Geostrategic and energy issues of the Nigeria-Europe gas pipeline – Morocco, Nigeria, Algeria, European Union, Gas, Russia, Ukraine, Trans-Saharan Gas Pipeline,
According to the daily newspaper Le Figaro (France) dated May 02, 2022, the Nigerian Minister of Petroleum has officially declared that Nigeria and Morocco are seeking funds to finance the mega pipeline project aimed at transporting Nigerian gas to the North Africa and Europe, which plans to eventually free itself from Russian gas, the share of which is more than 40%, while according to the Algerian Minister of Energy, remarks taken up by the APS, on February 17 2022, this project passes through Algeria. Where is the truth ? Will this project be able to compete with the Russian South Stream of 63 billion cubic meters of gas, North Stream1 of 55 and North Stream2 of 55 billion cubic meters of gas, the latter being frozen (Conference/debates by Pr Abderrahmane Mebtoul, at the invitation of the German Friedrich Ebert Foundation and the European Union March 31, 2021) In order not to repeat the mistakes of the past, the feasibility of the Nigeria Europe gas pipeline project must take into account the new global gas changes to assess its profitability because letters of intent are not final contracts. As demonstrated by an important IRIS study of August 19, 2021, the gas pipeline linking Nigeria to Europe, the main customer who must also decide on this project, is the subject of important geostrategic issues for the region. Hence the importance of having a cold economic vision without feelings for its profitability, especially in these times of serious geostrategic tensions. must take into account the new global gas changes to assess its profitability because the letters of intent are not definitive contracts. As demonstrated by an important IRIS study of August 19, 2021, the gas pipeline linking Nigeria to Europe, the main customer who must also decide on this project, is the subject of important geostrategic issues for the region. Hence the importance of having a cold economic vision without feelings for its profitability, especially in these times of serious geostrategic tensions. must take into account the new global gas changes to assess its profitability because the letters of intent are not definitive contracts. As demonstrated by an important IRIS study of August 19, 2021, the gas pipeline linking Nigeria to Europe, the main customer who must also decide on this project, is the subject of important geostrategic issues for the region. Hence the importance of having a cold economic vision without feelings for its profitability, especially in these times of serious geostrategic tensions. the gas pipeline linking Nigeria to Europe, the main customer who must also decide on this project, is the subject of important geostrategic issues for the region. Hence the importance of having a cold economic vision without feelings for its profitability, especially in these times of serious geostrategic tensions. the gas pipeline linking Nigeria to Europe, the main customer who must also decide on this project, is the subject of important geostrategic issues for the region. Hence the importance of having a cold economic vision without feelings for its profitability, especially in these times of serious geostrategic tensions.
1.- The energy sector in Nigeria is marked by the dominance of the oil and gas industry, providing 75% of national budget revenues and 95% of export revenues, proven natural gas reserves being estimated to 5,300 billion cubic meters of gas. The Morocco-Nigeria gas pipeline, the cost of which is estimated by IRIS at between 25/30 billion dollars, between 5 and 10 billion dollars more than that passing through Algeria, the duration of which would vary between 8/10 years should be about 5,660 kilometers long. It would run along the West African coast thus crossing 14 countries: Nigeria, Benin, Togo, Ghana, Ivory Coast, Liberia, Sierra Leone, the three Guineas, Gambia, Senegal, Mauritania and Morocco. This project was announced in December 2016,
In May 2017, cooperation agreements were signed in Rabat to commit the two parties to sponsor a feasibility study (completed in July 2018) as well as a preliminary study of details (FEED) carried out in the 1st quarter of 2019. In the phase of pre-studies, it is for the States crossed and ECOWAS to sign agreements relating to its construction but also to validate the volumes of gas available for Europe and to start discussions with the operators of the field ” Tortue” (gas resources) off Senegal and Mauritania (these two countries signed an agreement in December 2018 to jointly exploit the Tortue-Ahmeyim gas field and approach European customers. This project aims to connect Nigerian gas resources to different African countries,There are already two gas pipelines in the North-West Africa zone, the “West African Gas Pipeline”, which links Nigeria to Ghana, via Benin and Togo, and the Maghreb-Europe gas pipeline (also called “Pedro Duran Farell ”) which connects Algeria to Europe via Spain (Cordoba) via the Strait of Gibraltar and Morocco.
