Breakdown of Algerian-Moroccan ties could damage the flow of gas to Spain

Although the flow has not been interrupted, the possibility of a significant change in its conditions and even closure is now looming larger
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Algeria's recent decision to sever diplomatic relations with Morocco has increased uncertainty and concern over the strategic future of the Maghreb-Europe gas pipeline (GME), which since its commissioning in October 1996 has sent millions of cubic metres of gas from the Algerian desert to Spain via Moroccan territory and is vital for all three countries and Europe.

Although the flow has not been interrupted, the possibility of a significant change in its conditions or even closure is now looming larger, as the signed contract expires on 31 October and negotiations to extend it do not seem to be progressing.

A few weeks ago, in declarations to the local daily "Le Jour", the Director General of the Moroccan Office of Hydrocarbons and Mines, Amina Benkhadra, assured that her country was in favour of renewing the contract for the so-called "gas highway", a carbon steel pipeline more than 1,400 kilometres long through which nearly 9 billion cubic metres of gas pass each year.

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his enthusiasm does not seem to be shared by Algeria, according to statements by local analysts quoted by state media, such as the local news agency APS, which on 21 August described Morocco's interest as "pure lies, shared by the Alawi sovereign".

"While this is not his first lie, by dabbling in the economic field in general and gas in particular, which seem unknown to him, the Makhzen adds two lies. Algeria, with full sovereignty and autonomy of decision, has not yet decided to renew it," the expert was quoted as saying by the official agency.

Damage to Morocco

Considered key to Mediterranean energy policy, the exploitation of the GME, promoted in the 1980s by Spain's Enagás and Algeria's national hydrocarbon company Sonatrach, requires extensive and constant collaboration between Algiers, Rabat and Madrid on the four sections into which it is divided.

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The passage through its territory provides Morocco with some 800 million cubic metres of natural gas to cover part of its energy needs, plus an amount in commissions of around 7 %, which represents around 200 million euros a year.

Aware of the situation, and although the pipeline is not as vital to its energy strategy as it appears to be to Algeria's and Europe's, "Morocco has taken steps in recent years to shore up its own energy security needs". 

"It has backed plans for local renewables, for example, and is also working on a possible LNG import scheme, via a floating storage and regasification unit (FSRU)," explains energy analyst Ed Reed, an expert on the area.

Algeria bets on Medgaz alternative

Apart from the GME, managed by the company Europe-Magreb Pipeline (EMPL) - in which the Spanish group Naturgy, the Portuguese energy company Transgas and the Moroccan company SNPP participate - Algeria supplies gas to Spain and Europe through another pipeline that starts in the same desert and crosses the Mediterranean and ends in Almeria.

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Known as Medgaz, this pipeline starts in the town of Beni Saf, runs 700 kilometres to Perdigal beach on the Spanish coast, and currently has an annual transport capacity of some 8 billion cubic metres of gas.

Managed by Sonatrach (51%) and Naturgy together with the investment fund BlackRock, these companies are working together to increase its capacity by 2 billion cubic metres per year by the end of 2021, an amount that would in no way compensate for a possible closure of the Maghreb Europe pipeline. 

Algeria would thus lose the possibility of sending around 6 billion cubic metres of gas per year to Europe, which would seriously damage its ailing economy, totally dependent on fossil fuels: oil and gas account for 95% of its annual exports.

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Negotiations continue

"Behind the bellicose diplomatic posturing of Rabat and Algiers, negotiations continue. Morocco cannot do without the seven percent of gas it takes in. Algiers cannot do without its neighbour's services, at least for the time being. But, of course, the Algerian decision will have an impact and will condition the final wording of the agreement", diplomatic sources in the region told Efe.

Morocco is inclined to open the pipeline to other partners in order to benefit from the push from European companies, while Algeria finds few alternatives, since its commitment to LNG transporters through Hyproc, Sonatrach's maritime transport subsidiary, is not enough to compensate for the economic hole that the closure of GME would mean.