria ranked third (12.6%), between Norway and the United States. However, due to recent events in Eastern Europe, the Algerians have gone to work to increase their share of the European market.
From the Institute for the Development of Fuel and Energy Technologies (IRTTEK) they have studied the prospects of these plans, for Energy Magazine.
By Mikhail Smyshlyaev
Moscow, Russia.- Algeria, with its vast territory of 2,382 thousand square kilometers, is not only the largest country in Africa, but also the largest OPEC member state. Its economy is based on the oil and gas sector, which accounts for around 20% of its gross domestic product and 85% of its exports.
Algeria is one of 11 countries in the world with proven gas reserves. According to the US Energy Information Administration, the country also has the third largest recoverable shale gas resources, after China and Argentina.
Geographical proximity to Europe has played an important role. The Algerians have long maintained energy relations with the Europeans. And recently they have wanted to intensify them.
The path to diversification
There has been talk for some time of the need for Europe to diversify its energy sources. Even former US President Ronald Reagan referred to this in 1981, when he spoke of Europe’s growing dependence on what was then Soviet energy. Forty years later, Europe has taken up this conversation again.
The Russian invasion of Ukraine aggravated Europe’s energy crisis, forcing the European Union to desperately search for alternative sources of supply. Countries began to frantically search for new “friends”. Eyes were on the Middle East, North Africa and Central Asia. In particular, Algeria.
In March, the state-owned energy company Sonatrach said it was willing to supply Europe with more gas, although it could not satisfy Russia’s dependence. “Sonatrach is a reliable supplier of gas to the European market and is ready to support its long-standing partners in difficult situations,” company director Toufik Hakkar told the Algerian newspaper Liberté.
In April 2022, the Italian oil and gas company Eni signed agreements to import an additional 9 billion cubic meters of gas a year from Algeria. The energy “friendship” between the two countries dates back 40 years, when they were connected through the world’s first deep-water pipeline, Transmed. Additional volumes will begin to flow in 2023-2024. The agreement was signed by the president of Sonatrach Algeria, Toufik Haqqar, and the general director of Eni, Claudio Decalzi, in the presence of senior officials from both countries: the Algerian president, Abdelmajid Tebboun, and the Italian prime minister, Mario Draghi. The countries also signed an agreement to expand energy cooperation.
Interestingly, the crucial visit by Eni executives and Italian Foreign Minister Di Maio took place only three days after the start of the operation in Ukraine. The agreement was signed in record time after intense negotiations.
However, Algeria maintains tense relations with Morocco due to Western Sahara, which is controlled by Morocco. The Algerians themselves support the claim for independence of the territory.
The geopolitical conflict has had an eventual impact on the energy sector. The Maghreb-Europe gas pipeline, which has transported natural gas to Spain through Morocco for the last 25 years, was closed in 2021. Since the beginning of 2022, Algeria has begun to supply some 10 billion cubic meters of natural gas to Spain exclusively through the MedGaz submarine gas pipeline, bypassing Morocco.
Therefore, the new agreement with the Italians in the Pyrenees has not caused much of a stir. Thus, the internecine struggles between Algerians and Moroccans have been exploited by the Italians to the detriment of the Spanish. At the same time, Transmed, the gas pipeline that connects Algeria with Italy, has a capacity of about 32 million cubic meters per year, four times greater than that of Medgas, the gas pipeline that links the African country with Spain.
In 2021, Russian gas imports to the EU amounted to about 130 bcm. In this context, Algerian activity on the continent seems less global at the moment. However, Algeria itself could benefit from a drastic change in Europe’s energy course. According to Platts Analytics estimates, in 2022 this African country could supply an additional 7 billion cubic meters of gas to Europe, mainly due to the gradual increase in supplies through the Transmed pipeline to Italy.
And Algeria has no intention of stopping there. Despite considerable political instability and growing domestic consumption weighing on their shoulders.
But Algeria wants to take advantage of the current geopolitical situation. The state-owned company Sonatrach has already announced that it will invest $40 billion in gas exploration, production and processing between 2022 and 2026. And the current international energy crisis could help Algeria prove its worth and win promising new markets.
Mikhail Smyshlyaev is a member of the IRTTEK Institute