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European states seeking Africa's gas hit geopolitical and production problems

As the EU tries ends its reliance on Russia's gas, it's finalising a plan to buy much more from Algeria, Nigeria, Senegal and Angola

Plans by European Union states to buy billions of cubic metres of gas from Africa have been spelt out in a leaked document detailing the strategy due to be agreed by the end of this month.

The plan debated within the European Commission, the executive arm of the EU, envisages a shake-up of the global markets for Liquefied Natural Gas (LNG) making them as 'open, flexible, liquid and well-functioning' as possible, according to the document.

At the plan's heart is its goal to increase Europe's LNG imports from non-Russian producers by 50 billion cubic metres and boost shipments of pipeline gas by 10bn cubic metres.

On paper, Africa has the gas reserves to meet Europe's demand. But much of the continent's production is tied up in long-term contracts. Stepping up production would require billions of dollars at a time when European governments are wavering about new investments in fossil fuels.

Africa is set to produce 73bn cubic metres of gas this year, according to industry experts Rystad Energy. That's about half of what EU states imported from Russia last year.

But only 7bn cubic metres of Africa's gas is not tied into contracts. Another 29bn cubic metres is tied into flexible contracts which could be restructured.

European buyers will have to compete to rising demand for gas within Africa for power generation, petrochemicals and fertiliser plants. Nigeria's Dangote Industries is due to start production this year at its 650,000 barrels-a-day oil refinery, petrochemicals and fertiliser plant just outside Lagos.

Then, EU states will have to navigate the geopolitics within Africa. Algeria, with which Italy and Spain has been negotiating in recent weeks to increase gas supplies, last week threatened to break a contract to supply gas to Spain if Madrid transferred it onwards to 'a third destination', a thinly veiled reference to its regional rival Morocco.

Angered by statements from Madrid and Brussels favouring Morocco's position on the disputed Western Sahara, Algeria says it will not allow its gas to be piped through Morocco via the Gaz Maghreb Europe pipeline (AC Vol 63 No 9, Navigating through the fog of cold war).

In Madrid, officials are trying to row back from the letter by Prime Minister Pedro Sánchez last month appearing to endorse Morocco's plans offering limited autonomy for the disputed territory of Western Sahara (Dispatches 11/4/22, Europe looks to African energy as sanctions on Russia deepen). The Spanish government's rethink suggests it hasn't identified alternatives to Algerian gas.

Strongly supporting the pro-independence Polisario Front, Algeria recalled its ambassador from Madrid in protest, less than a day after Sánchez's letter endorsing Morocco's plan for Western Sahara was published.

Algeria's state-owned energy giant Sonatrach, the largest gas exporter in Africa, supplied more than 40% of Spain's natural gas imports in 2021.

And on 11 April, Italy's ENI signed a deal with Sonatrach to add another 9bn cubic metres of gas to their existing supply arrangements over 2023-2024. Last year, Italy imported 29bn cubic metres (40% of national demand) from Russia.

Despite Algeria's market share in EU states, the European Commission's report focuses more on supplies of LNG from Nigeria, Senegal, and Angola.

Libya, with the fifth biggest gas reserves in Africa, is hampered by its divisive politics and battle to control the national oil company ahead of much-delayed national elections.

The EU also wants to sign a memorandum of understanding with Egypt and Israel to boost LNG supplies to Europe this year.

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