Algeria seeks lowering its dependence on European markets by becoming America’s main suplier of natural gas

LPG in the US

----------------

Algeria has been looking to expand its sales of liquefied natural gas well beyond its traditional markets in Europe, and has found an eager buyer in the energy hungry US.

In recent years, Algeria has been increasingly targeting the US as a potential major customer for natural gas, having lifted total exports to more than 60bn cu metres last year. However, it has far more ambitious plans to become one of the US’s major suppliers in the coming years.

On May 14, Mohamed Meziane, the president and chief executive officer of Sonatrach, Algeria’s state owned oil and gas company, announced the company was looking to triple gas exports to the US from 4bn to 12bn cu metres by 2015.

Meziane said he was confident that Algeria could carve out a larger slice of the expanding US market, despite competition from other suppliers, especially those in the Middle East. Currently, Algerian exports account for only around 5% of US gas imports, something Meziane said he believed would change.

"We managed to break into European markets, including the British, so why not other markets? Our interest is no longer directed solely towards European nations," he said to local media.

The US is increasing its reliance on natural gas, with one quarter of the country’s energy now coming from gas. However, as the demand for gas rises, with daily consumption standing at around 1.7bn cu metres, the US is also seeing the depletion of many of its domestic resources, with fields in the Gulf of Mexico nearing the end of their commercial lives and daily production falling by 1.2m cu metres since 2001.

This is an opportunity in the market that Algeria hopes to take advantage of. Algeria aims at lifting its annual exports from the 62bn cu metres registered in 2006 to 85bn cu metres by the middle of next decade, with more than a third of this increase intended for the US market.

"Algeria will not miss the opportunity to take share from the US market and Algeria will contribute to fill the US gas shortage," said Chakib Khelil, the minister of energy and mines.

The emphasis on the US market is part of Algeria’s plan to capitalise on its gas resources and to diversify its markets. Sonatrach recently announced that, in the future, half of its exports would be carried by pipelines, mainly to Europe, which buys around 70% of its gas needs from Algeria, while the other 50% would be shipped by tanker to more far flung destinations such as the US and Asia.

The US too would be happy to lock Algeria into some long-term agreements and to meet its asking price as a means to ease calls for a gas cartel similar to OPEC. Washington, along with Europe, was none too pleased with the suggestions from some of the world’s major gas producers, including Russia, Venezuela and Algeria’s President Bouteflika that an organisation for gas producing nations be set up, fearing prices rises and market control.

During his May visit to the US, Khelil sought to allay these fears. Algeria did not seek "control of the world oil and gas market or to fix the prices", he told a press conference after meeting with Samuel Bodman, the US energy secretary of state on May 8.

Khelil also soothed ruffled US feathers over the close ties between Sonatrach and Russian gas giant Gazprom, saying the relationship was no different from that enjoyed by the Algerian firm and other international companies in America and Europe.