European politicians scoured their neighborhood for new gas supplies to replace those threatened by Russia. They got some promises on their tour which took them from Azerbaijan via the Gulf to Egypt and Israel. They also visited Algeria, but Africa’s biggest country and biggest gas producer remains a tricky partner.

Algeria exports gas via pipelines to Spain and Italy and by tankers from two liquefied natural gas (LNG) plants. It has long played a critical role in Europe’s gas balance, as the third largest supplier (after Russia and Norway), supplying 10% of the continent’s imports.

Outgoing Italian Prime Minister Mario Draghi traveled to Algiers on July 18 and returned with President Abdelmadjid Tebboune’s promise to provide $4 billion in gas. State-owned Sonatrach says it has delivered more than double the amount planned for Italy so far this year.

The TransMed pipeline that connects the countries via Tunisia is under maintenance; after its scheduled restart this week, streams will need to ramp up significantly to hit the target.

Algeria hit record gas production last year, jumping to over 100 billion cubic meters (bcm), a surprise after a period of stagnation since 1999 when production hovered between 80 and 90 bcm per year. The country consumes about half of its produced gas itself and rising domestic use has eaten away at exports, but increased production has seen exports at levels not seen since 2008.

Maybe it was a false dawn. Algeria’s ability to help Europe through its gas crisis, profiting generously from the process, is hampered by two factors: capacity and politics.

After the 2021 record, gas exports fell sharply in the first half of 2022. While flows to Italy increased slightly, those via a gas pipeline to Spain and Morocco and LNG transported by ship all increased. decrease. The culprit is a bit confusing. Morocco’s supply has been completely cut off following the expiry of the Gaz Maghreb Europe (GME) gas pipeline contract and a major political clash between Algiers and Rabat over the disputed territory of Western Sahara and the normalization of the Morocco with Israel.

The GME is heading towards Spain and, although its loss has been partly replaced by higher flows via another gas pipeline, the Medgaz line which runs directly under the Mediterranean from Algeria to Spain, it does not is not a full replacement. Spain has started supplying Morocco by turning GME upside down, irritating Algiers which does not want its gas to reach its rival in a roundabout way. On July 24, Sonatrach reported that Medgaz had suffered a breakdown on the Spanish section of its submarine route, but Spanish operator Enagas denied this. The incident could have been intended as a warning.

Algeria could have directed the gas that was not going to Morocco and Spain to its LNG plants, which are operating at only around 40% capacity. Yet supplies of these have also plummeted. Domestic demand is said to have increased, and as Algeria’s oil production cap under the OPEC+ deal increases, there may be a need to reinject more produced gas to sustain oil production.

None of these factors seems fully sufficient to explain the drop and with record gas and LNG prices in Europe, Algeria has every interest in maximizing its sales. He may be trying to pressure his customers to raise their contract prices and, indeed, he has signed a revised deal at a higher price with France’s Engie.

So far, therefore, Algeria’s contribution to replacing Russia has largely been limited to reducing overall exports while shifting supplies from Spain to Italy.

This change is not a bad thing for European energy security. The Iberian Peninsula has excess LNG import capacity and very limited connectivity with the rest of the continent, while Italy has generally obtained almost half of its gas from Russia and a quarter from Algeria. But if Algeria could return to the export levels of the first half of last year, an additional 10 billion m3 per year would be a useful, if not huge, contribution to replacing 130 billion m3 of Russian gas.

Algiers, however, only dances to its own beat. With high oil prices, its precarious budgetary situation is improving and it holds the upper hand in negotiations. It maintains close relations with Russia, whose Foreign Minister Sergei Lavrov visited in May.

The country has long been accused of underinvestment, unattractive fiscal conditions and a painfully slow bureaucracy, hampering the development of the hydrocarbon sector. But new deals have been signed since a new oil law was passed in 2019, including a $4 billion oil project with ENI, France’s TotalEnergies and US Occidental. The Italian ENI has been particularly active, agreeing to transport additional volumes of gas via the TransMed gas pipeline and to invest in the revival of Algerian production.

At the beginning of July, Sonatrach announced a major discovery on its largest gas field, Hassi R’mel, which will be developed rapidly to add 3.65 Gm3 of annual production from November, a very favorable moment with the European winter looming. . But other major new additions won’t arrive until 2024, as Sonatrach continues to struggle with rising domestic demand and declining maturing fields.

For Algeria to help ease the gas crisis in Europe, diplomacy will have to continue, which could require clumsy concessions from Spain. European solidarity will be important to limit competition between Madrid and Rome. Gas distribution companies will probably have to bite the bullet by paying significantly higher prices.

On a more positive note, Europe can offer its help in the fight against the 8 billion m3 of Algerian gas that goes up in smoke each year, burned in the fields due to the limited capacity of collection, treatment and transport. It can save Algerian domestic gas by cooperating on Saharan solar energy.

Thus, faced with its own upstream constraints, an unaligned position and a complex and opaque decision-making process, Algeria is not a savior for Europe’s gas needs. Yet with smart diplomacy and investment, the Europeans might still be able to coax some of their much-needed energy from the Sahara.