In 1981, while trying unsuccessfully to block a Soviet natural gas pipeline during a chill in the Cold War, then-US President Ronald Reagan warned Europe of its growing reliance on Russian energy, urging the continent to seek alternative suppliers, including from North Africa.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
41 years later, a similar geopolitical play is unfolding as tensions between Russia and the West ratchet up, with President Joe Biden saying his administration is working with the EU to identify other sources of vital natural gas, including -- once again -- from North Africa.
The European pursuit to secure energy supplies puts Algeria firmly in the spotlight, as the EU's third largest gas provider behind Russia and Norway.
The country, which has pipelines across the Mediterranean Sea to Spain and Italy, as well as an LNG terminal, exported about 34 billion cu m of gas to the EU in 2021, or 8% of the union's total imports, according to Eurostat.
Any increase in Algerian volumes would not come anywhere close to offsetting a complete shutdown of Russian imports, which totaled about 130 billion cu m in 2021, but it would provide some measure of relief to a continent already facing tight supplies and soaring energy prices this winter.
Having boosted output by bringing several projects online over the last few years, Algeria stands ready to tap its spare production and pipeline capacity to increase exports to the continent, if called upon, a government official told S&P Global Platts.
But growing domestic gas consumption and the country's political instability could put a damper on what Algeria may be able to provide, experts said.
"The country has major problems in relation to increasing supply in the context of rising domestic demand," said Jonathan Stern, distinguished research fellow at the Oxford Institute of Energy Studies, who closely follows natural gas markets.
Western governments, led by the Biden administration, have threatened to impose harsh sanctions on Russia, including its energy sector, if it invades Ukraine, potentially choking off the source of some 40% of European gas imports. The new Nord Stream 2 pipeline, which would send Russian gas to Germany, is among the projects in the sanctions' crosshairs.
In a joint statement Jan. 28, US President Joe Biden and EU counterpart Ursula van der Leyen said they were "collaborating with governments and market operators on supply of additional volumes of natural gas to Europe from diverse sources across the globe."
Platts Analytics estimates Algeria could provide an additional 7 billion cu m of gas to Europe in 2022, largely through higher shipments via the Transmed pipeline to Italy.
Other incremental exports could go through a recent expansion of the Medgaz pipeline to Spain and possibly some more LNG cargoes, said the government official, who spoke on condition of anonymity to discuss commercially and politically sensitive matters.
Reopening the GME pipeline through Morocco to Spain would restore another export valve, but the political dispute that shuttered its operations in November remains unresolved, and the government official declined to say whether Algeria was facing US or EU political pressure to resume gas flows.
Other North African gas producers are unlikely to be able to help ease a European gas crunch.
Libya, already struggling to supply its term customers and wracked by political instability and security liabilities, has no additional capacity for gas exports, according to market sources.
Egypt has maxed out its LNG export volumes.
Outside the region, Qatar has likewise largely contracted all of its volumes already, though sources suggest some cargoes could be diverted to Europe if Asian customers are amenable, which would require some deft negotiations.
Likewise with LNG customers of the US, which is already shipping record cargoes to Europe.
Norway could provide the biggest boost for Europe, with Platts Analytics estimating some 13 billion cu m of production upside.
That leaves Algeria as the second largest source of incremental volumes for the EU.
Algerian pipeline flows to Italy averaged 61 million cu m/d during the fourth quarter of 2021, leaving about 41 million cu m/d of space available in the Transmed pipeline for increased flows, according to Platts Analytics.
Capacity on the Medgaz pipeline to Spain is set to rise from 26 million cu m/d to 30 million cu m/d, following a recently completed expansion.
Filling both pipelines to maximum capacity would more than offset the closure of the GME pipeline, but that could be a tall order.
Algerian gas consumption rose more than 6% annually from 2010 to 2019, before the pandemic caused demand to contract 7% to 44 billion cu m in 2020, according to consultancy Enerdata, and officials have warned that exports could be crimped if domestic demand is not curbed.
Despite higher gas production from the start-up of several projects, including on its main gas field, Hassi R'mel, Algeria's economy has yet to prove stable. The volatile country is still wracked by deadly citizen protests, worker strikes and corruption scandals involving state energy firm Sonatrach, which could endanger its oil and gas production.
"The country is going through an enormous political [and] security crisis at the moment, and in Algeria, politics and the regime's survival always trump the economy," said Charles Gurdon, managing director of consultancy Menas Associates.