Could Algeria Solve the Europe Gas Crisis?

Most of the European countries such as the UK, France, Germany, Spain, and Italy are heavily relied on oil and gas that mostly imported from the USA and Russia. As the Russian invasion of Ukraine has spread chaos throughout the world, and due to the condemnatory stance of European nations towards unjustifiable invasion, the smooth trade between European Union countries and Russia is in utter distress.

Not did only western countries put embargos on Russia, but Russia also threatened the western countries by slowing down the gas supplies to Europe. The winters are coming, and the demand for gas is soon going to escalate. However, the tensions owing to the war will not be at ease perhaps. In this scenario, the only option left for European countries is to diversify their import patterns vis-à-vis gas.

Why Europe was dependent on Russian gas?

Due to the geographical proximity of Russia to other European countries, it had become one of the major suppliers of hydrocarbons to Europe. On the other hand, the US was also at the top for supplying the gas in form of Liquefied Natural gas (LNG), but the Atlantic Ocean remained a hurdle to rely fully on America’s gas. Resultantly, a flagship project was initiated between Russia and European nations named the Nord Stream gas pipeline, which was catering to the demand for gas in Europe. Therefore, Russia accounted for more than 40 percent of gas supplies to western Europe.

However, the Russian attack on Ukraine compelled the west to reconfigure their hydrocarbon import. Consequently, some other options were sought in which once Qatar was persuaded to divert its LNG export from Asia to Europe. But that did not prove a viable option for long-term sustainability. First, Qatar has not had enough capacity to boost its gas production; moreover, the deflecting of LNG supplies to Europe would cause a huge shortage of gas in Asian countries.

Amid this quandary, it seems as if Europe has somehow reengineered its options. Recently, French President Emmanuel Macron visited Algeria (an enriched soil of hydrocarbon reserves). Algeria is a former colony of France and holds some haunting memories of imperialist France. However, its current statement of Macron regarding the past depicts that France wants to melt down the traumatic ice and boost bilateral economic relations with Algeria.

Why Algeria is important for Europe?

Algeria is an African country and holds massive oil and gas reserves under its soil. Moreover, it is also a member of the Organization of Petroleum Exporting Countries (OPEC). Algeria produces around one million barrels per day (BPD) oil. Not do only it stand giant in the oil exporting countries list, but also have massive gas reserves.

Algeria is the 10th largest gas producer exploiting 130 billion cubic meters of gas per year. Moreover, it is also a top five LNG exporter to Europe. The countries in Europe manage 11 percent of their gas demand by importing from Algeria. Spain and Italy which are very near to Algeria in terms of geographical settings have already announced joint projects with Algeria for boosting gas supplies to them. As mentioned above, France has also increased its diplomatic connection to Algeria, and possibly the bilateral gas projects would be materialized soon.

Would Algeria be the Ultimate solution to the European gas problem?

Well, as far as the short-term solutions are concerned, Algeria could not provide enough gas to Europe as its demands are too high and there was no big pipeline project between Europe and Algeria. However, the case in point is not that the countries are seeking immediate relief, but actually, the long-term solution is being fostered also.

On the other hand, Algeria due to its massive domestic consumption (industries and public) cannot supply the gas in profusion. For example, 60 percent of gas is utilized by its own domestic sector while 40 percent is exported to other countries. Moreover, Algeria is not fully an open-market country because its oil sector is largely owned by the Government. Almost 80 percent of oil and gas exploration and distribution is held by state-owned enterprises. While 20 percent includes private sectors: domestic and international.

One more problem is that Algeria although remained a neutral country diplomatically esp. in Russia and the western conflict, but it is the biggest importer of Russian arms and weapons. Therefore, it could be possible that Russia would try to persuade Algeria with regard to its romance with Europeans. Nonetheless, diplomatic development is being practiced between Europe and Algeria, and probably, the outcome would be in favor of the west, and relief from the gas shortage problem would come.