The Iberian solution could supply more gas to Europe

The Iberian solution could supply more gas to Europe – Spain, Algeria, Libya, European Union, Morocco, Sahel, Russia

Francis Giles (Vía Fair Observer*) – The Ukrainian-Russian crisis has revealed Europe’s dangerous dependence on Russian energy. But it has also opened up new opportunities for the export of Libyan and Algerian gas.

The question of where Europe’s foreign gas supplies come from and whether there are alternatives to the continent’s dependence on Russia has never been more debated than in recent weeks. The subject usually reserved for specialists has become the subject of endless discussion. Are there other sources of gas supply from the EU?

The immediate answer is that there are very few today outside of Russia itself, hence the sharp rise in gas prices we have seen recently. But in the medium term, Libya and Algeria have ample scope to increase their supplies to the EU.

Supplies from Libya and Algeria

Libya has proven gas reserves of 1,500 billion cubic meters (bcm). Its production is modest at 16 billion cubic meters. Algeria has 4,500 billion cubic meters of proven reserves and 20 to 25 trillion cubic meters of unconventional gas reserves, the third in the world after the United States and China (and Argentina, whose proven reserves are linked to Algeria). Nobody can guess how much gas it can produce, but we are talking about a number on the order of tens of billions of cubic meters.

Algeria today produces 90 billion cubic meters, of which 50 billion cubic meters have been exported. Another advantage of Algeria is the enormous storage capacity – 60 billion cubic meters – of the Hassi Rmel gas field, which is the oldest and the largest compared to the storage capacity of the European Union of 115 billion cubic meters.

Pierre Terzian, founder of the French energy research center Petrostrategies, recalls that four gas pipelines link these two products directly to the European continent: the first links the Libyan gas fields to Italy; The second Algerian gas fields to Italy via Tunisia. The third Algerian gas field in southern Spain. The fourth is the same gas fields to southern Spain via Morocco.

The latter has been closed since November 1, 2021, due to the deterioration of relations between Algeria and Morocco, but this has not affected the gas supply to the Iberian Peninsula. Algeria also has two major LNG terminals, adding flexibility to its export policy. It is exported to France and the United Kingdom in LNG carriers.

The first reason for the current crisis is structural, since, according to Terzian, the internal production of gas in the European Union has decreased by 23% over the last 10 years and covers only 42% of consumption, compared to 53% in 2010. This decline is a consequence, in particular, of the closure of the giant Groningen gas field, which is well implemented and will be completed by 2030.

Europe has done a lot to expand the gas transmission network between EU countries, but there are still large gas peninsulas. In 2018 he suggested that connections between the Iberian Peninsula and the rest of Europe need to be developed. Spain has a third of Europe’s LNG import capacity, much of which is unused, and is connected to Algeria by two large gas pipelines that can be extended.

As Alan Riley and I noted four years ago, “the main impediment to opening supply routes from the Iberian energy market to the rest of the European Union is the restricted route to the border Franco-Spanish. A gas pipeline with a capacity of 7 billion cubic meters is available to transport the gas to the north. The main limiting factor was the political power of Electricité de France, which seeks to protect the interests of the French nuclear industry. We added that the Iberian solution “would not only benefit France and Spain, but also Algeria, by creating additional incentives to explore new gas fields and possibly launch a national revolution”. “Renewable energies”, which would encourage people to switch from gas to the consumption of solar energy. in Algeria.

Germany, Netherlands and Italy

Germany, for its part, hasn’t put its money’s mouth on Algeria. In 1978, Ruhrgas (now absorbed by E.ON) signed a major contract to supply liquefied natural gas to Germany. Germany never built the LNG terminal needed to start this decade. So far, it is the only major European country that does not have LNG import terminals, although it can rely on existing facilities in the Netherlands and Belgium.

In 1978, the Netherlands also committed to buying Algerian gas. Algeria dropped the contract in the early 1980s due to Germany’s refusal to go ahead. Later in the 1980s, Rourgas again showed interest in buying Algerian gas, but the price offered was too low and because Rourgas wanted to install gas via France, which insisted on very high transit charges. By getting rid of Algerian gas, Germany committed itself to Russian goodwill.

Italy, like Germany, the main importer of Russian gas, is better positioned. In December 2021, Sonatrach, the Algerian oil and gas monopoly, increased the amount of gas pumped through the TransMed gas pipeline, which connects Algeria to Italy via Tunisia and the Strait of Sicily, at the request of its Italian customers. This follows a highly successful state visit by Italian President Sergio Mattarella to Algeria in early November. On February 27, Sonatrach confirmed that it could pump additional gas to Europe, but only on the condition that existing contractual obligations are met.

Relations between the Italian energy company ENI and Sonatrach are historically close due to the important role played by the founder of the Italian company, Enrico Mattei, as an adviser to the Provisional Government of the Algerian Republic in its negotiations with France, which which led to the independence of Algeria. In July 1962.

The European Commission’s pursuit of ultra-liberal energy policies since the beginning of the last century has destabilized the policies of long-term gas and LNG purchase contracts, which until then had been the norm in international gas exchanges. However, security of supply is not based on such misguided liberalism. No new gas reserves can be found, let alone brought into production, if European producers and customers are, as Terzian points out, “at the mercy of prices set by trading platforms that have questionable liquidity (and can be affected by big players.) He adds: This is an attitude of “limiting irresponsibility”.

German energy policy has strongly contributed to the current crisis. He willingly sought to shut down the country’s nuclear power plants and increased its reliance on coal for its electricity sector, thereby increasing carbon emissions.

serious conversation

Considering Caspian gas as an alternative to Russian gas, I would like to add another country, Turkey, which has a very aggressive and independent policy as a major gas transit. However, few observers would argue that such a solution would increase Europe’s security.

Engaging in a long-term strategic dialogue with Algeria would give leverage to Spain and the European Union. This could help establish better relations between Algeria, Morocco and the volatile Sahel region. When trying to understand the politics of different countries, follow the money is often a good guide. You can also follow the gas.

*[Cet article a été initialement publié par Arab Digest, une organisation partenaire de Fair Observer.]

the corner02/05/2022

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