Algerian Gas Exports to Europe: A Historical Perspective Mark H. Hayes Program on Energy and Sustainable Development Stanford University Geopolitics of Gas Conference 27 May 2004 Outline ¾ Gas pipelines from Algeria to Europe, c.a. 1975 Projects in the “Old World” of gas ¾ The ‘Gas Battle’ and long-term impacts on Algeria and Atlantic Basin gas trade 2 8°W 4°W 0°E 4°E 8°E 12°E 16°E 46°N 46°N France Po V alley Bilbao ^_ ^_ Panigaglia 42°N Rome 42°N Portugal ^_Barcelona Madrid Italy Spain Mediterranean Sea d 38°N Me 38°N s- ^_ Cartagena Skikda an ^_ Almeria Algiers Tr Huelva ^_ Arzew Tunis Oran ^_ 34°N Rabat 34°N M Tunisia aghreb-Europe Morocco Hassi R' Mel Gas Pipelines Existing Algeria Proposed 30°N Libya LNG Facilities 30°N ^_ Import In Salah Amassak ^_ Export ] Gas_Fields 0 150 300 600 900 Kilometers 26°N 3 26°N 8°W 4°W 0°E 4°E 8°E 12°E 16°E Spain Primary Energy Supply 250 200 150 Gas m Bc 100 Oil 50 Nuclear Hydro Coal - 1965 1970 1975 1980 1985 1990 1995 2000 4 Source: BP 2003 Algerian Gas Planning, 1970s 120 100 s a 80 Exports G l a r u t 60 Na m 40 Bc 20 Domestic Consumption - 1970 1975 1980 1985 1990 1995 5 Source: Aissaoui (2001) 8°W 4°W 0°E 4°E 8°E 12°E 16°E 46°N 46°N France Po V alley Bilbao ^_ ^_ Panigaglia 42°N Rome 42°N Portugal ^_Barcelona Madrid Italy Spain Mediterranean Sea d 38°N Me 38°N s- ^_ Cartagena Skikda an ^_ Almeria Algiers Tr Huelva ^_ Arzew Tunis Oran ^_ 34°N Rabat 34°N M Tunisia aghreb-Europe Morocco Hassi R' Mel Gas Pipelines Existing Algeria Proposed 30°N Libya LNG Facilities 30°N ^_ Import In Salah Amassak ^_ Export ] Gas_Fields 0 150 300 600 900 Kilometers 26°N 6 26°N 8°W 4°W 0°E 4°E 8°E 12°E 16°E Spain 1970s 1. Regional political disputes create transit country problems • Morocco / Algeria • Spain/Morocco, Spain/Algeria (Western Sahara) 2. Weak state-owned gas player (Enagas); strong anti-gas players (CEPSA) Æ Lots of proposals; no pipes • 1975 LNG contract • De-Francoizaztion (1975-1978) 7 Italy Primary Energy Supply 250 200 t en 150 Ga s val i u eq 100 Oil m c B 50 Nuclear Hydro - Coal 1965 1970 1975 1980 1985 1990 1995 2000 8 Source: BP 2003 8°W 4°W 0°E 4°E 8°E 12°E 16°E 46°N 46°N France Po V alley Bilbao ^_ ^_ Panigaglia 42°N Rome 42°N Portugal ^_Barcelona Madrid Italy Spain Mediterranean Sea d 38°N Me 38°N s- ^_ Cartagena Skikda an ^_ Almeria Algiers Tr Huelva ^_ Arzew Tunis Oran ^_ 34°N Rabat 34°N M Tunisia aghreb-Europe Morocco Hassi R' Mel Gas Pipelines Existing Algeria Proposed 30°N Libya LNG Facilities 30°N ^_ Import In Salah Amassak ^_ Export ] Gas_Fields 0 150 300 600 900 Kilometers 26°N 9 26°N 8°W 4°W 0°E 4°E 8°E 12°E 16°E Italy 1970s 1. Strong, state-backed gas player (ENI), built on Po Valley resources 2. ENI seeking to expand abroad 3. Warm relations with Algeria (Mattei, ENI) Æ ENI and Sonatrach sign contract in 1973 10 Transmed Project ¾ LNG vs. pipeline debate; strategic objective for ENI Saipem lays test-pipe in 1975 ¾ 1977 transit agreement with Tunisia ¾ 1979 regime change in Algiers ¾ 1981 pipeline completed The ‘Gas Battle’ ¾ 1983 contract Indexed to f.o.b. oil Æ fast up, fast down 11 Algeria’s “Gas Battle” Gas Shipments to Italy via Transmed Pipeline 16.0 Delivered 14.0 Contracted 1977 >$3 Billion lost revenue 12.0 10.0 8.0 bcm 6.0 4.0 2.0 0.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 12 Sources: Dispenza (2003), BP (2003), Aissaoui (2001) Algeria, Realized Gas Shipments 120 VALHYD Pipeline Exports 100 s a 80 G l a r u 60 40 Bcm Nat LNG Exports 20 Domestic Consumption - 1970 1975 1980 1985 1990 1995 2000 13 Sources: Dispenza (2003), BP (2003), Aissaoui (2001) Conclusions ¾ Role of states in “creating demand” ¾ Transit countries Motivated, well-financed player can force project over transit challenges Contestability keeps rents in line (Tunisia) ¾ Cost of using the “Gas Weapon” 14.