how Algeria has become the particular Russia of Spain

  • 23

If gas was already at the center of attention, the recent turn of the Spanish government regarding Western Sahara has further shaken a completely stressed market. Algeria was and continues to be a strategic partner for Spain at the energy level. What can happen with the gas coming from Algeria and to what extent does Spain have alternatives are some of the questions that have now acquired renewed importance.

Algeria is to Spain with gas, what Russia is to Germany. Spain’s dependence on Algerian gas is enormous. Historically, it has been the main supplier of gas in Spain, having supplied up to 60% of the gas. Unlike northern Europe, whose gas comes mainly from Russia, in Spain a large part of the gas comes from Algeria, where some 100 bcm of gas are produced per year and is the great reference in North Africa.

In 2021, more than 45% of Spain’s gas came from Algeria, but the situation changed with the cut of the Maghreb-Europe (GME) gas pipeline in October last year “in reaction to hostile acts by Morocco”. This gas pipeline had been operating since 1996 with a capacity of about 13.5 bcm per year. Something less (10 bcm) has the Medgaz, the gas pipeline that Spain still maintains with Algeria.

The Government defends that Algerian gas will continue to arrive. Despite the historical change in position, the Government assures that the gas will continue to arrive. Jose Manual Albares, Foreign Minister, Explain that “Algeria is a strategic, priority, reliable partner for Spain, also as a gas supplier”. On the part of the vice president Nadia Calviño, definite Algeria as a “very important partner” that will continue to provide stability in gas.

Cutting off the gas supply would also be a huge blow to Algeria. The gas market is currently in a crisis situation, but very high prices are also being paid compared to previous years. Links for energy have a lot to do with geopolitics and similarly to Spain’s difficulty in finding other gas suppliers, Algeria has a hard time increasing its shipments to other countries in the short term. With Italy, its gas pipelines are already working close to maximum capacity.

Burn coal, buy from Algeria, methane tankers: how Europe can reduce its dependence on Russia

The Medgaz gas pipeline has the participation of Naturgy. Inaugurated in 2011, the Mezgaz belongs to the Algerian-Italian company Sonatrach-Eni, to the BlackRock fund and has a small stake from Naturgy. In fact, the relationship between Sonatrach and Naturgy is very close, as is derived from the fact that 4.1% of Naturgy’s capital is in the hands of the Algerian energy company. That is why Sonatrach is trusted to remain a reliable partner.

Another issue is the price.. Many agree that the supply will be guaranteed to a greater or lesser extent, but where there are more doubts is in the rates. Years ago discussions were held here that ended with the presence of Naturgy in the gas pipeline. As a result of the Spanish change of position, from Algeria They point out that they will raise prices at least until 2024. It is not the first time that they want to go in this direction, but the Government’s position has given them wings to significantly increase their rates.

On the contrary, from the Italian government they have made statements in favor of the Saharawi people that have been seen with very good eyes. Italy is the main buyer of Algerian gas, ahead of Spain. And just these months they are carrying out the negotiations for the price of gas for the next three years. Negotiations that not only affect the price. Companies such as Naturgy, Repsol, Cepsa, Técnicas Reunidas, Sacyr or Acciona are negotiating multi-million dollar investments in Algeria and the position of the Government could affect this process.

The new strategic ally for gas is the United States. According to 2021 figures from the Strategic Reserves of Petroleum Products Corporation (Cores)37% of the Algerian gas arrived through the Medgaz to Almería, while 5.5% did so in methane tankers, in the form of LNG.

This liquefied natural gas is the main winner of this situation. According to Enagás data, in recent months the main gas supplier has not been Algeria, but the United States. With 12,472 GWh in February, the United States handles 32.9% of our gas, compared to 23.2% for Algeria or 21.1% for Nigeria. A very different scenario from 2021, where Nigeria was the main supplier with 43%, the US had 14%, Nigeria 11% and Russia 9%.

Spain can become Europe's gas barn.  For that you need to bet everything on LNG

Waiting for a new pipeline to bring gas to Europe. Spain looks to Africa, but with its mind set on Northern Europe. Thanks to Spain’s enormous storage and regasification capacity, our country may end up becoming Europe’s gas granary. However, it has a problem: there is not enough interconnection capacity to send the gas. A new pipeline with France or a neighboring country is needed to send this gas. One of the projects was the MidCat, but it was stopped due to lack of profitability.

These weeks the alternatives to deal with the energy crisis are being debated in Europe and one of the options proposed from the Spanish point of view is a financing for the construction of a new gas pipeline. France does not seem to be very interested, but Italy can play an important role. An Italy that we remember is the main buyer of Algeria and has adopted a different strategy.

Europe lives pending the movements of Russia and Algeria can position itself as one of the main alternatives. Spain has wanted to position itself close to Morocco, but is well aware that Algerian gas continues to play a key role. Perhaps not directly for Spain, but to support the European energy market.

If gas was already at the center of attention, the recent turn of the Spanish government regarding Western Sahara has…

If gas was already at the center of attention, the recent turn of the Spanish government regarding Western Sahara has…

Leave a Reply

Your email address will not be published.