Algeria is taking the place of Russia, slowly but surely, in the gas supply of Central Europe

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Bucharest, February 17, 2024# RBJ (photo: Algerian gas pipelines to Italy and Spain) – Last week, the German Vice-Chancellor and Minister of Economy, Robert Habeck, had very intense discussions with Algerian officials for the development of new Algerian deposits and the import of gas for the rehabilitation of the German economy.
Habeck, in person, witnessed the signing of a “significant” agreement between the Algerian giant Sonatrach and the German company Handel & Vertrieb GmbH (VNG), a subsidiary of VNG AG. The quantities that will be bought by the German side are not known, but the Germans are committed to participating in the development of new gas deposits in the Algerian Sahara and in the production of green hydrogen.
It is a win for both sides, considering that until 1-2 years ago, Germany was totally dependent on imports from Russia.

Algeria is already, since last year, the second largest supplier of natural gas to Europe, according to the monthly report published by the Gas Exporting Countries Forum (GECF). Algeria held a 20 percent share of pipeline gas exports to Europe from January last year to the end of September in 2023.

In the first place, according to the same report, was Norway, with 54% of the natural gas exported through the pipeline to Europe in the same period, while Russia, whose deliveries were interrupted through the Nord Stream gas pipeline as early as 2022, occupies the third position , representing 17% of pipeline exports to Europe.

Algeria’s favorite customer, Italy is the country that has benefited the most from Algerian gas exports. Algeria is now Italy’s biggest gas supplier after Russian imports were cut sharply in 2022, according to S&P Global Commodity Insights data, which said pipeline flows from Algeria hit their highest level since February 2023.

Italy thus imported a total of 22.4 billion m3 of gas from Algeria in 2022, up from about 20 billion m3 in 2021. In May 2023, Italian imports of Algerian gas totaled 8.36 billion m3, slightly higher than from the same period last year (8.33 billion m3, according to available data).

Gas supplies through pipelines from Algeria to the European continent come from two entry points: the Medgaz pipeline to Spain and reaches Portugal. The second pipeline is TransMed, which carries gas to mainland Italy via Tunisia and Sicily. Algeria is thus well placed to meet Europe’s energy needs, taking advantage of existing transit routes and utilizing its vast energy resources.

Sonatrach has spare capacity on the Transmed pipeline that could be used to increase supply to the European market, according to the group’s former CEO who said the pipeline could carry up to 32 billion cubic meters per year, four times more. than the Medgaz pipeline that supplies Spain. Thus, the policy of the Algerian gas giant has always been aimed at recapturing market share in Europe, succeeding, in November 2022, in signing a contract for the purchase and sale of natural gas with the Slovenian company Geoplin. This contract allows the supply of natural gas to Slovenia through the gas pipeline connecting Algeria to Italy for a period of three years, starting in January 2023.

Referring to gas production, Sonatrach’s CEO stated that “Algeria could reach 150 billion m3 of gross gas production by 2025, if all fields in production today and those in development are well exploited”, according to the Algerian Press Agency.

In this context, he added that Algeria’s current global average gas production is about 130 billion m3 per year.

“Our challenge is to maintain this average production after 2030. This production will allow us to meet the demand of the national market and maintain our exports of around 50 billion m3 to the historical market which is Europe and to “go to other markets”, he pointed out. .

Algeria is Africa’s leading exporter of liquefied natural gas (LNG), overtaking Nigeria, which has held the position for more than a decade. As a result, Algeria has become the largest exporter of LNG in Africa.

But Algeria does not stop there. At the end of January this year, the Algerian hydrocarbons giant Sonatrach signed an agreement with the British company Grain LNG, which aims to strengthen the supply of LNG to the United Kingdom, for a period of ten years, starting from January 2029.

The same group and the German company Handel & Vertrieb GmbH (VNG), a subsidiary of VNG AG, concluded a medium-term gas supply contract at the beginning of February 2024.

Continuing its momentum, Sonatrach plans to sign several contracts in the gas sector by the end of the current year with major global oil groups.

Thus, for the year 2024, companies such as Eni, Total Energies, Chevron, Exxon Mobil and Spanish companies appear on the list of potential candidates for the acquisition of new markets with Algerian gas.

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