Algeria to increase gas exports to Europe

Authorities in Algeria have said they would would increase its supply of liquified natural gas (LNG) to Europe. This move has been necessitated by the disruption caused by Russia’s invasion of Ukraine. Much of Europe’s LNG supply comes from Russia. But its invasion has disrupted flow through Ukraine and led Germany to suspend the planned start of the new Nordstream-2 LNG pipeline. The shift to securing LNG supplies from Algeria has not come as a surprise. The north African republic was identified as a potential alternative as concerns mounted over Russian troop build-up near the Ukranian border the weeks before the invasion.

Algeria is ideally placed to help fill Europe’s sudden LNG shortfall. It is the world’s sixth-largest LNG exporter and already has gas pipelines connected with Spain and Italy. Algeria also has a substantial LNG storage facility in its northern city of Skikda from which LNG can be shipped to European ports.

Importantly, Algeria has the ability to scale up its deliveries to Europe. For instance, the Transmed pipeline which connects Algeria to Italy transports 60 million cubic metres (mcm) of LNG per day but it has the capacity to transport 110 mcm per day. If Algeria can bolster its production to meet the Transmed pipeline’s capacity as well as that of the underwater Medgaz pipeline which connects to Spain, the country will see a sharp improvement in its export revenue and balance of trade.

The demand for Algerian LNG will likely revive regional and global diplomatic efforts to repair relations between Algerian and Morocco to ensure the resumption of the Maghreb-Europe Pipeline connecting Algeria to Spain via Morocco, which ceased operating in October 2021 amid a diplomatic fallout between Rabat and Algiers. This could boost LNG exports to Europe by an additional 13,500 mcm a year.

Algeria is not the only African state set to benefit from the sudden urgent short-term need for LNG in Europe. LNG producing countries such as Egypt, Libya, Nigeria, Niger, Angola and Equatorial Guinea could all benefit from increased exports to Europe.

The war in Ukraine has fundamentally changed the European Union (EU)’s relationship with Russia and will force the EU to look for new LNG exporters and diversify its gas suppliers. African countries provide the fastest and most effective means to address this challenge. As a result, long-term investment is expected to flow into African LNG developments located across the continent, including those in Tanzania, Mozambique, South Africa and Nigeria, helping to address the infrastructure shortcomings which held this sector back. This will include a fast-tracking of the planned 4,127-km Trans-Saharan Gas Pipeline which will connect LNG reserves in Nigeria, Niger, and Algeria to Europe. Once completed, this pipeline will be able to transport 30 billion cubic metres (bcm) of gas to Europe per annum.

African states will need to move quickly and decisively to benefit from the sudden opening of the European gas market. Europe is urgently looking for alternative LNG suppliers and is also seeking to secure increased imports from Asian LNG-producing countries such as Qatar. However, African states such as Algeria have an advantage due to the largely untapped and unallocated reserves. Qatar will need to divert LNG from its Asian customers in order to supply Europe on such short notice.

 

References

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'Europe Could Look To Africa If Ukraine Conflict Threatens Gas Flow', Rigzone, 24 February 2022.

'Italy to get more gas from Algeria, foreign minister says', Reuters, 28 February 2022.

'U.S. reaches out to foreign producers in Algeria on gas options -sources', Reuters, 8 February 2022.

'African states eye EU gas opportunity from Ukraine crisis', EURACTIV, 25 February 2022.

'Spain allows Morocco to use the Maghreb-Europe gas pipeline in a new sign of rapprochement', Atalayar, 2 February 2022.

'Analysis: Can African gas replace Russian supplies to Europe?', Aljazeera, 1 March 2022.

'Algeria offers to supply EU with extra gas amid Russia-Ukraine crisis', Middle East Eye, 27 February 2022.