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FT: Algeria struggles to meet rising gas demand amid Ukraine war

An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy on April 14, 2022 [FETHI BELAID/AFP via Getty Images]
An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy on April 14, 2022 [FETHI BELAID/AFP via Getty Images]

Faced with renewed interest in its natural gas following Russia's invasion of Ukraine, Algeria may not be able to meet the growing demand, according to a report today by the FT.

Despite being Europe's third-biggest natural gas supplier with about eight per cent market share, the North African country does not have enough extra gas to make readily available.

A longstanding shortage in foreign investment in Algeria's hydrocarbons sector and bureaucracy have been cited as reasons why there is limited spare capacity. Political tensions with neighbouring Morocco over the issue of Western Sahara have also hampered Algeria's export potential, resulting in last year's closure of the Maghreb-Europe gas pipeline to Spain.

"Algeria missed an opportunity to realise its full potential," Anthony Skinner, a political risk consultant was quoted as saying.

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"This is due to years of under-investment by international oil companies because of a history of difficult fiscal terms and the overall operating environment marked by bureaucracy and slow decision-making."

Meanwhile, a senior research fellow at the Oxford Institute for Energy Studies, Mostefa Ouki, said that "in the short term, Algeria could only provide Europe with a few additional billion cubic metres of gas".

As Europe looks to reduce its dependency on Russian gas, Algeria has recently received visits from US Secretary of State Antony Blinken and Italy's Prime Minister Mario Draghi. Last week, Draghi signed a gas import agreement deal amid talks between Algeria's state-owned oil and gas company Sonatrach and Italian multinational Eni to increase output in Italy.

Following last year's hike in oil and gas prices, Algeria – which is going through an economic downturn – was able to benefit from increased revenue, amounting to $35 billion, up from $20 billion in 2020. "The extra cash has allowed Algeria to shelve plans for unpopular tax increases and subsidy reforms and to introduce a new unemployment benefit of $90 per month," the report stated, this would help alleviate growing socioeconomic grievances, particularly among the country's youth.

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Categories
AfricaAlgeriaEurope & RussiaMoroccoNewsRussiaSpainUkraine
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