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Historic opportunity for African producers to capitalise on the restructuring of oil and gas markets
The trip to Algiers by Italy's Prime Minister Mario Draghi on 11 April is the latest of bids by European Union states to step up supplies of oil and gas from Africa to replace imports from Russia.
Draghi is due to meet Algeria's President Abdelmajid Tebboune to discuss supplies this year and longer-term investments in gas and renewable energy. The plan is to increase Italy's gas imports from Algeria by about 10 billion cubic metres a year in the medium term.
Last year, Italy bought 21bn cubic metres from Algeria, making it the second biggest supplier after Russia. Algeria transports its gas to Italy via the TransMed pipeline.
It runs two other gas pipelines across the Mediterranean, both to Spain: one direct and one via Morocco. Algeria's relations with Madrid cooled last month after Spain's Prime Minister Pedro Sánchez tilted towards Algiers' regional rival Morocco in the long-running dispute over Western Sahara (AC Vol 63 No 7, Rabat strengthens Sahara grip).
Algeria is playing the energy diplomacy carefully. President Tebboune's government sees an opportunity to boost investment in the country's oil and gas industry after a decade of dwindling inflows but wants to assure customers about the stability of supply.
In Egypt, President Abdel Fattah el Sisi is also stepping up energy cooperation with Europe. Last week, his Prime Minister Mostafa Madbouly hosted EU Climate Chief Frans Timmerman in Cairo for talks on increasing liquefied gas exports to Europe and setting up a green hydrogen plant there.
Sanctions against Russia and moves towards an embargo on Russian oil and gas, are focusing EU attention on alternative gas supplies from Africa (AC Vol 63 No 7, Continental ties tested in a zero-sum game). But the current energy crisis in Nigeria points to both operational problems and the urgent need for more investment in production and infrastructure in the region. As an example of the new thinking, plans for some of the most grandiose production and pipeline projects are back in contention and are now getting serious consideration.
The long-delayed Trans-Saharan gas pipeline or NIGAL (Nigeria/Algeria) pipeline first envisioned in the 1980s could be one of the main beneficiaries. Supported by the African Union's Programme for Infrastructure Development in Africa, it plans to transport gas from Nigeria to Algeria via Niger and connect to the existing Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi pipelines, all of which already supply gas to Europe.
The Declaration of Niamey signed in February by Algeria, Niger, and Nigeria has put the TSGP Project, which carries an estimated US$21bn price tag, back on track. Although there are question marks about the availability of sufficient natural gas from the Niger Delta, the project will boost Algeria's output which currently provides about 11% of European gas imports.
The Nigeria-Morocco Gas Pipeline (NMGP), linking 11 countries also faces similar supply challenges but has also recently made progress. It's Front-End Engineering Design (FEED) study received financing from the Islamic Development Bank in December 2021. The project is estimated to cost $25bn.
The EuroAfrica Interconnector, connecting the electric grids of Egypt and Europe via Cyprus and Greece will also use local gas supply to improve regional electrification. 1,396kms long, the project is intended to transmit up to 2GW, and is a two-stage project covering the Cyprus-Egypt route in its first phase and the Cyprus-Greece route in its second. The Egypt-Cyprus section is expected to be operational by 2023, at a cost of €2.5bn ($2.7bn), while the Cyprus-Greece section is scheduled to enter service by 2024.
Galsi (Gasdotto Algeria – Sardegna Italia), a consortium of Sonatrach, Edison, Enel and Hera Group is also developing one of the deepest gas pipelines running from Algeria to Italy via Sardinia, 837km long and projected to require an investment of €2bn ($2.5bn). Construction, which had been scheduled to commence in 2012, is now proposed for this year.
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