Girth of Europe

Gazprom agrees on cooperation with Algeria

The high-profile arms-debt deal between Russia and Algeria almost overshadowed another important topic of bilateral cooperation. The Gazprom delegation, led by Chairman of the Board Alexey Miller, took the penultimate step towards a memorandum of cooperation with the Algerian state oil and gas company Sonatrach. This document is planned to be signed during a return visit to Moscow, which is tentatively scheduled for April. And although Gazprom signs dozens of such memorandums with companies from all parts of the world, the development of interaction with Sonatrach has a special background. Algeria is the second supplier of imported gas to the European Union and one of the main hopes of Europeans for reducing gas dependence on Russian raw materials.

Alexey Miller discussed the contents of the memorandum at meetings with Algerian Minister of Energy and Mines Shakib Khelil and Sonatrach President Mohammed Meziane. According to the Gazprom press service, the parties talked about the possibility of participating in tenders for the exploration and subsequent development of gas and oil fields, implementing projects for the modernization and development of Algeria’s gas transportation infrastructure, as well as the prospects for a mutually beneficial partnership in the production and supply of piped and liquefied gas to world market.

Algeria has the second proven natural gas reserves in Africa (7th place in the world) - 4.55 trillion cubic meters. In 2004, the country produced 82 billion cubic meters of gas, of which almost 61 billion were exported. The largest market for Algerian gas is Europe - about 57 billion cubic meters, of which 35.1 billion cubic meters are supplied by pipe. Italy receives 23.6 billion cubic meters of pipeline gas, Spain - 7.5 billion, Portugal - 2.25 billion. The main buyers of LNG are France and Spain - 6.7 billion cubic meters each in 2004. Another 3.2 billion cubic meters were bought by Türkiye, 2.9 billion by Belgium and 2.1 billion by Italy. Sonatrach management declared its intention to increase gas exports to EU markets to 84 billion cubic meters by 2010.

Sonatrach is the first (most experienced) producer and exporter of liquefied natural gas in the world, the oldest player in a business in which Gazprom is only taking tentative steps. In addition, LNG from Algeria currently ranks second in the US import gas market. In 2004, 3.4 billion cubic meters of liquefied natural gas were shipped across the Atlantic to consumers in the United States. And North America is named one of the priorities in the marketing strategy of the Russian gas monopolist. “Taking into account the experience that Algeria has, which goes back decades, cooperation in this area is interesting for us, and we do not exclude that the Algerian side will be able to take part in the construction of gas liquefaction facilities in Russia,” he said during visit of Mr. Miller.

The simplest, but at the same time strategically important for Gazprom, could be the implementation of exchange operations, when Russian pipeline gas in Europe is exchanged for Algerian LNG intended for the United States. Gazprom has already completed one such deal, although at the end of last year 80 million cubic meters of gas of Algerian origin were exchanged not from Sonatrach, but from Gaz de France. Close cooperation in the exchange area will allow Gazprom not only to obtain volumes to enter the European market, but also to work more closely with a competitor in traditional European markets.

The prospects associated with the exchange of gas production assets in Russia and Algeria look more distant. Sources at Gazprom say that these topics are being discussed in general, and the Russian company would be interested in gaining access to gas markets in southwestern Europe (Spain and Portugal), to which it is now very problematic to deliver Gazprom’s raw materials.

Alexey GRIVACH, Nikolay GORELOV