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Jan 26 2006

Russia-Ukraine Gas Dispute Forces Rethinking on a Timetable for the Construction of an Algeria-Italy Pipeline

The Galsi gas project, a pipeline that will link Algeria to the Italian island of Sardinia in Italy could be built ahead of schedule. The Sardinian authorities say they are hoping to convince the parties involved in the construction of the pipeline to deliver earlier than scheduled, largely as a reaction to the dispute of Russian gas supply to Ukraine. The Sardinian government expressed their concerns to the Algerian ambassador in Rome, urging him to speed up the construction of what will be the second pipeline linking the two countries. A meeting between ambassador Rachid Maarif and the head of Sardinia Renato Soru took place recently and a delegation of Algeria's energy and mining ministry is scheduled to travel to the Italian island in the first week of February.

The request made by the government of Sardinia followed remarks made by the CEO of Eni, Paolo Scaroni in an Italian newspaper that his company and Algeria's Sonatrach will likely speed up the construction of the pipeline. The two companies jointly own the existing pipeline called Enrico Mattei which links the two countries via Tunisia. While this pipeline has the capacity to move 27 billion cubic meters of gas, its owners are planning to raise that capacity to 33.5 billion in two phases, with one increase in 2008 and another in 2012.

The dispute between Ukraine and Russia caused more alarm than actual damage to the European markets. However, it has created a certain impact on European governments that a diversification of suppliers is critical for security and continuity purposes. And, Algeria is likely to benefit from this reaction. The quarrel between Ukraine and Russian began when the Russian oil and gas firm Gazprom said it wanted Ukraine to pay market prices for natural gas. Ukraine disagreed and said it wanted to continue operating under a barter agreement setting the price at about $50 per 1,000 cubic meters. A deal was reached under pressure after Gazprom decided to cut off supplies to Ukraine. Gazprom will now sell gas to a Swiss-based trader RosUkEnergo for $230 per 1,000 cu m, which national gas company Naftogaz Ukrainy will then buy for $95.

© The North Africa Journal 2006

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