Brussels, 01/07/2015 (Agence Europe) - According to several Algerian newspapers reporting on news from the Financial Times at the beginning of the week, negotiations are under way between the EU and Algeria for a trade agreement that ensures the EU's supply of gas and the stabilisation of Algerian sales.
In Brussels, the European Commission says that it is not involved as such in the negotiations of trade agreements. It is nevertheless observing the proceedings.
Algerian daily newspaper Al-Watan provides more extensive news on the ongoing negotiations which, Al-Watan states, aim to increase imports of Algerian gas in the EU so as to reduce the share of Russian gas in the imports. Al-Watan reports that the issue is expected to be raised at a meeting of the energy ministers from Spain, France and Portugal and European Commissioner for Climate Action and Energy Miguel Arias Canete on 30 June (see other article), as part of the interconnection for south-west Europe group. The meeting will assess how to use the existing links to best effect, and will also assess the Midcat gas pipeline project, which will link Catalonia to the south of France. Last March, the Commission and EIB agreed to relaunch the project and decided “to assess the feasibility [of the work] in six months”. The total cost is reportedly €1.782 billion (see EUROPE 11268).
The Commission's DG Energy says on its website that the western part of the project will be operational in 2013, whilst the eastern part should enter into force in 2016. The objective of the project is to develop a high pressure gas network in France so as to strengthen the Africa-Spain-France gas interconnection line.
Al-Watan reports that Algeria is “linked to Europe by two gas pipelines - Galsi with Italy, and Medgaz with Spain. The new European plan has been negotiated by Arias Canete, the European commissioner for energy, who was in Algiers during the month of May” and tried to convince Sonatrach (Algeria's national hydrocarbons company) “to open up more to foreign investment, especially as regards the upstream foreign parts (exploration and production)”, the newspaper adds.
According to an expert in energy economics, Abderrahman Mebtoul from Algeria, who spoke to EUROPE, “Algeria is currently faced with strong domestic consumption and a drop in physical volume compared with 2007”. The result of this is that “the large Transmed pipeline, the planned capacity of which was 35 billion cubic metres through the Italy-Tunisia line, is under-used”. The situation would reportedly be better in the use of Medgaz, via Spain, but its capacity is smaller - “only 8 billion cubic metres” are channelled, says Mebtoul. In his opinion, “everything will depend on the sale price, on the fact that the price of the gas is indexed to that of oil”. Mebtoul explains the problem, for the Algerians, of having to lower prices more, “because for the big fields - Hass R Mel, for gas, and Hassi Messasoud, for oil - the costs are high compared with other competitors - especially Gazprom and Qatar - while awaiting the entry of Iran”. These three competitors “have a total of over 50% of the world's reserves in traditional gas although Algeria (only has) 2% for gas and less than 1% for traditional oil. Neither should Mozambique's entry be forgotten - the third global reserve from 2017 - nor America's shale gas or oil”. For the new projects, “the cost of amortisation is high. So, everything depends on an agreement that can be arranged, by both Europe and Algeria.” (Fathi B'Chir)