Gas shortage: Algeria to the rescue of Europe

With the price of gas which exceeded 300 euros per megawatt hour on Monday in Europe, the States and companies of the Old Continent are making sweet eyes at Algeria, which is mobilizing to partially fill the shortage which is announced.

Europe, almost 40% dependent on Russia for its gas, sees the noose tightening further on its economy, which is also dependent on energy overconsumption.

However, since the European Union (EU) and the United States announced sanctions against Russia, concerning in particular financial assets for the purchase of gas, the commissioning of the Nord Stream 2 gas pipeline, and the sale, by of European companies — ENI, Shell, BP and Centrica —, of their holdings in joint gas operations with Russia, Europe finds itself forced to turn to new exporters.

And as observers expected, the price of gas has gone up, reaching an all-time high of 345 euros per megawatt hour (MWh) on Monday.

Algeria, which has large gas reserves and infrastructure connecting it to Italy and Spain, has been requested by the political leaders of the two countries to increase its exports.

According to the former Algerian Minister of Energy, Abdelmadjid Attar, Algeria is quite capable of increasing its exports. “Algeria exports about 22 billion cubic meters through the TransMed gas pipeline. And can export an additional 10 billion cubic meters” per year, says the former minister.

Still, the contracts, currently under study, for this increase in delivery via gas pipeline to Italy, as to Spain, are subject to a constraint: the current gas agreement between Algeria and Spain, for example, stipulates that the latter cannot resell Algerian gas to a third country.

For the rest of Europe, therefore, it will be necessary to negotiate separate agreements for the purchase of liquefied natural gas (LNG) per barrel.

Algeria's gas is discussed bilaterally

A constraint which will concern, in particular, France. The Engie group – a merger of Gaz de France and Suez – revealed last Sunday that it would turn to Algeria, among others, for the purchase of additional volumes of LNG.

Only here, according to the CEO of the Algerian oil and gas giant Sonatrach, future agreements remain dependent on the “availability of surplus volumes after satisfaction of domestic market demand and contractual commitments” to foreign partners. Sonatrach will therefore deal with new European desires on a case-by-case basis.

Currently, everything seems to be moving forward with Italy, whose foreign minister began discussing with Algiers on February 28th. The untapped potential of TransMed, in addition to rising prices, is also encouraging for Algeria, whose President Abdelmadjid Tebboune had declared that Algeria “will remain a reliable partner”.

For Spain, which has a large fleet of LNG carriers, the increase in trade with Algeria will depend on the availability of ships and the respect of the Spanish authorities of their contracts with Algiers. Since October 31, 2021, Algerian gas has been passing directly to Spain via the Medgaz gas pipeline, bypassing Morocco.

France under pressure over MidCat

As far as France is concerned, it looks more complicated, however. In addition to the tense relations between Paris and Algiers in several cases, despite gestures of appeasement, that of gas causes some turmoil between the two countries.

Since 1984, Algeria has sought to extend the network of MidCat pipelines, crossing Spain and then going to central Europe. Only here, at the time, it was France which refused, on three occasions, to finish its section. Last blockage to date: in 2019, when the French government declared that the pipeline was "not financially profitable". However, the implementation of the MidCat was widely encouraged by the European Commission for Energy. The head of the latter, Miguel Arias Cañete, said he was "disappointed" by the French decision.

Only here, France, which wants to be Europeanist, especially on the sidelines of the Ukrainian conflict, had swept away the finalization of MidCat because, simply, it was a long-term project, aimed among other things at promoting clean energies. Now that the MidCat is much more economically viable, Paris seems more inclined to pursue the project.

Not only will the completion of the MidCat serve to promote Franco-German relations, but it would, according to a Spanish government source, NATO which puts pressure on France to close the file. Undoubtedly also to the benefit of Germany, which remains the country most dependent on Russian gas and which, therefore, is the country most in a hurry to find new suppliers.