Algeria-Morocco deadlock threatens Spain’s gas supply
Algeria is pumping huge volumes of gas through Morocco to Europe, but with Algiers and Rabat at loggerheads as a gas pipeline deal nears expiration, experts say the taps may be shut off soon .
It would affect Spain’s gas supplies as prices soar across Europe and winter approaches, and Foreign Minister JosÃ© Manuel Albares was due to visit Algeria on Thursday to discuss the matter. the issue, his office told AFP.
Algeria, Africa’s largest natural gas exporter, has been using the Gaz-Maghreb-Europe (GME) pipeline since 1996 to deliver several billion cubic meters (bcm) per year to Spain and Portugal.
But GME’s contract is due to expire at the end of October, a little over two months after Algiers severed diplomatic relations with Rabat for “hostile actions”.
And in August, Energy Minister Mohamed Arkab told Spanish Ambassador Fernando Moran that Algeria was ready to deliver all of its gas exports to Spain via another submarine pipeline, bypassing the Morocco.
“An agreement to continue the GME agreement before October 31 is very unlikely,” North African geopolitical expert Geoff Porter told AFP.
“In view of the absence of diplomatic channels between Rabat and Algiers, it is difficult to see a route for negotiations.”
Unlike their border, closed since 1994, the GME gas pipeline has remained open for a quarter of a century, despite repeated crises.
Both parties benefit. Morocco receives about a billion m3 of gas per year, of which it buys half and the other half in the form of in-kind transit fees, worth about $ 50 million per year, according to a Moroccan expert in energy who wished to remain anonymous.
In return, Algeria obtains a profitable route for about half of its piped gas exports to the Spanish and Portuguese markets.
Still, with another diplomatic row erupting just as the contract expires, a new deal is far from certain.
– Economic weapon –
The latest crisis followed months of tension, in part over the normalization of Morocco’s ties with Israel in exchange for Washington’s recognition of Rabat’s sovereignty over Western Sahara.
Algiers, which welcomed the Polisario independence movement and supported the Palestinian cause, accused its neighbor in August of “hostile actions”, including complicity in deadly forest fires, support for separatists in Kabylia and use of the Pegasus spyware against Algerian officials.
Morocco has called Algeria’s move “completely unwarranted”, but experts say Algeria is keen to hit its rival where it hurts – in the pocket.
“Algeria could deprive Morocco of transit fees, which are an important and stable source of income, but also of gas supply at good prices”, estimates Roger Carvalho, energy expert for North Africa.
But, he added: âAlgeria has obligations (vis-Ã -vis Spain and Portugal) and cannot deprive itself of international income from these contracts. It must therefore find another delivery route.
– International turnover –
Algeria has two alternatives to GME, but both have shortcomings.
The Medgaz submarine pipeline, which transports Algerian gas directly to the Spanish coast, is already operating near its full capacity of 8 billion m3 per year, or about half of Algeria’s total gas exports to Spain.
“If the Algerians manage to supply enough gas through Medgaz, they probably will,” Carvalho said.
But while the Algerian national energy company Sonatrach and its Spanish partner Naturgy have pledged to increase Medgaz’s capacity to 10 billion m3 per year in the coming months, this remains well below the total needed at current levels.
The second option is to liquefy the gas and send it to Spain by ship.
But Porter says the short distance means the option “doesn’t make financial sense.”
As a result, “Algeria will potentially lose gas export revenues in order to deprive Morocco of its main source (97%) of natural gas,” he told AFP.
The Moroccan energy expert told AFP that closing the pipeline would hurt Algeria but would only have a “marginal” impact on Morocco.
“The GME is an opportunity for the Algerians. If they let it go, it would be an irrational decision and they would be the biggest losers,” he said.
Porter says this could force Morocco, which uses GME gas to generate around 10 percent of its electricity, to increase its imports of coal to cover the deficit.
– “Costs will increase” –
Rabat has said it wants to keep the GME open. But despite an agreement made directly between the companies managing the contract, many analysts are betting that the taps will be turned off.
Matthew Cunningham, an economist at FocusEconomics, a Barcelona-based consultancy firm, said it would cause significant supply disruptions for Spain, which has already been pushed to cut electricity taxes and impose caps on electricity. prices as gas bills skyrocket across Europe.
“Despite this, Spain should be able to meet its energy needs by sourcing natural gas from different locations or by using other energy sources, although the costs will increase significantly,” he said. .
Spain’s environment ministry told AFP this week that Algeria had given it “the necessary guarantees that gas imports from Algeria will not be compromised despite the current crisis”.
But Carvalho warned that in the long run, the closure of the GME could push Spain and Portugal to diversify their supplies away from Algeria.
“Using gas deliveries as an economic weapon is not a good long-term calculation for Algeria,” Carvalho said.
Â© 2021 AFP