Algeria further undermines its market share in Spain’s gas market

Algeria further undermines its market share in Spain’s gas market

When Algeria halted its biggest gas pipeline with Spain in late 2021, decision-makers in Madrid knew that Algiers’ reliability as an energy supplier was called into question. In a series of self-defeating measures, Algeria has announced a technical problem in the small Medgaz pipeline, effectively halting all exports to Spain and further pushing the country to diminish the share of Algerian gas in its imports.

Experts have warned that the Medgaz 8 bcm pipeline was not enough to meet Algeria’s gas sales commitments to Spain. In the wake of the closure of the 13 bcm Maghreb-Europe pipeline, Algerian officials gave promises to Spain that they will further expand the capacity of Medgaz to 10 bcm, but the promise was empty.

The technical problem has been foreseen by most experts who urged Spain to diversify its sources.

However, the diplomatic context in which Algiers took the decision leaves many observers questioning the veracity of the technical problem, as in recent weeks Algeria have not shied away from using the gas card to blackmail Spain.

Following Spain’s support for Morocco’s autonomy plan for the Sahara region, Algerian diplomacy lost all sense threatening to cut gas supplies and asking importers to avoid Spanish suppliers.

Whether genuine or fabricated, such technical problems will only lead Spain to further reduce its gas imports from Algeria.

Shrinking market share

Earlier this year, Spain opted for US gas, after Algeria unilaterally halted gas supply through the 13 bcm pipeline that channels gas via Morocco, especially after Algeria, which promised to satisfy Spain’s needs through the smaller Medgaz pipeline, failed to do so.

In March, after Spain took the sovereign decision of backing Morocco’s autonomy plan for the Sahara region, Algeria shot itself in the foot when it threatened to renegotiate prices and even warned to cut gas supplies to Spain altogether if the latter resells Algerian gas to Morocco.

The result of Algeria’s blackmail was a 41% drop in Algerian gas imports to Spain and a 34% increase in US supplies.

Russian gas supplies, despite the war and boycott context, increased 3.2%, unseating Algeria as the second largest supplier.

Spain is resolutely and gradually replacing Algerian gas by opting for other suppliers including Qatar and Nigeria whose market share is slowly eating to Algeria’s.

Spain used to be the second largest market for Algerian gas, where it had a competitive edge. The loss of the Spanish market will deal a heavy blow to Algeria’s gas competitiveness amid a rising domestic consumption and slower new discoveries pace.

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