The Algerian president confirms the closure of the gas pipeline and the end of the contract

The president of Algeria, Abdelmedjid Tebboune, confirmed this Sunday the closure of the Maghreb Europe Gas Pipeline (GME), which supplied Spain and Portugal through Morocco, and the non-renewal of the contract signed with the Moroccan Kingdom, which expired this Sunday.

Although the president had already announced that he would abandon the supply through this route after 25 years of commercial relationship with the Iberian Peninsula, he had not revealed until now what would be the destination of the contract signed with Morocco, a country with which Algeria broke diplomatic relations on last august.

In a brief statement published by the Algerian Presidency through its official page on the Facebook social network, it explained that the decision is due to the “aggressive practices” of the neighboring country, which Algeria considers one of the sources of instability in the north. Africa and the Sahel, the border that most worries Europe.

“The President of the Republic received today a report on the contract that links the national company Sonatrach with the Moroccan Office of Electricity and Water, dated July 31, 2011 and which expires today October 31, 2021, at midnight”, explained the note.

“In light of the aggressive practices of the Kingdom of Morocco towards Algeria, which affect national unity, and after consulting with the Prime Minister, and with the Ministers of Finance, Foreign Affairs and Energy and Mines, the President of the Republic ordered the national company Sonatrach to cease the commercial relationship with the Moroccan company and not to renew the contract, “he added, without further details.

Guarantees to Spain

In this context of instability, Algeria guaranteed Spain this week that it will comply with “the signed contracts” and will continue to supply gas in two ways: increasing the capacity of the other gas pipeline that connects the two countries through the Mediterranean (Medgaz) and compensating the rest with LNG tankers, built to transport liquefied gas (LNG).

One option, that of LNG, which could lead to an increase in the price, since shipping rates on ships are higher, something that could have an impact on Spanish households that are already facing the rise in electricity prices, the gas and fuels.

Not so much during this winter, in which the supply is guaranteed, if not in the future, since Algeria has insisted that it will honor the “agreements already signed” without referring to following.

Future uncertainty

“Currently Algeria has shown that it has all the possibilities to ensure its levels of shipments to Spain, either via the submarine pipeline or by transporting LNG. That means that the situation regarding the economic plan, the contractual and commercial plan is controlled; the price is another debate but I will say that in terms of volumes and means of transport, these options are sufficient for the contractual volumes currently committed, “Algerian analyst Mahfud Kaubi explained to Efe.

More optimistic is Buzian Mahmah, an energy expert and permanent researcher at the Center for the Development of Renewable Energies (CDER), who assures that the expansion works carried out in Medgaz have the final objective of approaching supply before the closing of the GME, since that “will allow it to easily reach twice the initial capacity of the gas pipeline, that is, 16,000 million cubic feet.”

“Algeria also has the capacity to transport 34,000 cubic feet of LNG. It is a very extensive infrastructure that of course can satisfy the demand of the Spanish customer even for additional quantities of LNG without increasing the shipping price, since the distance between the two countries does not exceed three hours, something different from what happens with clients in the Asian market, “he explained.

Algeria, which is Spain’s main gas supplier, supplying 47% of its needs during the first half of 2021, “cannot risk its place as an important partner in any case,” he concluded.