France-Algeria: rapprochement that smells of gas

The page of misunderstandings between Algeria and France seems to have been turned. French President Emmanuel Macron’s recent trip to Algeria marks a new beginning in the relations between the two countries. The fog lifted, giving way to a recovery and a warming of relations between the two countries.

By Nadjoua Khelil in Algiers

French President Emmanuel Macron’s recent visit to Algiers confirms the rapprochement between the two countries, which have had complex relations since the independence of the former French colony sixty years ago. The latest episode was the diplomatic row in the fall of 2021, which resulted in Algeria moving towards other economic partners, including China, Turkey and Italy. But in a context of energy crisis suffered by Europe, due the Russian-Ukrainian armed conflict, Algeria stands out as a partner that France cannot neglect. 

Algeria is already a major economic partner of France. With 14.7% of total Algerian exports, France represented in 2020 the second largest customer of Algeria, behind Italy, with 13.3%, followed by Spain (10%) and China (5%). In the first quarter of 2022, the trade balance of France with Algeria has gone from a surplus of 156 million euros in the first quarter of 2021, to a deficit of 519 million euros, according to French Customs. At the same period in 2022, trade between the two countries « picked up by 17% to 2.1 billion euros, » adds the same source. This increase is due to « the rising value of French purchases from Algeria, amounting to 1.3 billion euros, up over 62% compared to the first quarter of 2021, » notes the document. Still during the first quarter of 2022, sales of Algerian oil to France grew by 46%, amounting to 507 million euros, and those of natural gas increased by 168%, to 482 million euros. However, French imports of refined petroleum products from Algeria fell by 21% to 188 million euros. As for French exports to Algeria, they fell by 19%, compared to the same period of 2021, to 807 million euros. But now, France is looking to the significant Algerian energy resources, including gas. In this sense, long-term gas contracts are being put in place. 

Algeria, a « key and decisive player in energy stability in the Mediterranean”

Indeed, Algeria’s policy is to develop its resources taking into account its capacities. The country has confirmed its position as the first exporter of natural gas on the African continent and 7th in the world. Its reserves are close to 2,400 billion m3. The gas supplied to Europe, which wants to depend less on Russian gas, represents a rate of 11% against 47% for Russia. Faced with this situation, many Mediterranean countries have turned to Algiers as a source of gas supply. Algeria has become unavoidable. The energy situation in Europe has allowed Algeria to stand out as an economic force on the Mediterranean market. For example, Italy has increased its flows of Algerian gas by an additional 4 billion m3 in mid-July. Algeria is now its leading supplier, a privileged energy partner, in parallel with a cooperation in solar, wind, hydrogen and geothermal energy. Algeria has already delivered to Italy 13.9 billion cubic meters of gas, since the beginning of the year, exceeding by 113% the projected volumes. It is also planned to deliver to Italy some 6 billion m3 additional, by the end of 2022, according to experts.

Algeria is also the main supplier of gas to Spain. However, the situation between Algeria and Spain has been tense, since last March, after the backtracking of the Spanish government which aligned itself with Morocco’s position regarding the Western Sahara issue. In response, Algiers has halted some trade with Madrid, without interrupting the supply of gas. 

Overall, Algeria, whose « current reserves allow to increase relatively the domestic production of gas has the capacity to provide part of the Russian gas, especially since it is practically the closest country to Europe, the only one that has direct relations in gas pipeline or LNG with the old continent, » says Abdelmadjid Attar, former minister, expert on energy issues, and former CEO of Sonatrach. According to him, Algeria’s two liquefaction sites in Arzew and Skikda “are able to export twice as much as what we currently export.” Algeria is therefore a « key and decisive” player in “contributing to ensure energy stability in the Mediterranean, » said Attar. Regarding the country’s domestic energy security, Attar states that it is « guaranteed » insofar as in the Algerian policy, « the domestic market is a priority. However, Attar notes, « no country, alone, can replace the supply of Russian gas for Europe; this is impossible.”

« New partnership »: « priority » sectors

It is also time for diversification between France and Algeria. In addition to research on innovation, bilateral economic cooperation focuses on partnerships between companies in « sectors of the future », generating wealth and value added, namely digital technology, tourism, renewable energy, rare metals, health, agriculture. Algerian business operators, on their side, expect to « seal fruitful win-win partnerships in promising sectors including in the knowledge economy, » says Hemamda. Algeria has the potential to emerge with « good partners »: « we are the only country that has no foreign debt, a young population of which more than 70% is under 30 years, a country that has a geostrategic position. In a broader sense, he defines the partner of Algeria as the one « who can transform » the Algerian Sahara in « Green Paradise »; able to make it an agricultural hub to create employment and strengthen the country’s food security. « The real partner is the one who builds with us.”

Macron’s visit comes at a time when Algeria is in a rather comfortable situation. After years of instability, marked by a decline in energy revenues and foreign exchange reserves, which had shaken the country following the drastic drop in crude oil prices in 2014, the Algerian economy is recovering and returning to the spotlight, due to the ongoing Ukrainian crisis. With a third of Europe’s gas consumption coming from Russia, Algeria could well be an alternative gas supply for Europe. Algeria’s position should be further consolidated on the global market characterized by strong demand: especially with the launch next November by the Algerian hydrocarbon giant, Sonatrach, of the LD2 Lias Carbonate reservoir, freshly discovered in Hassi R’Mel (Laghouat), with a production capacity of 10 million m3 / day. This confirms the return of Algeria to the international stage and its pivotal role « in the stability of the sub-region, the Mediterranean and the African continent.”