2.- Concerning the 4128 km Nigeria Algeria gas pipeline, the cost is estimated by the European Commission at 19/20 billion dollars for a minimum construction period of 5/7 years after the start of the launch, with an annual capacity of thirty billion cubic meters. It should leave from Warri in Nigeria to end in Hassi RMel, passing through Niger, the idea of which germinated in the 1980s, the agreement of understanding having been signed on July 03, 2009. On September 21, 2021 the Nigerian Minister of Energy said in an interview with CNBC Arabia television channel on the sidelines of the Gastech conference that his country has started to implement the construction of a gas pipeline to transport gas to Algeria. Recall that currently
Algeria has three pipelines. The TRANSMED, the largest pipeline of a GO3 loop which increases the capacity by 7 billion cubic meters to which will be added the 26.5 for the GO1/GO2 allows a capacity of 33.5 billion gaseous cubic meters . It is 550 km long on Algerian territory and 370 km on Tunisian territory, towards Italy. We have the MEDGAZ directly to Spain from Beni Saf from a capacity of 8 billion cubic meters of gas which, after an extension planned for 2021, the capacity will be increased to 10 billion cubic meters of gas. We have the GME via Morocco which Algeria has decided to abandon, whose contract ended on October 31, 2021, with a length of 1300 km, 520 km of Moroccan section, the initial capacity being 8, 5 billion cubic meters having been increased in 2005 to 13.5 billion gaseous cubic meters. This project is strategic for Algeria according to various reports from the Ministry of Energy in order to be able to honor its international commitments in terms of gas exports traditional gas reserves for Algeria, for a population exceeding 45 million inhabitants (for shale gas, the third largest reservoir in the world, 19,800 billion cubic meters of gas, according to a US report), but not for tomorrow for various technical, financial and political reasons, international banks being more and more reluctant to finance this type of project .
Also, for the financial balances with the strong domestic consumption and the disinvestment in this sector which policy to follow in order to be able to export again horizon 2030 where the internal consumption will exceed the current exports explaining the decision of the president of the republic of November 21, 2021, to focus on renewable energies to meet domestic consumption where we are witnessing a decrease in production and exports in physical volume of traditional oil/gas. Oil reserves are evaluated according to the declaration of the Algerian Minister of Energy at the beginning of 2020 at 10 billion barrels and between 2200 and 2500 billion gaseous cubic meters for traditional gas, domestic consumption exceeding current exports horion 2030, explaining besides, with in addition fixed price contracts in the medium term, that Algeria benefits little from the exceptional rise in prices. In 2021 since according to the OPEC report, production has gone from more than 1.2-1.5 million barrels/d between 2007/2008 to around 1 million barrels/d at the end of 2021, exports being around at 500,000 barrels/d and for gas exports were 65 billion cubic meters of gas at only 43/44 for 2021, due to strong domestic consumption, nearly 40/50% of production for oil and gas between 2019/2021 and expected to ramp up between 2022/2030, leaving little for exports.
3 .- The profitability of the Nigeria Europe project, supposes five conditions. First , the mobilization of financing, while foreign exchange reserves are at a relatively low level for Algeria $44 billion at the end of 2021 45 million inhabitants but low debt, $35.7 billion for Morocco with a high debt for a population of 37 million and Nigeria 40 billion dollars for 210 million inhabitants with political instability . Without the involvement of international financial groups, Europe’s main client, and without its agreement and financial contribution, it will be difficult, if not impossible, to launch this project. Secondly, the evolution of the gas transfer price because as the CEO of Sonatrach points out, Speaking at the Forum of Channel 1 of the National Radio, on September 12, 2021 specified that the feasibility is linked to the study of the market in view of the fall in the price of gas, which could, according to Sonatrach, “influence the decision to launch such an investment”, hence the approach to launch a market study to determine the demand for gas before deciding on the advisability of committing to this project”. This feasibility involves determining the break-even point based on competition from other producers, the cost and changes in the price of gas. Thirdly, security and agreements with certain countries, the project crosses several areas that were unstable at the time and which jeopardize its reliability with groups of armed militants in the Niger Delta who manage to destabilize the supply and supply of gas, the consequences of such an action, if repeated, could jeopardize the profitability of this project. It will be necessary to involve the States crossed where it will be necessary to negotiate for the right of passage (payment of royalties) therefore to evaluate the risks of an economic, political, legal and security nature. Fourth, for the feasibility of the NIGAL project, future demand will be decisive, Europe’s dependence could reach, , nearly 70% of total energy consumption, i.e. 70% for natural gas, 80% for coal and 90 % for oil, according to European Commission estimates. fifth, international competition which influences the profitability of this project. Reserves with low costs are 45,000 for Russia, 30,000 for Iran and more than 15,000 for Qatar, not counting the entry of Mozambique into Africa (4,500 reserves). Unable to circumvent the entire corniche of Africa, in addition to the high cost compared to its competitors, the famous Siberia-China gas pipeline, Qatar and Iran, close to Asia, with advantageous contracts for China and the India, the Israel-Europe gas pipeline, the large gas fields in the Mediterranean (20,000 billion cubic meters of gas) explaining the tensions between Greece and Turkey.
