Algeria’s state-owned energy company Sonatrach will not renew a contract to supply natural gas to Morocco via the 13.5-Bcm Maghreb-Europe pipeline, Reuters reported, citing sources familiar with the matter. The move came after the North African country officially broke off diplomatic relations with the neighbouring kingdom. After the cut-off, Sonatrach will export gas to Spain directly through the 8-Bcm Medgaz undersea pipeline, which does not go through Morocco, the sources added.
The sources noted that Algeria is expanding the Medgaz pipeline to accommodate larger export volumes. However, industry sources said the country is facing technical issues in carrying out the project. This means that Sonatrach will have to charter ships to deliver gas to Spain as LNG. Analysts added that it could boost LNG prices and deteriorate Europe’s energy crisis.
Algeria is Spain’s biggest gas supplier, accounting for nearly half of its gas demand through the Maghreb-Europe gas pipeline. Morocco also uses Algerian gas to generate around 10% of its electricity. Moroccan and Spanish officials have discussed the possibility of reversing the gas flow in case Algeria does not renew the supply deal.
