Spanish gas groups fear reliance on Algeria

The debate on energy security in Europe has previously centred on northern Europe’s dependence on Russian gas and overlooked southern Europe’s high dependence on Algerian gas. But that is about to change.

The north African country is a significant gas supplier to Italy, Spain, France, Portugal and Turkey. It will become even more important when two new pipelines – one to Spain and France and the other to Italy – are completed over the next 18 months.
Once the pipelines are operational, Sonatrach, Algeria’s state-owned oil and gas company, will for the first time start marketing gas in southern Europe rather than just supplying it. That will put it in direct competition with local suppliers such as Spain’s Gas Natural.

Italy has not placed any obstacles to Sonatrach’s entry into its domestic gas market. But in Spain, gas distributors have tried – and failed – to keep the Algerian company off their home turf.

The dispute has soured diplomatic relations between the two countries and was resolved in Algeria’s favour only when Sonatrach threatened to cancel the Medgaz pipeline project to Spain. Last year, Spain imported 37 per cent of its gas from Algeria.

Disagreements between Madrid and Algiers have multiplied – in addition to the marketing spat, Algeria caused bad blood by cancelling the contracts of two Spanish companies for a gas development project last September. Sonatrach and Gas Natural, Spain’s largest gas importer, are also locked in a price dispute that could affect long-term supplies.

Gas Natural says Algeria is using Spain’s energy dependence to extract unfair competitive advantages. Some Spanish energy executives go so far as to describe Sonatrach as a “Gazprom on the Med”, accusing it of adopting the bullying tactics of the Russian producer.

Financial Times Deutschland