Algeria: Sonatrach and Fenosa finalise deal

Companies from the two sides of the Mediterranean have agreed to pen a deal valid for almost two decades. Spain’s Gas Natural Fenosa was a signatory to the deal with Algeria’s Sonatrach for 800mn m³/year of gas for a period of 18 years and for a 10% stake in the 8bn m³/yr in the Medgaz pipeline which serves as a connection between the two countries. Their agreement will become active next month, February.
The 210 kilometer long Megadez which cost 2billion Euros started operation in 2011 and is linking Bani Saf in northern Algeria to Almeria in Spain. Megadez has been supplying Europe with natural gas. Sonatrach and fenosa are all under contracts to export gas to Spain.
The companies, Fenosa and Sonatrach, have been involved in a dispute due to gas pricing in the past but they were able to overcome it in June 2011. Gas Natural agreed at the time to pay the Algerian producer $1.9bn, and Sonatrach took a small stake in the Spanish firm.
The deal also comes amid a shift in the composition of Spanish supply towards pipeline imports. With spot liquidified natural gas prices more expensive in South America and northeast Asia, Spanish shippers have diverted or re-exported an unprecedented amount of it away from the country’s shores. The trade at first helped to displace a substantial surplus of contracted supply that would otherwise have swamped the country, but it has now become so extensive — thanks to still-strong demand further afield — that additional pipeline supply is needed to offset lost tanker-borne supply.
Pipeline gas imports have increased by more than 21% over the period of November 2011 to November 2012 and Algerian pipeline deliveries have provided almost half of the increased percentage.