On 31 October, a few hours before the current long-term Gazoduc Maghreb Europe (GME) gas export contract expired, President Tebboune announced that it would not be renewed. The Presidency claimed that this expected decision was in response to Morocco’s ‘aggressive actions’ which was particularly related to Morocco’s deployment of Israeli-developed Pegasus software to spy on Algeria’s senior generals and politicians. This is such an embarrassing failure by Algeria’s own security system, that the ‘crimes’ have been wrapped up in propaganda about Rabat’s alleged support for Kabyle separatism.
After 25 years the GME pipeline is now closed and this appears to be final because Algeria rarely reverses its decisions. The Moroccan media response — notably from the 360.ma site which is close to the Royal Palace — is portraying the country as the victim of blackmail and Algeria as an unreliable gas supplier. It explained that ‘the decision ‘will force Morocco to establish a sustainable energy security strategy. We now know that we cannot rely on an unreliable partner, even more so when it comes to strategic matters.’
Amar Belani — Algeria’s special envoy in charge of Western Sahara and the Maghreb, and Morocco’s bête noir — warned that Rabat should understand that the ‘New Algeria’ will not be taken for a ride and that hostile actions come at a price.
There is, however, another more rational reason for the closure of the GME pipeline other than to simply punish Morocco.
Many experts argue that there is no longer any need for the GME because of Algeria’s collapsing natural gas export capabilities. This is the result of falling production and increasing domestic consumption which now exceeds 52% of total production. Since 2018-2019 consumption has significantly exceeded exports. In 2018 consumption accounted for 42.3 million tonnes of oil equivalent (TOE) and 43.6 million TOE in 2019 while exports were, respectively, 36.3 million TOE and 25.2 million TOE.
Algeria can currently only export 45-49 BCM compared to more than 65 BCM at the beginning of the century. In the next few years exports will fall to less than 40 BCM as domestic consumption exceeds 55% of production. This is without taking into account the gradual depletion over the next decade of the country’s gas reserves, including the most important ones such as Hassi R’Mel, because of the lack of major new discoveries and delays in developing existing fields.
It is for these purely economic reasons that Algeria can no longer afford to maintain the GME pipeline. Given its export constraints it can hardly even profitably run its two other gas export pipelines:
- the 8 BCM a year capacity 757 kms Medgaz pipeline direct to Spain; and
- the 34 BCM a year capacity 1650 kms Enrico Mattei (a.k.a. TransMediterranean) pipeline to Italy via Tunisia.
Algeria also exports LNG and has a total nominal annual production capacity of around 34 BCM. But as with natural gas, it is not exploiting its full potential because of numerous technical breakdowns and production stoppages at its two LNG complexes. It has recently only been exporting LNG via the 21.9 million tonnes a year capacity six-train Arzew GL1Z and GL2Z terminal, because the 9.2 MMt/y capacity Skikda facility is closed for maintenance. LNG exports fell last year but are forecast to rise by 4%-5% in 2021 to 11.3 MM/t in 2021 before falling again to 9.1 MMt/y in 2022 because of rising domestic demand, pipeline exports, and slow production growth.
These purely economic figures justify Algeria’s closure of the GME pipeline. Given static or falling production, and rising domestic consumption, it will be hard pressed to export much natural gas after 2027-2028. The regime has been far too tardy in developing the country’s considerable renewable energy potential to help meet its rising domestic energy demand. Many experts believe that its bellicose rhetoric against Morocco is therefore merely subterfuge to mask the current bitter economic reality and the decline in its gas revenues.