Since the first ship that arrived in Barcelona in 1974, the relationship between the two countries has been completely conditioned by the supply of gas
Relationships have been strong and growing, but there have also been lawsuits and price fights
The first big contract was signed just fifty years ago. Gas Natural -then a subsidiary almost recently created by the century-old Catalana de Gas to import hydrocarbons- sealed an agreement in 1972 with the Algerian monopoly Sonatrach for the supply of natural gas to Spain for fifteen years. Barely two years later, the first ship with liquefied gas from Algeria arrived in Barcelona.
Gas Natural had already built in the Port of Barcelona, in alliance with the American company Exxon, the first regasification plant in Spain. That plant was inaugurated in 1969 with the gas that came from Libya. Five years later, the arrival of ships from Algeria began. And from that first methane tanker with Algerian gas from 1974in the last throes of Francoism, and until just three months ago, Spain had Algeria as its main supplier of natural gas almost without interruption.
Catalana de Gascommanded by the great pioneer of the national sector Pere Duran Farrell, had already tried in the sixties without success. He tried to add Spain in 1960 to the continental Eurafrigas project, which aspired to bring gas from Algeria to West Germany with a 2,600-kilometer gas pipeline that would pass through Cartagena and Barcelona. And he also tried it in 1966 with a new unborn gas project to bring Algerian gas to different parts of the country.
The Franco regime rejected both initiatives and even created the Interministerial Gas Commission to designate it as the only body authorized to study possible projects to transport African gas through Spanish territory. Official resistance was fierce for years. It was not until 1972 when the Franco regime declared that natural gas was free from monopoly, and at the same time, created the public company National Gas Company (enagás) to participate directly in the business. And she did it bravely.
Following the contract sealed and activated by Gas Natural, Enagás signed its own gas supply contract with Algeria in 1975. A colossal contract -which was later shown to be disproportionate- with very high annual deliveries and which was expected to be maintained for more than two decades. And, furthermore, in the last throes of the Franco regime, it also ended up subrogating the Gas Natural contract and assuming control of the regasification plant in the Port of Barcelona.
“In the framework of an inflexible political situation, without palliatives of any kind, in which the reason of State was implacably opposed to industrial reason and the moral force of an entire history, I had to accept, ultimately and by pure pragmatism and conservation instinct or survival, the transfer to Enagás of the Barcelona plant and of the contracts in Libya and Algeria”, explained Duran Farrell himself in a lengthy column published by El País in 1990. “Gas Natural therefore transferred the plant and the contracts, and Catalana de Gas the distribution network”.
international lawsuits
The huge contract Enagas and Sonatrach it committed to the purchase of 4,500 million cubic meters per year for 23 years (four times more than the Natural Gas agreement, which was for 1,500 million cubic meters for 15 years). In the midst of the economic crisis of the 1980s, Spain was only able to acquire a third of the amounts contracted, which led to Sonatrach launching the first of the international lawsuits that have ended up confronting it with Spanish companies due to discrepancies over the agreed conditions.
The dispute was closed with a solution agreed in 1985 directly by the then vice-president of the socialist government, Alfonso Guerra, with a compensation for the Algerian group of 530 million dollarsan increase in the price of future deliveries and a cut in contracted gas purchases until 2004. Years later, well into the two thousand years, Sonatrach and Gas Natural Fenosa (the current Naturgy) faced each other in another international lawsuit due to discrepancies in review of prices, which was resolved in 2011 with the payment of the Spanish electricity company of 1,300 million and which led to the entry of the Algerian corporation in its capital as a shareholder.
In the nineties, after the nuclear moratorium approved by the Government of Felipe González, Spain made a firm political commitment to natural gas in industry and in homes, and to gas-fired power plants to produce electricity until we became a power in the sector. To guarantee the massive deployment of gas plants and their industrial and domestic uses, Spain strengthened its ties with Algeria as a major supplier. It did so first in 1996 with a gas pipeline that linked both countries, passing through Morocco (Maghreb-Europe gas pipeline, GME) and later, in 2011, with another tube that directly linked Spain and Algeria (Medgaz).
current diplomatic clash
During the last decades, Spanish-Algerian relations have been conditioned by the energy agreements. Gas supply contracts and diplomatic relations between the two countries have gone irremediably hand in hand. More than 95% of income from exports from Algeria come from the sale of hydrocarbons. And the giant Sonatrach is not a simple energy group, but a fundamental tool of the economic strategy and foreign policy of Algiers. Relations between Spain and Algeria are currently going through a delicate moment, in which energy and diplomacy are inseparably intertwined again.
In the midst of the energy crisis and in the midst of the spiral of price increases, Algeria decided to close the largest of gas pipelines with which it supplied gas to Spain, which has caused a change in the structure of the imports from the country. The closure of the submarine tube of the Strait, at the end of October, has forced Spain to skyrocket the weight of gas purchases that arrive by ship and has ended up causing a historic turnaround in the ranking of supplier countries. After five decades of permanent leadership by Algeria, since last January the United States has become the largest seller of gas to Spain and last month purchases from the American giant accounted for 43% of total imports.
On October 31, Algeria shut down the Maghreb-Europe gas pipeline, which connects with Spain through Morocco, as a result of the diplomatic clash between Algiers and Rabat on account of Western Sahara. After 25 years in operation, the tube was closed and there is no real prospect that it will be reactivated in the short or medium term. Algeria guaranteed the Spanish Government the supply contemplated in all contracts with Spanish energy companies (especially Naturgy, the largest buyer), by expanding the capacity of the other gas pipeline between the two countries and even supplementing shipments using ships.
But in recent weeks, bilateral relations have become even more cloudy after the turn of the Pedro Sánchez government around Western Sahara, supporting Morocco’s autonomy plan for the former Spanish colony to the detriment of the self-determination supported by the Saharawi movement and also Algeria.
In the midst of an energy crisis aggravated by the impact on the sector of Russia’s military invasion of Ukraine, Algeria has offered to maintain prices for all gas-purchasing countries. Everyone except Spain, for which the Algerian Government is considering “recalculate” the cost of supply. A warning that arrives precisely Algerian giant Sonatrach and the Spanish Naturgy lThey have been negotiating a review of the prices of their gas supply contracts for the next three years for months.
Related news
The gas sector insists that it is about an “ordinary review” of the many contracts that are made approximately every three years, but the negotiations have been rarefied and stressed by the turn of the Spanish Government. With the international gas markets out of control and setting record prices, the price increase in the renegotiation is almost taken for granted.
Own president of Naturgy, Francisco Reynés, slipped that the best result of the negotiations of Sonatrach would be in any case to maintain the current prices. “To think that a price revision today in Algeria is going to lead to a drop in prices, I think it’s being out of the world,” the executive said. And asked if he takes it for granted that the Algerian group will raise prices, Reynés settled with a “we’ll see.” The Spanish Government, in any case, insists on completely disassociating this more than probable upward revision of its position on the Sahara and the anger generated in Algeria, a traditional ally of the Saharawi movement.