Algeria Boosts Gas Supply to Spain with Medgaz Pipeline Expansion

The president of the Algerian national energy company (Sonatrach), Toufik Hakkar, and the president of the Spanish company Naturgy officially signed the agreement for the commissioning of the extension of Medgaz, the submarine pipeline between Algeria and Spain. This investment of more than 70 million euros, which involves an extension of 2,000 million cubic meters per year, will increase the gas supply offer to Spain by 25%, according to a joint press release from the two structures.

The Medgaz extension will be operational in the fourth quarter of this year, the period during which the Maghreb-Europe pipeline, which supplies Spain and Portugal with gas from Algeria via Morocco, expires. "Negotiations with Morocco for a renewal of the concession are still not progressing," informed well-informed sources to the newspaper El Mundo.

The situation does not seem to worry the president of Sonatrach, who reassured two weeks ago that they will not yield to any blackmail from Rabat. "We have taken all the necessary measures in case the contract is not renewed... Even if this contract, which expires next October, is not renewed, Algeria will be able not only to supply Spain, but also to meet any additional demand from the Spanish market without any problem," Hakkar said.

The Medgaz pipeline is currently owned by Sonatrach (51%) and Naturgy (49%). The project was awarded in 2006 by the Algerian state for a period of 35 years (until 2041), renewable for an additional 15 years. By not renewing the concession of the Maghreb-Europe pipeline, Morocco risks losing two major advantages: the right to a 7% toll, which represents about 200 million euros per year, and the quantity of gas it benefits from by transiting through the pipeline.