European Union courts Algerian gas cooperation

EU’s third biggest supplier behind Russia and Norway

ALGIERS, May 24, (RTRS): Officials from Algeria, the European Union and energy firms meet in Algiers on Tuesday in an attempt to get their energy cooperation back on track and find ways to pump more gas north again after years of dwindling exports.

Algeria is seen as a natural partner for the European Union as it looks to diversify energy supplies after the Ukraine conflict once again exposed the risks of relying too much on the bloc’s top supplier, Russia.

At the moment, the north African country is the EU’s third biggest gas supplier behind Russia and Norway yet its export capacity through its three pipelines across the Mediterranean Sea is widely underused.

In 2013, the EU estimated Algeria exported 25 billion cubic metres (bcm) of natural gas via pipelines to Spain and Italy, or less than half the capacity of 54 bcm, while it exported 15 bcm of liquefied natural gas out of capacity of 40 bcm.

Declining European demand has been a factor cutting into Algerian exports, but the amount of gas for export has also been hit by a combination of depleting production from mature fields, and Algeria’s rapidly expanding need for gas to generate power.

Algeria has dozens of projects the government expects to generate new production and help keep its flow of gas exports to Europe stable. But the problem has been attracting investment needed to discover and develop new fields and maintain old ones.

Oil industry sources say the problems Algeria has struggled with over the past decade have stemmed from a combination of a glacial bureaucracy, tough contract terms, security worries, delayed projects and turmoil at state oil company Sonatrach.

Tuesday’s forum brings together Algerian and EU officials as well as oil companies to discuss gas, renewable energy sources and energy efficiency, though most recognize this will just be a first step on the road to better cooperation.

“There is perfect awareness on both sides of what the challenges are,” EU ambassador to Algiers Marek Skolil said. “This is something strategic, that this is a first or second chapter in our strategic energy dialogue and it will continue.”

According to a Sonatrach document from a March meeting with EU officials, oil companies had six areas of concern, including lack of quality offers and clearer data, rigid contracts, fiscal terms, taxes, and the need for more flexibility.

“They can’t do much about the price of oil, but they can something about the ease of operation,” said one foreign oil industry source.