Spain's gas imports from Algeria fall as costlier US product picks up slack

OVIEDO, Spain

Spain is increasingly turning towards the US and away from Algeria for its natural gas supplies, according to data released this week.

In April, Algerian gas provided Spain with around 9.5 gigawatt-hours' worth of electricity -- around 37.5% less than during the same time last year, according to Enagas, the owner and operator of Spain's gas grid.

Last year, the North African nation provided 41% of Spain's total gas needs.

This shift is the result of both an increasingly tense relationship between Madrid and Algiers and the closure of the Maghreb/Europe gas pipeline last fall.

Algeria shut off the pipeline, which passes through Morocco, to cut its western neighbor off from its gas.

That was after Algeria froze diplomatic ties with Morocco over Rabat's positioning and lobbying around the autonomy of the Western Sahara region, as well as a vast spying scandal.

Then, in March, the Spanish government made a surprising U-turn on its stance on Western Sahara, siding with Rabat in that the territory should be an autonomous region within the Moroccan state.

This provoked the ire of the Algerian government, though officials assured that gas supplies to Spain would continue. However, Algeria's state-owned oil company Sonatrach publicly mulled a "recalculation" of the price Spain pays for the gas.

When it emerged that Spain was supplying Morocco with natural gas, Algeria's energy minister said this amounted to a "breach of contract" and threatened to suspend gas supplies to Spain.

Supplies currently continue as the result of some diplomatic maneuvering, but Spain appears to be weaning itself off its reliance on Algeria, which is still its second-largest supplier.

The US became Spain's top source of natural gas in January. In April, US supplies accounted for 31% of Spain's gas consumption, a 250% increase from April 2021.

Amid a backdrop of already soaring natural gas prices, however, Spain is paying as much as 50% more for liquified natural gas sent by ship from the US.

"If Algeria stops supplies, Spain can meet its demand with LNG imports. But this can push up gas prices in the country because it is much more expensive than getting gas directly from Algeria via the LNG pipeline," said Ana Maria Jaller-Makarewicz, an analyst for Europe at the Institute for Energy Economics and Financial Analysis (IEEFA).