According to the latest data from S&P Global Commodity Insights, Algeria’s natural gas exports to Southern Europe will continue to flourish in 2023. Algeria has maintained its position as Italy’s main gas supplier, following a significant reduction in Russian imports last year. In addition, gas flows to Spain are recovering after a slight fall in the first quarter. This trend underlines Algeria’s crucial role in the region’s energy supply, and highlights its ability to harness its vast resources to meet Europe’s growing demand.
Algeria: main gas supplier for Italy and Spain
In 2023, Algerian natural gas exports to Southern Europe remain strong. Algeria is still supplying Italy with gas imports, while gas flows to Spain are recovering after a slight fall in the first quarter.
Algeria is now Italy’s main gas supplier, following the sharp reduction in Russian imports in 2022. In Spain, gas pipeline flows from Algeria reached their highest level since February.
Algeria supplies the continent with gas via two main entry points: the Medgaz pipeline to Spain and the TransMed pipeline, which transports gas to mainland Italy via Tunisia and Sicily.
Algeria’s transit infrastructure and energy resources: meeting Europe’s energy needs
As North Africa’s largest gas exporter, Algeria produces around 100 billion cubic meters of gas a year, almost half of which is exported, while the rest is consumed on the domestic market.
The country is well positioned to meet Europe’s energy needs by using existing transit infrastructures, exploiting its vast energy resources and adjusting its policy frameworks to encourage upstream developments.
State-owned Sonatrach plans to supply around 110 billion cubic meters of gas per year for export and domestic consumption over the next five years, according to CEO Toufik Hakkar in an interview with S&P Global Commodity Insights in March.
Italian and Spanish imports of Algerian gas: trends and key figures
Italy is a key market for Algeria, both in terms of long-term supply agreements and additional sales via the TransMed pipeline on the spot market. In 2022, Italian imports via TransMed average just over 61 million cubic meters per day, remaining well in line with the previous year’s average so far this year.
In 2022, Italy will import a total of 22.4 billion cubic meters of gas by pipeline from Algeria, compared with around 20 billion cubic meters in 2021. Algerian gas imports into Italy up to May 18 this year totaled 8.36 billion cubic meters, slightly up on the same period last year, when they averaged 8.33 billion cubic meters.
As far as Spain is concerned, Algerian gas will account for around 24% of the country’s gas supplies in 2022, just behind the USA at 29%, according to Spanish transmission system operator Enagas. Pipeline gas flows peak in December 2022, at 28.1 million cubic meters per day, before declining in early 2023. However, supplies began to recover in May, reaching 24.7 million cubic meters per day on May 2, the highest level since mid-February.
Algeria and Naturgy: a major energy partnership
Naturgy, a Spanish energy company, is a major buyer of Algerian gas. In February, it stated that it was negotiating with Sonatrach to agree a price for gas volumes in 2023, having agreed in October of the previous year to retroactively apply a new price for 2022. The contracts covered by the price review were signed over 20 years ago and cover volumes of 5 billion cubic meters per year until 2030.
Spanish gas prices are currently the cheapest among the hubs traded in Europe, thanks to solid Algerian supplies, LNG import infrastructure and high gas stocks. Platts, a division of S&P Global Commodity Insights, estimates the price of PVB gas for the coming month at 26.60 euros/MWh on May 19, with a reduction of 3.50 euros/MWh compared to its TTF equivalent.
Algeria’s natural gas exports to Southern Europe will remain strong in 2023, with a dominant position in the Italian market and a gradual recovery in gas flows to Spain. Algeria is well positioned to meet Europe’s energy needs, thanks to its infrastructure, resources and political adjustments. These exports help maintain competitive prices and provide stability and economic opportunities for importing countries. Algeria plays a key role in ensuring a reliable and sustainable supply of natural gas to Southern Europe.
