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Algeria's Sonatrach eyes more gas exports to Spain through Medgaz expansion

London — Algeria's state-owned Sonatrach wants to boost its gas exports to Spain through the expansion of the 8 Bcm/year Medgaz pipeline while also maintaining supplies through the GME link via Morocco, its CEO Abdelmoumen Ould Kaddour said late Wednesday.

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Algeria sends gas via the two pipelines to Spain -- with volumes totaling 14.5 Bcm in 2017 -- but Sonatrach wants to be able to increase exports as it brings online a number of new major gas production projects in the coming years.

Sonatrach began construction work Wednesday on a new 200 km pipeline that can divert gas away from the GME pipeline into Medgaz, but Ould Kaddour said this did not necessarily mean transit via Morocco would cease -- rather that it would give the company more flexibility and optionality in its exports to Spain.

"One of our objectives is to continue to produce more gas and to transport more gas to Europe and in particular to Spain," he said.

The new pipeline will run from El-Aricha on the border between Algeria and Morocco to Beni-Saf, the starting point of the Medgaz pipeline, creating a new "loop" between the export lines. In order to be able to move gas in that direction, however, the capacity of Medgaz will also need to be expanded.

"We are currently transporting 8 Bcm/year through Medgaz and we are putting in place a turbo-compressor to increase it to 10 Bcm/year," he said.

According to a Sonatrach engineering source, with the addition of more turbo-compressors, the Medgaz capacity could then be further expanded to 16 Bcm/year by 2020.

Ould Kaddour was speaking after the launch ceremony of the new El Aricha-Beni Saf pipeline, also attended by energy minister Mustapha Guitouni. The new link is expected to be completed by September 2020.

MOROCCO TRANSIT

On the question of continued gas transit via Morocco through the GME pipeline after the current contract expires in 2021, Ould Kaddour was hopeful of reaching a new deal.

"By 2021, we will see what will happen. There are Moroccans who are on the project and we are discussing it with them. I think there is going to be an extension of this contract. I do not think there are any difficulties so we can continue to work with them," he said.

"For us it is a question of increasing our export capacities. I have always said that Algeria is a 'gas country' rather an 'oil country' and it is in this sense that we want to increase our export capacity."The Moroccan authorities have said it is unclear whether the contract to transit Algerian gas via Morocco to Spain will be renewed, prompting Algiers to come up with a back-up plan.

Morocco has made some significant gas finds in the east of the country in recent years, including finds by the UK-based exploration company Sound Energy, and is also looking to install an LNG import terminal, meaning it will have less need for Algerian gas, which it takes in lieu of payment for transit.

It could also use the GME pipeline to export its own gas if the discoveries are big enough to allow for exports in the future.

--Struart Elliott, stuart.elliott@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com