Rabat – Spain’s winter stocks of natural gas are under threat due to Algeria’s decision to no longer use a pipeline that flowed through Morocco. Following rising diplomatic tensions between Morocco and Algeria, Algeria announced it would not extend a contract that ensures the delivery of approximately 12 billion cubic meters annually of natural gas to Spain and Portugal through Morocco.
The pipeline, known as the Maghreb–Europe Gas Pipeline (GME), supplies 10% of Morocco’s natural gas, and almost 50% of Spain’s. Thus, amid an EU-wide gas supply crisis, the European country is potentially facing an energy shortage following Algeria’s decision to halt supplying gas through the GME pipeline.
The EU faces shortages in its gas reserves ahead of what is predicted to be a particularly harsh winter when gas is used to heat homes across the continent.
Experts predict that Algeria’s decision would have dire consequences on gas prices, amid a market already suffering from prices surging following the COVID-19 economic crisis.
The supply shortage coupled with the rising demand for gas for heating purposes during winter is already sending gas prices soaring.
Besides the Maghreb-Europe Gas pipeline, Algeria supplies Spain with gas using a smaller sea pipeline that cuts through the mediterranean sea.
Algerian state-owned gas company Sonatrach announced plans to boost the supply capacity of the Mediterranean-undersea pipeline from eight billion cubic meters to 10.5 billion cubic meters annually, but it’s unlikely that this solution could solve the expected gas shortage on the Iberian peninsula.
Algeria further proposed to deliver gas in liquefied form via traditional shipping. The solution could potentially slightly alleviate the gas-shortage issue. Yet, the measure will undoubtedly cause gas prices to further skyrocket given the recent rise in the cost of transporting liquefied natural gas (LNG). Gas prices are rising following the unequal post-COVID economic recovery that caused a “crunch,” where demand rises while supply chains struggle to fill demand amid shortages in labor, equipment, and continuing production cuts by crucial gas-producing countries.
Fear of a colder winter also contributed to the rally in gas prices, as European countries are racing to secure ships to deliver LNG, adding to the already high cost of converting liquid gas to its original form prior to consumption.
The GME pipeline had been transporting gas to Spain and Portugal since 1996. The 25-year contract ended this Sunday, October 31, at midnight.
The geographical location of Spain and Portugal in the Iberian peninsula makes it difficult for the European countries to access international gas pipelines going through eastern, northern, and central Europe.
