Brussels, 10/06/2013 (Agence Europe) - On Monday 10 June, the European Union and Algeria officialised the conclusion of an agreement in the form of a memorandum of understanding (MoU) on the establishment of a strategic partnership on energy. The Council noted the two parties' agreement. It will be formally signed during an announced visit, but for which no date has yet been fixed, by the European commissioner for energy (for details of the MoU see EUROPE No 10861 of 7/6/2013).
The agreement was signed at a time when further questions are being raised on the soundness of links between the EU and its Mediterranean neighbours. The EU, or at least its member states, is said to be seeking new gas supply sources.
Recent Italian and Spanish decisions commented on by experts indicate that things have been put in motion, much to the chagrin of Algeria, which is a major supplier in the region, alongside Libya and Egypt. Insecurity and also the risk of social instability are said to be the causes of this. European energy companies, announcing a reduction in gas imports from North Africa (especially Algeria, Egypt and Libya) to diversify their supply sources, speak of the growing insecurity and also discouraging market conditions.
The relative withdrawal of North Africa from Europe's supply would seem to be most apparent in two countries which each depend on the Algerian market for 10% of their supply - Italy and Spain. Statements from company directors and experts in these two countries, quoted by Reuters, confirm this intention - “We need new supply sources”, Leonardo Senni, head of the energy department of Italy's Ministry of Economic Development, told Reuters. Italian energy firm ENI - which last week negotiated a reduction in the quantities supplied by Algeria through long-term contracts - confirms the need to diversify while asserting that Italy will not be able to dispense with Algerian gas. Spain has a similar attitude, according to Reuters. “There is also a trend in which our African gas imports are becoming more unreliable and our biggest concern is Algeria. So we are looking for new import sources”, said one Spanish gas importer. Liquefied natural gas (LNG) exports to France also fell in 2011, according to this source.
Quoting analysts from the region, Reuters considers that while in Libya and Egypt the risk is, in particular, military, in Algeria the risk reportedly also stems from the unequal distribution of wealth (97% of which comes from exports of hydrocarbons) which is arousing growing social tension. The decrease observed in production (export has fallen from 70 billion m3 to a little over 50 billion m3 in 10 years), added to the security risk, is scaring off investors, Reuters states. According to intelligence analysts, the fall in revenues from the sale of gas could amplify these social risks and put a brake on the reforms under way for liberalising the economy and private sector.
The government tries to be reassuring and the minister for energy has said that two new drilling operations are under way with a view to boosting production. (FB/transl.fl)