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Algiers now plays an increasingly important role in ensuring EU energy security and is itself moving towards economic sovereignty.
In the spring of 2022, when the Russian-Ukrainian conflict was at its most intense, the EU began to consider abandoning Russian natural gas supplies and reducing energy consumption as much as possible. EU countries began to look elsewhere, one of which was Algeria.
Now, two years later, Algeria has become the largest supplier of pipeline gas to the EU and continues to lead in gas production and exports in Africa. But its position on a range of international issues now threatens Europe’s supply, and European Mediterranean countries have had to compromise on foreign policy to avoid losing such an important source of energy.
In early June, Spanish energy company Enagas announced that Algeria had become Spain’s largest natural gas supplier for six consecutive months, surpassing the United States, which was previously the largest natural gas supplier.
According to Enagas, in May last year, Algeria exported a total of 10,267 GWh (about 973 million cubic meters) of natural gas to Spain, accounting for 36.3% of the country’s total natural gas imports. Russia and the United States followed closely behind, with 22.7% and 13.8%, respectively. This proportion has remained basically stable since the beginning of this year. US liquefied natural gas imports to Spain fell to third place, having been halved compared to spring 2023.
European Natural Gas
Algeria remains the most important gas supplier to Europe in general and the Mediterranean in particular. In 2023, it will surpass Russia to become second– Become the largest supplier of pipeline natural gas to the EU after Norway. This further strengthens the role of African countries in promoting European energy security.
Algeria exports 85% of its gas to Europe and has committed to investing $50 billion in the sector by 2028 to consolidate its position as a pipeline exporter. For 2024, the Algerian government has allocated up to $8.8 billion, most of which will be used for gas exploration and production.
Algeria has three pipelines to Italy and Spain, one of which is currently out of service, and a pipeline to Nigeria is under construction. yes Italy and Spain’s largest natural gas supplier. Italy’s Eni reached an agreement with Algeria’s national oil and gas company Sonatrach in 2022 to deliver up to 9 billion cubic meters of pipeline natural gas to Italy by 2026.
Algerian National Oil Company Headquarters
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No more loans needed
In April 2024, the International Monetary Fund (IMF) ranked Algeria as the third most important economy in Africa, behind South Africa and Egypt. Algeria surpassed Nigeria, which was fourth in this IBF ranking. According to the report, Algeria’s GDP this year is about 266.78 billion US dollars, and the IMF expects a growth rate of about 3.8% in the coming months.
In early May, Algerian President Abdelmadjid Tebboune said that Algeria has almost no foreign debt and will not borrow from international organizations. He pointed out that Algeria’s economic growth rate last year was between 4.1% and 4.2%, and by the end of 2023, Algeria’s GDP will reach 260 billion US dollars. The government aims to increase this figure to 400 billion US dollars by 2026 and 2027.
File photo: Algerian President Abdelmadjid Tebboune.
Horacio Villalobos/Corbis via Getty Images
Tebboune also said that the Algerian dinar has appreciated by 4.5% against hard currencies. “This is just the beginning.” The country’s foreign exchange reserves have increased to $70 billion, which has eliminated the need for the country to borrow new foreign debt.
It is worth noting that when Tebboune came to power in 2019, foreign exchange reserves reached $42 billion and import costs exceeded $60 billion. In addition, the president pointed out that Algeria is determined to diversify its sources of income and move away from a “rentier economy” based on oil and gas exports.
“In 2022, Algeria’s non-primary product exports hit a record $7 billion for the first time in 40 years, while previously this figure had never exceeded $1.5 billion.” Tebboune added.
No.1 in Africa
The Organization of Arab Petroleum Exporting Countries (OAPEC) 2023 report said that for the first time since 2010, Algeria became the number one LNG exporter in Africa, surpassing Nigeria, which had held the position for more than a decade. The volume of LNG supplied abroad by Algeria is the highest in the Arab world.
The report shows that Algeria reached its highest level in 2023, with its total LNG exports reaching approximately 13 million tons, an increase of 26.1% from 2022.
New fields and plants
According to a recent statement by Algerian Energy Minister Mohamed Alkab, Sonatrach discovered eight important oil and gas fields in the country between January and May 2024. All are new and undeveloped locations, mostly located in the southwestern Algerian province of Béchar, the central province of Salah, and the southeastern provinces of Illizi, Djannet and Ouargla. Alkab did not disclose specific numbers, but he noted that the deposits “It will significantly increase the country’s proven hydrocarbon reserves, especially natural gas.”
FILE PHOTO: Private company Calgaz inaugurates a new liquefied industrial gas production plant in southern Algeria.
Billal Bensalem/NurPhoto via Getty Images
The minister noted that the hydrocarbons law adopted in 2019 includes global measures that have yielded results, with large contracts signed with major companies such as Italy’s Eni, Norway’s Equinor and the US’s Occidental Petroleum (OXY). In recent weeks, Algeria has also signed contracts with US energy giants ExxonMobil and Chevron to develop several oil and gas fields.
In May, Algeria’s National Oil Company signed a contract with Italian and American companies to build three gas processing plants at the giant Hassi R’Mel gas field, 550 kilometers south of the Algerian capital, to increase production. The project aims to continue producing natural gas at the country’s and the continent’s largest gas field.
“Algeria is a reliable country in terms of contracts and provides large supplies to the European market.” Arkab stressed.
The current strategy of the Algerian National Oil Company is to increase annual gas production to 200 billion cubic meters within five years. According to the state-owned company’s data for 2023, current production has reached 137 billion cubic meters.
