Algeria Turns Towards Greece

Algeria and Greece recently signed a long-term liquefied natural gas supply contract for the sale of 0.75 bcm LNG per year.  According to GreekReporter, the Greek national gas company DEPA has been negotiating with Algeria’s national gas company, Sonatrach, to raise the scale of Algeria’s LNG supply to Greece, thereby expanding the company’s business in South Eastern Europe. GreekReporter states Sonatrach will supply the Interconnector Greece-Bulgaria with gas, starting with a 3 bcm initial flow, to reach 5 bcm by 2020. DEPA demanded from Sonatrach a decrease in the price of LNG for the Greek domestic market, in exchange for functioning as a wholesale importer that would manage the exportation of gas to the Bulgarian and Romanian markets

 Sonatrach’s initial objective was to reach a capacity of 30 bcm in gas supply to Italian markets via the TransMediterranean Gas Pipeline. However, since 2008, Italy’s natural gas consumption has dropped and Italian gas market has been losing its attractiveness for Algeria. In this context, DEPA’s proposal was very attractive for Algeria, as it is still looking to achieve its export objectives despite the disruption in Italian demand.

However, this plan requires DEPA to make new infrastructure investments, such as upgrading existing LNG facilities and building at least one new liquefaction terminal. According to GreekReporter, other alternatives for DEPA include importing natural gas from Azerbaijan via the Trans-Adriatic Pipeline (TAP), or convincing Israel to supply Europe with gas through a Greece-Cyprus connection. As none of these alternatives would be feasible for at least six years, Athens needs to find a short-term plan. Algerian gas seems to be the fastest supply option. If terms are eventually agreed, Greece will benefit with decreased prices and Algeria with a more competitive product against Russia.