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Algeria’s Energy Minister Laments ‘Unjust’ Gas Prices, Calls For Gas OPEC
International gas prices are “unjust” and “should be two times their current level,” Algeria’s Minister of Energy and Mines Chakib Khelil said in an interview he gave with Russia’s Expert Magazine
last week. The minister openly expressed his support for the Gas Exporting Countries Forum (GECF) functioning like OPEC, particularly in redefining the way gas prices are calculated, despite having criticized the idea in the past. “We have already started to actively cooperate in the domain and coordination of gas strategies,” he said. GECF member countries include Algeria, Egypt, Iran, Nigeria, Qatar, Russia, and Venezuela, and their next ministerial meeting is scheduled to take place in Doha on 9 December.
In the interview, which was also carried by Algeria’s official daily El Moudjahid
, Dr Khelil acknowledged that creating a gas OPEC would be very complicated, but emphasized the importance of developing short term gas sales contracts, particularly in the context of the rise in the production and sales of LNG. “We can load the tankers and in a very short time send them to wherever the price is highest,” he said. Algeria has in recent years sought to reduce its long term gas sales contracts, and reap the benefits of the arbitrage opportunities that LNG allows, as its liquefaction capacity rises (MEES, 14 July 2008). Dr Khelil admitted that this market is currently small, with spot sales accounting for just 15% of Algerian gas trade. He has previously played down suggestions of a gas OPEC, on the grounds that producers are linked to consumers by long-term contracts
But as Ali Hached, senior adviser to the Algerian minister, told MEES in Algiers last November, the volume of gas that Sonatrach will be able to sell via short term contracts or on the spot market is set to more than double by 2012, from about 9-10 bcm/year now, when its two new LNG trains come on-stream. “The new 9mn ton (per annum) LNG trains are completely free. So we’ll have 20 bcm/y (of gas) completely free…And this gives us more flexibility,” said Mr Hached. He insisted that the GECF was not a cartel, but rather a group of producers monitoring the supply and demand gas balance “very closely,” which could adjust production if necessary to avoid a supply glut.
Spanish Gas Disputes Rumble On
Its European customers may balk at the idea of Algeria liaising with Russia or Qatar to fix gas prices. But such price collaboration seems highly unlikely in the short term, given that most of Algeria’s gas exports to Europe will continue to be shipped through pipelines, while energy cooperation between Sonatrach and Gazprom has never been particularly close. Algerian piped gas and LNG sales to Europe have nevertheless witnessed problems of their own, as illustrated by the ongoing price arbitration between Sonatrach and Gas Natural for Algerian gas purchased by the Spanish firm via the Maghreb-Europe pipeline. Gas Natural’s Chief Executive Rafael Villaseca said in the company’s third quarter results presentation on 4 November that he hopes to see the dispute resolved in the first half of next year.
Meanwhile, Dr Khelil highlighted the problem of energy cooperation with the EU, in the interview he gave last week, given certain “bizarre decisions” by European countries that would make Algeria “think twice before building new projects in Europe.” He mentioned in particular the move by Spain’s Ministry of Finance to impose a tax on Algerian gas imported via the new Medgaz pipeline that links the two countries directly. Medgaz was the source of a heated row between Algiers and Madrid in 2007, when the Spanish Energy Commission tried to seriously limit Sonatrach’s power to operate in Spain but relented after some emergency negotiations (MEES, 17 August 2007).
Dr Khelil’s critical comments about Spain taxing Algerian gas imports coincided with a report by Algerian official news agency APS
on 3 November that appears to justify the minister’s frustration. A court in Catalonia ruled in favor of Sonatrach’s marketing arm in Spain, according to APS
, in its dispute with the customs authorities in Barcelona over tax payments levied on Algerian LNG imports. The Algerian news agency quoted a source close to the case saying that, following the court ruling, Sonatrach should be paid a refund equivalent to the value of the tax paid plus interest. © Copyright MEES 2009.
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