Home Energy system Can Algeria contribute to EU energy security? | Business | Economic and financial news from a German perspective | DW

Can Algeria contribute to EU energy security? | Business | Economic and financial news from a German perspective | DW


As the EU diversifies away from Russian natural resources, the Mediterranean is emerging as one of the most important regions for energy security in the bloc. In the southern part of the Mediterranean, oil and gas reserves are abundant. Around 10% of EU imports come from Algeria.

Last month, Italian oil and gas company ENI used its ties and signed deals to import LNG from Egypt and an additional 9 billion cubic meters (bcm) of piped gas per year from Algeria. The two North African countries hold the largest proven gas reserves in the area, even ahead of Libya.

The EU, well aware that it can only depend on a few suppliers, understands that the two countries will be at the heart, but not a silver bullet, of its energy security.

Timing is crucial

Hydrocarbon deposits and infrastructure take more than a year to develop, while the most critical moment for Europe should come during the next heating season.

“The region is currently unable to provide a full substitute for volumes imported from Russia, at least in terms of oil and gas, but can make significant contributions if producers fully exploit existing infrastructure, such as LNG terminals in Algeria. and in Egypt, pipelines in Algeria and Libya,” Nadim Abillama, Middle East and North Africa (MENA) program manager at the International Energy Agency (IEA), told DW.

Regional specificities

“There is a reasonable chance that Europe’s energy needs will give Algeria some leverage to pit European countries against each other based on their political and economic concessions and positions on the issue of Western Sahara, which has recently revived,” Marco Giuli, a research fellow at the Brussels School of Governance, told DW.

The renewal and strengthening of old ties, which in the case of Italy predate Algeria’s independence, could create tensions. Transmed, the world’s first deepwater gas pipeline, linked Algeria and Italy in 1983. Apart from the Berlusconi era, the two countries have enjoyed strong relations.

Still, Algeria’s recent decision to sign a deal with Italy has ruffled some feathers in Spain. Experts see the revision of Spanish policies in Western Sahara as a reason for this decision. In November, Algeria closed one of two gas pipelines bringing gas to the Iberian Peninsula due to tensions with Morocco. Others sensed a lot of opportunism from the Italian side.

Despite the different interpretations, one aspect is undeniable: exporting countries can choose their partners and offer additional gas as part of a wider collaboration, which will also include political and technological aspects.

“Spanish companies cannot offer the same level of technical know-how in exploration, building LNG plants and laying subsea pipelines as their Italian counterparts,” researcher Francis Ghiles told DW. Principal at the Barcelona International Business Center.

Ghiles, a former FinancialTimes The correspondent for North Africa explains that France, Japan and the United States have also played a role in the country’s oil and gas industry and will continue to do so. Germany is another potential key player.

“Germany has a reputation for being reliable in Algeria, dating back to the tractor and engine factories it built in the 1970s,” Ghiles noted. “As the energy tectonic plates shift, it could be a good time for Germany and Algeria to relaunch a conversation about gas and renewables,” he suggested.

Ongoing changes

But Algeria is not the only country targeted. The Eastern Mediterranean region is seeing significant change – with the US-sponsored reintegration of Turkey into the regional energy system in recent months and momentous discoveries off the coasts of Israel, Cyprus and Egypt over the past decade.

“Egypt has re-emerged as a natural gas exporter,” said IEA’s Abillama, explaining that Eastern Mediterranean exporters will have to rely on LNG terminals, unlike Western Mediterranean exporters who can fall back on existing gas pipelines.

The fragmentation of the Mediterranean remains a problem in the regional energy sector. Nevertheless, a lesson can be learned: cultural proximity, long-standing ties and mutual understanding are valuable diplomatic assets, which will help maximize the contribution of the Mediterranean to EU energy security.

African oil reserves

Algeria’s potential

Algeria is one of the top 11 countries in terms of proven gas reserves. According to data from the US Energy Information Administration, Algeria sits on the third largest recoverable shale gas resource after China and Argentina.

US companies see opportunities in shale gas cooperation in the country, while Germany is considering renewable projects.

As part of the German-Algerian energy partnership, the German development agency GIZ has been commissioned to study the country’s green hydrogen potential.

“In 2021, GIZ presented a study on the potential of Power to X technologies in Algeria by 2050,” a spokesperson told DW. “According to the study, the country can generate a lot of electricity from solar energy which is needed for the production of green hydrogen.” (Power-to-X is an umbrella term for a number of energy conversion and storage pathways that utilize excess electrical energy from renewables, typically solar and wind.)

GIZ explains that Algeria is also in a good position to exploit its oil and gas expertise and its gas pipelines, which could transport hydrogen after some technical adjustments.

EU investments in green projects in the region could also increase national electrification, which would imply less gas consumption in the region and higher profits on exports.

The International Energy Agency notes that renewable energy development requires significant private sector investment, which would put pressure on Algeria to ensure an attractive investment environment. Some regulatory changes have been made, including reforms to encourage foreign ownership of companies based in Algeria.

“A tender for 1 GW of solar capacity was launched at the end of 2021 and bids must be submitted by June this year,” Abillama said. “The results of this tender will allow us to properly assess the success of the reform efforts.”

Edited by: Hardy Graupner