Skip to content Skip to Search
Skip navigation

Gas-rich Algeria struggles to assuage Europe’s energy crisis

Reuters/Ramzi Boudina
Algerian President Abdelmadjid Tebboune needs to tackle investment environment, fiscal terms and bureaucracy in order to capitalise on energy export opportunities
  • Algeria is third largest gas supplier to Europe after Russia and Norway
  • State-owned oil company Sonatrach recently made new oil discovery
  • Expert warns domestic issues could hamper Algeria’s ability to capitalise

The Algerian energy sector looked well placed to capitalise on the war in Ukraine and the European energy crisis that it unleashed — but it has failed to live up to that expectation.

In fact, rather than increasing gas exports to fill the gaping hole left by Russian energy, Algerian exports have plunged in 2022.

“Algeria had record gas output and an 11-year high in exports last year. This year exports are down 20 percent year-on-year,” Robin Mills, CEO of Dubai-based Qamar Energy, told AGBI.

Algeria is Europe’s third largest supplier of gas. Behind Russia and Norway, it usually accounts for roughly 10 percent of the continent’s imports. 

Since Russia invaded Ukraine in February, the North African country has also been the subject of repeated diplomatic overtures from European states, and the Union itself.

In July, Italian Prime Minister Maria Draghi secured a deal with Algeria’s President Abdelmadjid Tebboune to supply $4 billion worth of gas to Italy, which historically has relied heavily on Russia as by far its largest supplier of gas imports.

To Mirko Giordani, founder of Rome-based Prelia Consulting, Italy’s overtures are part of a competition between Italy and Algeria’s former coloniser, France, for access to the country’s sizeable energy resources.

“Historically, Italy has geopolitical clout over Algeria and has always ‘fought’ with France,” he said. “Italy has moved quickly in its diplomatic contacts with the country, but it will be a long shot.”

Giordani warned that Algeria is unlikely to be able to quickly make up for the drop in Russian supply.

“You can’t just pump more gas from one country to replace another. Europe imports gas from unstable areas of the world; just think about Azerbaijan and the never-ending war with Armenia over Nagorno-Karabakh,” Giordani said.

“Algeria is somewhat stable, but gambling on a single country is risky, as we have acknowledged with Russia.”

Oilfield, Construction Crane
Algerian state oil company Sonatrach has discovered oil and gas reserves in the Berkine North Basin in the Algerian desert

According to Mills, the increase in exports to Italy may have been rerouted from Spain, rather than the result of an overall increase in output.

“It has helped by diverting gas from Spain to Italy — which takes Russian gas, while Spain doesn’t — but not in increasing aggregate exports,” said Mills, adding, in agreement with Giordani, that Algeria may not be Europe’s answer to a growing energy crisis and looming bitter winter.

He said: “Algeria anyway could only be one small part of the solution to lost Russian gas  — perhaps another 10 billion cubic metres annually versus 160 billion cubic metres lost from Russia.”

This has not stopped the EU as a whole from trying, however. In early September, President of the European Council Charles Michel concluded a visit to Algeria.

He lauded EU-Algeria relations, and said: “We have considered that in the international circumstances that we know, energy cooperation is obviously essential and we see in Algeria a reliable, loyal partner committed on the ground of this cooperation in the field of energy.”

Algeria has also made a number of sizeable findings of energy deposits in recent years. In late August, state-owned oil company Sonatrach made a new oil discovery in Adrar province, initially estimated at 151 million barrels of oil.

Mills said: “The new discoveries in Adrar are encouraging for the oil sector but not huge. The developments in the Berkine Basin are more significant, with almost 200 thousand barrels per day of potential, and for gas, the new finds around Hassi R’mel.”

In Hassi R’mel, an estimated 12 trillion cubic feet of gas reserves were discovered — a finding credited by Sonatrach as “one of the largest reserve evaluations in the last 20 years”.

Boat, Vehicle, Transportation
Algerian Sonatrach tanker delivers energy, but not enough to compensate for Russian sanctions

A number of Algerian initiatives are ongoing, regionally and internationally, that would allow Algeria to make better use of its hydrocarbon reserves.

Sonatrach agreed with French oil company TotalEnergies, US-based firm Occidental and Italy’s Eni to extend a production-sharing contract for a period of 25 years earlier this year.

And in its Africa Energy Outlook 2022 report, the International Energy Agency (IEA) noted that “the construction of the Trans-Saharan Gas Pipeline, which connects Nigeria to Niger and Algeria, recently resumed.” 

The Trans-Saharan Pipeline would connect Nigeria, Niger and Algeria with the Trans-Mediterranean Pipeline, which stems from Algeria, through Tunisia, and into Italy — but it is not expected to be completed for many years.

This pipeline, if completed, could remove the most significant obstacle that prevents Algeria, and Africa more broadly, from profiting from Europe’s pivot away from Russian gas: infrastructure.

The IEA report notes: “Limited LNG and pipeline infrastructure is hindering efforts to exploit higher global demand for non-Russian gas.”

But Mills warned that domestic issues could hamper Algeria’s ability to see projects through and capitalise on geopolitical developments: “The investment environment, fiscal terms and bureaucracy have traditionally been seen to be very problematic.”

Latest articles

Switzerland-based Barry Callebaut is the world's largest manufacturer of industrial chocolate, with about a 40 percent market share in volume terms

World’s largest chocolatier plans factory in Egypt

The world’s largest producer of chocolate has said it plans to build a $30 million factory in Egypt. Switzerland’s Barry Callebaut is the world’s largest manufacturer of chocolate, with about a 40 percent market share in volume terms, and is the largest processor of cocoa beans with about 20 percent market share. Vamsi Mohan Thati, […]

Spinneys says the deal with Food Tech Valley is a 'significant step in our ambitious growth plans'

Spinneys to build processing unit in Food Tech Valley

The UAE supermarket chain Spinneys has signed a deal to build a 500,000 square foot food processing unit in Dubai’s Food Tech Valley as part of the plan to increase its locally sourced produce. The deal, which will last for 27 years, is intended to foster innovation in food processing as part of the wider […]

The Oman desert at night. Its location near the equator makes it suitable for its planned spaceport, alongside its satellite

Oman to acquire its first national satellite

Oman is in the process of acquiring its first national satellite, the head of the country’s space programme has revealed. As part of the sultanate’s national development plan, Vision 2040, it aims to have the information and communication technology sector, which includes space technology, contribute 10 percent to the overall GDP by 2040.  “Oman is […]