Algeria is expected to become Italy’s top gas supplier

Last Monday the Italian government signed an agreement with the Algerian government to increase the supply of natural gas starting from the next months. What are the possible implications of this agreement within the Mediterranean area?

On Monday the Prime Minister, Mario Draghi, and the Algerian President, Abdelmadjid Tebboune, met in Algiers to agree on an increase in gas supplies from Algeria to Italy, with the aim of reducing the Italian dependence on Russia. The meeting ended with the signing of an agreement between the CEO of ENI, Claudio Descalzi, and the president of the Algerian company Sonatrach, Toufik Hakkar.

Although the Italian government had initially hoped for a quicker substantial increase in gas supplies, the agreement plans a gradual one. Starting this year, three billion cubic meters more of gas will be supplied, while in 2023 the increase in supply will be 6 billion cubic meters. Only from 2024 the full capacity will be in place with at least 9 billion cubic meters of more gas. For the transport of Algerian gas will be used the Transmed pipeline, which connects Algeria and Italy through Tunisia.

What this agreement means for Italy

Draghi, in a brief speech at the end of his mission to Algeri, explained the reasons for the new agreement: to reduce the Italian dependence on Russian gas in light of the Russian-Ukrainian conflict. Italy is among the European countries with a considerable dependence on Russian gas supplies, used in industrial plants, for heating and producing electricity. With the new agreement gas imports from Russia should be reduced by about a third, and the Italian government is already working to find other sources and reorganize consumption to be less and less dependent on Russia.

Italy's decisions on this issue are important on a European level not only because they show a stance against Putin's government, but also because Italy has one of the largest gas transport networks in Europe and is therefore perceived as a possible bridge between Europe and North Africa for gas and green hydrogen produced in the latter area. In this direction, Draghi said that Italy is also ready to work with Algeria to develop renewable energy and green hydrogen.

The consequences for the Mediterranean balances

This decision gives a breath to Algeria, affected by a lack of investment and political instability, and whose production and export capacities are weakened by a national demand that takes 52% of natural gas. It is worth mentioning the decrease in gas exports to the Iberian Peninsula in recent months due to the shrinking of diplomatic relations with Morocco and, subsequently, with Spain. Indeed, in October 2021, Algeria decided to suspend the Maghreb Gas Pipeline-Europe (Meg), which had connected Algerian gas fields to Europe, particularly Spain, through the Moroccan kingdom since 1996. The suspension was a consequence of Algerian diplomatic conflict with its neighboring enemy Morocco, especially linked to the historic issue of sovereignty over Western Sahara and Morocco's rapprochement with Israel. In addition, the recent Spanish decision to abandon a ten-year policy of neutrality on Western Sahara and support an autonomy plan presented by Morocco has led to a further tightening of relations with Algeria, which could also concerns the supply of gas. In fact, earlier this month Sonatrach warned that it might raise the price of its gas sales to Spain, which account for more than 40% of the country's imports.

If Algeria has therefore its own strategic interest in increasing gas exports to Italy, at the same time, precisely considering what conflicts teach about the importance of diversifying sources, Italy is looking to increase imports of liquefied natural gas from markets such as Qatar, the United States and Mozambique. In the coming days, the Italian government will go to Congo, Angola and Mozambique, to evaluate new agreements for extra supplies in the medium to long term.

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