Algeria eyes greater role as Europe’s gas supplier

• Sonatrach signed supply agreements with German and UK-based companies, and MoUs with ENI and Equinor
• Algeria is strengthening its position as energy supplier to Europe
• Additional supply agreements can be expected in near future

LONDON (ICIS)–Algerian state-owned gas producer Sonatrach in March signed a new memorandum of understanding (MoU) with Italian supplier Eni and Norway’s Equinor aimed at closing hydrocarbon contracts in the regions of In Salah and In Amenas.

This is just one of the plenty agreements signed by Algeria with the aim to increase its presence as a gas supplier to Europe. This commitment started with an MoU signed in 2013 with the European Union.

The Algerian government seems to be accelerated this push in 2024 so far. A gas trader told ICIS that Algeria is in a favourable position for closing deals with European companies given the current geopolitical circumstances. While most of the Russian volumes to Europe have been replaced by LNG, that supply is not as flexible or reliable as piped flows, which are usually the preferred option. In addition, LNG cargoes from Algeria might also be considered more stable and possibly cheaper than LNG coming from the US due to a shorter route not affected by cyclones on the US east coast or freezing temperatures affecting terminals in the winter.

ICIS data shows that Algerian exports to Europe have risen greatly in the last two years compared to pre pandemic levels.

Piped flows via Italy increased to 23 billion cubic metres (bcm) in 2023, more than double compared with 2019, while piped volumes entering the continent via Spain have also increased to about 8.5bcm in 2023, about 38% more compared with 2019.

Algeria LNG exports to Europe also increased to 7.3million tonnes in 2023, about 6% higher compared to 2019 figures.

Medgaz, a company operating the pipeline between Algeria and Spain, announced in an operational notice that it will increase available capacity in its daily auctions from 1 January 2025. The document detailed that current bookable firm capacity is 1.3 million cubic metres (mcm)/day until 31 December 2024, after which it will increase to 1.4mcm/day during the whole 2025 calendar year. A second source involved in Algerian gas production told ICIS they believe available capacity could be updated in the future in accordance with new requirements and changes in Algerian gas production.

Early in February 2024, Sonatrach had signed a mid-term gas contract to supply German-based VNG Handel & Vertrieb GmbH.

In January, Sonatrach signed a new agreement with the UK-based Grain LNG terminal extending storage and redelivering capacity from January 2029.