Algeria Restores Hope for EU Energy Security

Algeria Restores Hope for EU Energy Security

As one of the most resource-rich nations in the Mediterranean region, Algeria has long been identified as a strategic energy partner by European Union policymakers. Reflecting this vision, the development of EU-Algerian relations, particularly interregional energy cooperation, has underlain many major EU foreign policies towards the Middle East and North Africa (MENA), as seen in EU initiatives such as the Barcelona Process, the EU-Mediterranean Partnership, the European Neighbourhood Policy and the Mediterranean Union. Based on these cooperative frameworks, as well as bilateral agreements between Algeria and some of the EU countries, Algeria has become the third largest energy provider to the 28-member state bloc after Russia and Norway.

Algeria’s importance as a source country for EU energy imports was recently highlighted once more, with the signature of the historic Memorandum of Understanding (MoU) between the Maghreb nation and the European Union on 7 July. In the words of European Commission President Jose Manuel Barroso, the MoU is “a strategic document, a tool to develop energy cooperation between Algeria and the EU.” Although still in its preliminary draft version, the MoU will evidently pursue an ambitious and comprehensive agenda, covering several areas of cooperation such as oil and gas development, renewable energy, energy efficiency, legal and regulatory reform, progressive energy markets, energy infrastructure, and technology transfers.

Both EU and Algerian diplomats welcomed the new energy agreement, having been under negotiation for over five years, and arguably comes at a highly critical time for the EU’s energy security. According to official Eurostat data, recent years have seen a substantial decrease in primary energy production in the European Union — from 940.6 million tonnes of oil equivalent (TOE) in 2000 to roughly 830 million TOE at present.

Considering the relatively stable levels of EU energy consumption (1725 million TOE in 2000, 1759 million TOE in 2010), this marked downturn in domestic energy production in turn implies that the EU increasingly has to rely on imports, to provide European industries and households with enough energy. The trend towards greater energy import dependency has been particularly pronounced with regard to the EU’s crude oil and natural gas supplies, 85.2% and 62.4% of which are currently imported from non-EU source countries.

The EU’s increased reliance on energy imports is alarming, particularly considering the Union’s energy dependence on Russia, which supplies nearly one-third of its coal, oil and gas imports. Therefore, especially since the 2006 gas conflict between Russia and Ukraine and the ensuing short-lived European energy crisis, the EU has prioritized diversification of its fuel imports to reduce its energy dependence on Russia. Until recently, the centerpiece of the EU’s energy import diversification strategy was the ambitious Nabucco-West project, which envisaged the construction of a 1,326-kilometer pipeline transporting Caspian gas to Central and Eastern Europe. However, as was announced in late June this year, the project would no longer be pursued due to the huge economic and political costs associated with its implementation.

The abandonment of Nabucco-West will likely incentivize the European Union, at least in the short to medium run, to refocus its foreign energy policy on the MENA region, and the MoU with Algeria may be one of the first major steps in this direction. With an annual production of 700 million barrels of crude oil and 85 billion cubic meters of natural gas, Algeria, among other resource-rich MENA countries, is certainly well positioned to meet part of the EU’s energy demand and thereby assist the Union in rebalancing its energy import mix and consolidating its energy security. Moreover, as reiterated by Barroso, the EU perceives Algeria not only as a reliable exporter of natural gas and oil, but also as a key player in its plans to develop solar technologies in the Mediterranean region. EU-Algerian cooperation in this area will be the subject of further multilateral negotiations at the Ministerial meeting on renewable energies and solar energy to be held in Brussels in December this year.

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