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Sonatrach sees pipeline gas sales sinking, spot LNG sales rising
ALGERIA
SONATRACH, Algeria’s national oil company (NOC), anticipates a sharp drop in natural gas sales this year.
According to Ahmed El-Hachemi Mazighi, the company’s vice-president of marketing, the problem stems largely from a supply glut that is driving down prices, especially in Europe. Sonatrach’s European clients have “greatly reduced their demand” for pipeline gas from Algeria, since the Continent is awash in cheap gas from Russia and LNG from new suppliers such as the US, he explained.
Sonatrach delivers gas to Europe via sev- eral subsea pipelines – the Maghreb-Europe Gas (MEG) and Medgaz links to Spain and the Trans-Mediterranean link to Italy. Altogether, these pipes have a design capacity of 50bn cubic metres per year.
For many years, Algeria’s relative proximity to Europe made these routes competitive. But they have lost ground in light of this year’s influx of Russian pipeline deliveries and LNG cargoes, coupled with the unusually warm winter of 2018/2019.
Additionally, Sonatrach’s practice of linking gas prices to the crude oil market has also made Algerian supplies look less attractive, the Wood Mackenzie consultancy said.
Mazighi was quoted by Bloomberg as saying that his company was trying to compensate for these shifts by turning out more LNG and sell- ing its production on the spot market to custom- ers under immediate-delivery contracts. This
strategy has been successful, he said, explaining that Algerian LNG was fetching prices that were about 25% higher than anticipated.
This year is set to be the first time that spot sales have made up more than 30% of Sonatrach’s LNG exports, he added.
He went on to say that recent trends were likely to persist into next year. “In 2019, the trend was completely reversed due to the warm winter in Europe,” he said. “2020 is expected to be a dif- ficult year too. If we have a warm winter as [we did] last year, we will have to do a lot of spots, too.”
Sonatrach is projected to sell the equivalent of5bcmofgasintheformofLNGthisyearand will export about 60 cargoes of the fuel by tanker. This would represent the highest recorded figure in the last 20 years, Mazighi said.
Deals with Engie
He was speaking several days after he signed a set of agreements on Sonatrach’s behalf with repre- sentatives of France’s Engie.
One of the documents outlines the terms for future supplies of pipeline gas from Algeria to Spain via the TransMed pipeline. The other pro- vides for Engie to receive LNG from Sonatrach at its Fos Tonkin terminal in France.
As of press time, neither party had revealed the value of the deal or the volumes of gas and LNG to be delivered. Sonatrach did describe the terms of the agreements as “medium- to long- term”, though.
Week 47 28•November•2019 w w w . N E W S B A S E . c o m P7
