Algeria backpedals on expanding gas pipeline to Spain
After failing to honor its gas shipment promises to Spain, Alegria decided to halt works to expand the Medgaz pipeline to Spain vindicating the fears of Spanish gas importers and undermining its market share in the Spanish market.
Algeria had promised Spain to expand the capacity of the Medgaz pipeline from 8 billion cubic meters annually to 10 cbm, in the wake of its unilateral halt to the larger Maghreb Europe pipeline, in a series of hostile measures against Morocco.
The decision to put an end to the medgaz expansion plans was made public by American investment fund Blackrock which carried out feasibility studies but did not get the green light from the Algerian authorities to go-ahead, Spanish media Marca2 said.
Algeria’s share in the Spanish gas market has shrunk as the US topped Spanish LNG suppliers while Nigeria saw it gas shipments grow amid tensions between Madrid and Algiers.
After Spain made public its new position in support of Morocco’s sovereignty over the Sahara, Algeria- which supports and hosts the Polisario separatists- waved the gas card threatening to hike prices and to cut gas altogether in case Madrid supplied Rabat through the halted pipeline.
Gas blackmail has shown once more the unreliability of Algeria as a gas supplier and its disregard for commercial contracts, using the energy card to the detriment of neighborliness.
Analysts see that diminishing production capacity and the long-term gas supply deals providing for price stability have undermined Algeria’s chances in benefiting from the surge of gas and oil prices in the spot market.
The drop in gas supplies also vindicates analyses which warned of a diminishing Algerian gas export capacity in view of rising domestic consumption and depletion of reserves amid a lack of new discoveries.
Algeria’s energy minister Abdelmedjid Attar has recently warned that the country will have to give priority starting from 2025 to supplying the local gas market, hinting without saying it to the demise of Algeria’s gas export capabilities.
Starting from 2025, Algeria will no longer be a major gas exporting country. This in part explains the counter-intuitive decision taken by the military junta in Algiers to put an end to the Maghreb Europe gas pipeline.
On the surface, Algerian officials said the non-renewal of the pipeline deal was directed to hurt Moroccan interest after Algiers unilaterally cut diplomatic ties with its Western neighbor. But in fact, Algerian officials are aware of the inability of their country to meet gas demand in Europe.
Algeria has maintained a pipeline that runs through the Mediterranean to Spain but failed to give guarantees that it will be a reliable gas supplier to its Spanish client.