Trans-Sahara Gas Pipeline
Currently, Algeria supplies natural gas to Europe through two pipelines. The first pipeline, TransMed, connects to Italy via the Mediterranean Sea. This line passes through Tunisia and has an annual transmission capacity of 32 billion cubic meters. The second pipeline, Medgaz, connects the port of Benisaf on the west coast of Algeria to the southern Spanish city of Almeria. This line has an annual transmission capacity of up to 10 billion cubic meters.
In 2009, Algeria, Niger and Nigeria also signed an agreement to build an ambitious Trans-Sahara Gas Pipeline, NIGAL, which would allow gas to be supplied from southern Nigeria through Niger and Algeria to Spain and Portugal. However, this plan remains extremely fragile. In early 2024, it was announced that the project had been shelved due to the political situation in Niger, which saw a military coup in the summer of 2023. Despite this, Energy Minister Mohamed Alkab said in March that Algeria and Nigeria had reached an agreement to resume construction.
The Trans-Sahara gas pipeline is 4,128 kilometers long and will connect the Nigerian capital Abuja to the Algerian coast. The cost of the project is estimated at between $13 billion and $15 billion, including the cost of building the pipeline and the collection center. At a press conference after the seventh Gas Exporting Countries Forum (GECF) held in Algeria from February 29 to March 2 this year, Alkab pointed out that Nigeria has basically completed its part of the project and is only 1,000 kilometers away from Niger. Algeria has completed the construction of 700 kilometers of natural gas pipelines and is about 1,800 kilometers from the Niger border.
Forward/Forward
It is worth noting that Nigeria is considering other options for supplying gas to Europe. In particular, the Nigeria Morocco Gas Pipeline (NMGP), which will be laid on the Atlantic Ocean floor off the coast of West Africa and has been under construction since 2016. When completed, it is expected to be the world’s longest underwater pipeline, with a length of 5,660 kilometers.
For Morocco and Nigeria, the pipeline provides an opportunity to promote economic development and improve people’s living standards in both countries. However, for Algeria, the pipeline poses a competition in the competition for the top natural gas exporter.
Supplying Spain: Tensions rise
Morocco’s gas exports to Spain have only recently resumed normalcy. In the past few years, there have been a number of incidents that have brought its gas supplies to the brink of total disruption. The threats to gas supplies come mainly from Algeria’s international policy and its relations with its neighbors, especially Morocco, with which Algeria has a long-standing dispute over the status of the territory of Western Sahara.
On August 24, 2021, Algeria officially announced the severance of diplomatic relations with Morocco, accusing the country of ‘Hostile action’ These included supporting Algerian rebel groups and assisting in the burning of Algerian forests. Soon after, Moroccan military and civilian aircraft were banned from using Algerian airspace, and on October 31, Morocco announced that it would not renew its contract to supply natural gas to Spain via the Maghreb-Europe pipeline (MEG), which passes through Morocco. Instead, liquefied natural gas will be delivered directly via the Medgaz highway. Soon after, Algeria banned Spain from reselling natural gas supplied to the country from its territory. This decision put both Madrid and Rabat in a difficult position, especially with the looming EU energy crisis.
On June 9, 2022, Algeria suspended the 2002 Treaty of Friendship, Good Neighborliness and Cooperation with Madrid due to Spain’s change of position on Western Sahara (claimed by Morocco), and subsequently stopped all import and export operations with Spain (except gas supplies). The tension between Spain and Madrid was caused by a letter from Spanish Prime Minister Pedro Sánchez to Moroccan King Mohammed VI in March 2022, in which he expressed support for Morocco’s initiative to grant autonomy to Western Sahara.
In July 2024, Sonatrach announced that it would suspend gas supplies to Spain due to damage to the Medgaz main pipeline, claiming a fault “Over in Spain.” Meanwhile, tensions between Madrid and Algeria over gas re-exports to Morocco remain high. Algeria has repeatedly objected to gas being delivered to its neighbour via the MEG pipeline, while Madrid argues that the fuel supplied to Morocco comes from third countries.
File photo. Mohamed Alkab, Minister of Energy and Mines of Algeria
APP/NurPhoto via Getty Images
Algeria’s gas supplies to Spain have been stabilized for a while now, but now face a new threat. Last May, Algeria announced that it would stop supplying gas to the Spanish company Naturgy if the company decided to sell its stake. Such a statement might seem strange if we do not take into account the fact that Naturgy is in negotiations with the Abu Dhabi National Energy Company (TAQA), and that Algeria and the UAE have been secretly accusing each other of hostility for months. The UAE’s normalization of relations with Israel, which Algeria does not recognize as a state, remains the main cause of tension between the two countries.
A month ago, TAQA said it was in talks with the three largest shareholders of Naturgy, which could lead to the purchase of shares and a full takeover of Spain’s largest gas company. Naturgy has a contract with Sonatrach for a stake in a large gas pipeline between Spain and Algeria. Naturgy officials denied the possibility of selling their stake, and on June 11, TAQA announced that it had failed to acquire a stake in the Spanish gas company.
View of the coast of Algiers.
Alan Phillips/Getty Images
Therefore, driven by its own interests, Algeria cannot guarantee the EU’s complete energy security, nor can it guarantee its independence from Russian energy supplies. Therefore, this former colony can now have an equal dialogue with Europe, put forward conditions, and develop its economy while protecting its own interests.
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