Algeria – Italy: an agreement that turns the energy map upside down


Algeria – Italy: an agreement that turns the energy map upside down
Written by madishthestylebar

While Spain aspired to become the gas hub of Europe, it was Italy that was offered this opportunity thanks to its historical relations with Algeria and the upheaval of the world energy map by the war in Ukraine. .

Historically the leading gas supplier to Spain, to which it is linked by two gas pipelines, Medgaz and GME, Algeria lost this position in early 2020 to the benefit of the United States.

In their development strategy, the Spaniards have opted for the diversification of sources and means of supply. The country’s position, both on the Atlantic and the Mediterranean, makes it a gateway to Europe for gas from North Africa transported by pipelines and American LNG transported by LNG tankers.

Its large regasification capacities should eventually make it possible to transport American gas to the heart of Europe, in particular to Germany via France.

But two events that occurred in the first months of this year 2022 turned everything upside down. The invasion of Ukraine by Russia on February 24 reminded Europe of its vulnerability in being dependent to a very large extent on Russian hydrocarbons and it was the whole West that set out to find alternatives.

On March 18, the Spanish government committed an imprudence that remains unexplained to this day by announcing its support for the Moroccan autonomy plan for Western Sahara, not without knowing that such a reversal will not please Algiers.

Before this date, Algeria was already being asked to supply more gas, including by Spain, which had been worried about its supplies since November 2021 following Algeria’s decision to close the GME (Maghreb-Europe gas pipeline ) which crosses Morocco following the severance of diplomatic relations with this country in August.

Their new position of strength has not escaped the Algerian authorities who have decided to use gas as a lever for diplomatic pressure. In Algiers, we are not without knowing the ambitions of Spain.

As early as March 25, an official Algerian source warned in a statement to a Spanish newspaper (El Confidencial) that Algeria “will modulate its relations towards certain partners in southern Europe who have invested in Algeria and who maintain ‘excellent traditional relations with our country’, specifically citing Italy as a qualified country ‘to become the gas hub in the region in view of the capacity of the Enrico Mattei gas pipeline and the demand and availability displayed by the operators of this country friend “.

On April 11, it was the first action with the signing in Algiers of an agreement between the companies Sonatrach and ENI, in the presence of Italian Prime Minister Mario Draghi, for the increase in gas flows by 9 billion additional cubic meters by 2023-2024.

On July 18, another agreement was signed, this time involving, in addition to the Italian company, the American Occidental and the French company Total Energies.

Worth 4 billion dollars, the agreement concerns the development of the Berkine perimeter (Hassi Messaoud) and “will make it possible to supply Italy with very large quantities of natural gas”, according to the President of the Republic Abbdelmadjid Tebboune.

Mario Draghi was again present, who also came to attend the summit of the Algerian and Italian governments, for what seems to be his last mission before his resignation.

The two countries, with distinguished historical relations, have decided to make gas a springboard towards broader cooperation and, above all, towards a strategic relationship. This visit “is intended to be a further step towards the establishment of strategic relations”, indicated the Algerian President after his meeting with the President of the Italian Council.

Waiting for gas from Nigeria

By the end of the year, an additional six billion cubic meters will be pumped to Italy and the increase will be even greater with the agreement that has just been signed.

Algeria finds itself de facto Italy’s leading supplier of gas, making this country, which nevertheless imported 40% of its gas from Russia before the war in Ukraine, the European state which has the least worries about its supply. .

With Spain, relations have continued to deteriorate since March 18. On June 8, Algeria announced the suspension of the treaty of friendship, good neighborliness and cooperation signed by the two countries in 2022, a suspension followed by that of commercial transactions.

During the same month, Russia became Spain’s second gas supplier, behind the United States, relegating Algeria to third place.

Already highly criticized internally for having taken the initiative alone to align itself with Moroccan theses and for having jeopardized relations with an important partner, the government of Pedro Sanchez is even more so with this succession of agreements concluded by the Italians in the Algerian energy sector.

“With this agreement, Italy becomes the great energy hub of Europe, a role that our country could have played if diplomatic relations were maintained normally”, regrets the newspaper The Objective.

“It (the agreement) makes the transalpine country a privileged partner of the Maghreb. Not only on energy issues, but also on the Sahrawi question, in which the two powers have agreed to support a self-determination referendum to resolve the conflict,” the newspaper adds.

Italy could even become a giant hub when gas arrives from Nigeria, which has just relaunched the trans-Saharan gas pipeline megaproject with Niger. And Algeria’s position would be further strengthened. Such an energy map, no one saw it coming. The war in Ukraine but also the Algerian-Italian understanding turned everything upside down.

For Algeria, the dividends of the new situation cannot be counted. In addition to having a strategic partner in southern Europe, the size of Italy, it is already seeing its difficulties in attracting foreign investment begin to come to an end.

With the Ukrainian crisis, the Europeans regret all the investments they refused to make in the Algerian oil sector. Observers expect to see investment continue to flow and the partnership with Italy intensify. With, however, the risk, they warn, of putting all the eggs in one basket by depending on a single customer.

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