Wednesday, August 10

Algeria cuts the largest of its gas pipelines with Spain due to the crisis with Morocco | Economy

The president of Algeria, Abdelmayid Tebún, confirmed this Sunday night, through a statement, the termination of the contract with Morocco that allowed the transport of gas to Spain through the Maghreb-Europe gas pipeline (GME). This pipeline, inaugurated 25 years ago, connects Algeria with the Iberian Peninsula and is 1,400 kilometers long, of which 540 kilometers cross Moroccan territory. Last year 6,000 million cubic meters of gas arrived in Spain through it.

To supply this amount, Algeria plans to increase the gas capacity of the Medgaz gas pipeline, inaugurated ten years ago, which has already been supplying Spain with 8,000 million cubic meters and directly links Algeria with Almería. The Algerian authorities have undertaken works to increase its capacity to 10 billion cubic meters. But, assuming that the works conclude before the arrival of winter, there would still be 4,000 million cubic meters of gas to reach Spain. 48 LNG tankers are needed to transport that amount in the form of liquefied natural gas (LNG). The price of these freights is subject to the fluctuations of a market that has become very competitive since last year due to the high demand from Asia.

The Algerian presidency issued its statement a few hours before midnight from Sunday to Monday, when the contract that allows transportation through the gas pipeline expired. The letter states: “In view of the hostile practices of the Kingdom of Morocco, which threaten the national unity of Algeria, and after consulting the Prime Minister, the Minister of Finance, the Minister of Energy and Mines, the President of the Republic [Abdelmayid Tebún] has instructed the national company Sonatrach to cease all commercial relations with the Moroccan company and not renew the contract ”.

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The Algerian Government has already broken diplomatic relations with Morocco. Both countries have had a difficult relationship since they achieved their independence. The underlying conflict has always been Western Sahara. Algeria is the main ally of the Polisario Front. This Saharawi organization decreed the breaking of the ceasefire with Morocco in November 2020. The ceasefire had been signed at the UN in 1991. But the Polisario Front maintains that the UN is being an accomplice of the “fait accompli policy” of Rabat regarding Western Sahara. Since last year, the situation between the two countries has only worsened. Algeria also announced in August that it would terminate the pipeline contract and in September it closed its airspace for any civil or military flights from Morocco.

This Sunday another act has been consummated in the diplomatic escalation between the two great powers of the Maghreb. The great victim of this measure is Morocco, a country that charged between 50 and 200 million euros a year as “rights of way”, a figure that depends on the amount transported. Furthermore, the contract with Algeria and Spain allowed Morocco to power two combined cycle power plants: Tahaddart (in the Tangier region) and Ain Beni Mathar (in Oujda, in the east of the country). Both cover around 10% of Moroccan electricity production and are managed by the Spanish companies Endesa (it has 20% of Tahaddart) and Abengoa, respectively.

But, in addition to Morocco, the other victim is Spain. Algeria covered 51% of Spain’s gas needs in 2018; the figure dropped to 33% in 2019 and 29% in 2020. But so far in 2021, gas imports from Algeria have risen to 47%, according to the Spanish company Enagás. That 47% was a total of 15,000 million cubic meters of gas. Of these, 6,000 million came through the gas pipeline that crosses Morocco; 8,000 million were transported through the Medgaz pipeline, which goes directly to Almería. And the remaining 1,000 million cubic meters were transported in ships, as liquefied natural gas.

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The Third Vice President and Minister for the Ecological Transition, Teresa Ribera, traveled to Algiers on Wednesday to meet with various Algerian authorities. But Algeria did not change its position. The Algerian Government has guaranteed the Spanish supply of the same amount of gas that reached Spain through the GME. But only when the winter passes will it be possible to know if Algeria is in a position to fulfill with solvency what it has promised to do.

A Spanish source who has closely followed the tripartite negotiations on the gas pipeline says: “We would make a mistake if we think that the closure of the gas pipeline is something that Algeria perpetrates only against Morocco, which is something that only concerns them. Because it is also issuing a message for Spain. This measure makes us more vulnerable compared to Algeria ”.

A “negligible” effect in Morocco

The authorities of Rabat issued at midnight a statement released through the official agency MAP where they assure that the decision of the Algerian Government will have no more than an “insignificant” effect on the Moroccan electricity system in the short term. “The necessary provisions have been made to ensure the country’s electricity supply,” says the letter.

The gas that Morocco received from Algeria supplied at least 10% of Moroccan electricity consumption, although some sources put that figure at 17%. A possible option to supply this provision would be to hire LNG tankers that bring liquefied natural gas from other countries. And the other, to reverse the flow of the Maghreb-Europe gas pipeline (GME), so that gas arrives from Spain. The Spanish Government has not ruled on this last measure, which could perhaps create an uncomfortable situation vis-à-vis Algeria. And the Moroccan Government has not revealed the alternatives it is considering, although it maintains that it is studying medium and long-term options.

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For now, the only thing clear is that Algeria has confirmed the closing of a contract that for a quarter of a century guaranteed the supply of gas to both Morocco and Spain. From there, all are unknowns that will only be cleared with time.

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