And Algeria is in competition even in Africa, with the entry into Libya, reserves of about 1500 billion cubic meters not exploited, with more than 42 billion barrels of light reserve oil like Algeria and close to the Europe explaining the current tensions, and the large deposits in Mozambique (more than 4,500 billion cubic meters of gas. In addition to the USA, the world’s leading producer of shale oil/gas, with large terminals, having already started Europe, we have competition from the Caspian Sea, including the Trans Adriatic Pipeline (818 km) direct competitor of Transmed, which transports gas from Azerbaijan which crosses northern Greece, Albania and the sea Adriatic Sea before joining, for 8 km, the beach of Melendugno in the south-east of Italy,operational that can transfer the equivalent of 10 billion cubic meters per year.
Unable to circumvent the entire cornice of Africa, in addition to the high cost compared to its competitors, the famous gas pipeline Siberia China, Qatar and Iran close to Asia with advantageous contracts for China and India, the natural market of Algeria, in terms of profitability, being Europe where the market share of Algeria against many competitors, in Europe is declining where according to the site “Usine Nouvelle”, Russia supplies 36 % of gas imported by Europe, Norway (23%), other LNG suppliers (10%) and Algeria about 8%.
4.- With the budgetary tensions that Algeria is experiencing, there is reason not to repeat the unfortunate experience of the GALSI project, the Algeria-Sardinia-Italy Gas Pipeline, which was to be commissioned in 2012, at an initial cost of 3 billion dollars and a capacity of 8 billion cubic meters of gas, also to supply Corsica. It was abandoned by Algeria following the offensive of the Russian giant Gazprom, extending its market share, with financial losses from Sonatrach having devoted large amounts in foreign currency and dinars for feasibility studies (conference at the chamber of trade in Corsica A. Mebtoul in 2012 on the Galsi project) . Let’s avoid these utopian statements where with all the bureaucratic constraints that all the investment codes have not lifted since political independence, that if highly capital-intensive projects are launched in January 2022, they will only be profitable between 2027 /2030 such as petrochemicals, iron from Gara Djebilet or phosphate from Tebessa.
Indeed, the government is planning a new investment code in Algeria, after so many others that have had little impact on non-hydrocarbon production and exports, having attracted little foreign investors. Despite the skid of the dinar, not to say devaluation of 5 dinars around the years 1970/1973 of 80 dollars between 2000/2004 and May 03, 2022, at 144 dinars a dollar, this did not make it possible to boost non-hydrocarbon exports where more than 97% with derivatives of foreign currency inflows come from hydrocarbons, the Sonatrach 2021 report giving 2.5 billion dollars for derivatives recorded in the non-hydrocarbon section. In addition for an objective assessment, must be taken into account, not only the value, certain products such as fertilizers and others having seen their prices increase at the level of the international market between 30/50% but of the volume, the volumes of the exported products, the only reference to see if there has really been an increase in exports and performance of Algerian companies. And for the net foreign currency balance of Algeria, it is necessary to subtract the raw materials imported in foreign currency, the subsidies such as the sale price of gas for certain exporting units at a price much lower than the international one and the tax exemptions.
In conclusion, the Nigerien authorities and Europe, the main customer, must have a clear position concerning the gas pipeline to Europe: either Algeria or Morocco avoiding contradictory speeches and that certain organic experts or heads of ministerial departments avoid mislead both public opinion and the highest authorities of the country. The language of truth must prevail, if the errors of the past are to be avoided. The attraction of investment with high added value cannot result from laws but from a real political will going towards deep reforms, a stability of the legal and monetary framework allowing visibility and that the countries which attract the most FDI n have no investment codes . My experience and my international contacts at the highest levels show that the time is over for personalized relations between heads of state or ministers to ministers in international relations where decentralized networks dominate, that in business practice there is no of feelings but only of interests and that any investor is attracted by profit whether he is American, Chinese, Russian, Turkish or European. It is up to the regulatory State, which is strategic in the market economy, like a conductor to reconcile private costs and social costs.
The world is moving between 2022/2030, inevitably, towards a new model of energy consumption based on the digital and global energy transition and in particular in the Mediterranean, the main market of Algeria, as much as water, is at the heart of the state sovereignty and security policies. The new economic dynamics will modify the balance of power on a global scale and will also affect political recompositions within States as well as on the scale of regional spaces
