Par Abderrahmane MEBTOULUniversity Professor, State Doctor in Economic Sciences
American President Donald Trump, in order to fight against inflation, plans to reduce the price of both gas and oil, the USA having become the world’s leading producer before Russia and Saudi Arabia between 2022/2024, proposed on 20 December 2024 a “deal” to European countries to buy more American oil and gas to avoid a sharp increase in customs duties. The United States supplies about 47% of the EU’s liquefied natural gas (LNG) imports and 17% of the bloc’s oil imports in the first quarter of 2024, according to data from statistical office Eurostat.
In response, the European Commission said it was ready to discuss how to strengthen relations particularly in the energy sector. And committed to gradually eliminating energy imports from Russia and diversifying its sources of supply. But according to the European Commission and experts, in addition to American pressure, the European energy map risks being further disrupted by the repercussions of the so-called DSDDD directive or “duty of vigilance of companies in matters of sustainability”, which will impose on large companies to ensure from 2027 that their entire chain of activities does not contravene human rights and environmental protection, a fine of up to 5% of the turnover of refractory companies .
However, the main destination for Algerian gas and oil is Europe, including Turkey, which provides nearly 80% of its foreign exchange earnings. For the year 2023 and only for gas, Algeria has become the second exporter to Europe for around 19% against 12/13% in 2022, and for the month of October 2024, Sonatrach has become Europe’s leading gas supplier with 1.3 billion euros or 21% of EU imports. But in 2024, Sonatrach, on the economic level, is Algeria and Algeria is Sonatrach. The Bank of Algeria provides 92% of the country’s foreign exchange revenues and 98% if we include the derivatives for 67% contained in the non-hydrocarbon section which went from 7 billion dollars in 2022 to 5 in 2023, the revenues of Sonatrach having been 60 billion dollars, 50 in 2023 and, according to forecasts, between 42-45 billion dollars for 2024. For an average barrel price between 75/77 dollars, what will happen if the barrel falls to less than 60/70 dollars, the budgetary balance according to the IMF for the 2024/2025 finance laws requiring more than 140 dollars per barrel? Hence the eight axes of Algeria’s energy strategy in order to adapt. It is within this framework that the energy transition policy in Algeria is articulated around seven axes.
Sonatrach’s energy strategy: an ambitious plan for a sustainable future
1. Energy transition and reduction of emissions
Natural gas, having a key role in the energy transition, occupies a central place in Sonatrach’s strategy. The company aims to produce it in environmentally friendly conditions by reducing CO₂ and methane emissions, and reducing its carbon footprint. According to the CEO of Sonatrach, this approach is based on three main axes:
- Reduction of fugitive emissions : in particular by reducing flaring, with an ambitious target of reduction to -1% by 2030/2050. Since 2020, a drop of 28% has already been recorded, equivalent to one billion standard cubic meters.
- Improved energy efficiency : This includes modernizing construction methods, as current techniques save 40-50% in energy consumption compared to old standards.
- Adoption of a new targeted subsidies policy : generalized subsidies being considered unfair and sources of waste of resources.
2. Development of renewable energies
With more than 3,000 hours of sunshine per year, Algeria has exceptional solar potential. However, exploiting this potential requires investments in modern technologies and equipment.
The national program aims to install renewable generation capacity of 22,000 MW by 2030/2035, including:
- 12,000 MW to meet national electricity demand,
- 10,000 MW intended for export.
The objective is to cover 40% of internal electricity needs from renewable energies. However, this development requires substantial funding and strong political will, because renewable energies represent less than 3% of domestic consumption in 2024.
3. Promotion of hydrogen (green, blue and white)
The Ministry of Energy plans to invest between 20 and 25 billion dollars in the development of hydrogen by 2040. This plan has three phases:
- Pilot projects (2023-2030),
- Expansion and creation of markets (2030-2040),
- Industrialization and competitiveness (2040-2050).
By 2040, Algeria plans to produce 30 to 40 TWh of hydrogen (gaseous and liquid), a significant part of which will be intended for export, covering up to 10% of European needs in green hydrogen.
White hydrogen, often forgotten, is also a promising resource. Produced naturally by the Earth without CO₂ emissions, it offers significant ecological benefits.
4. Upstream investment in hydrocarbons
Sonatrach plans to invest around $50 billion over the next five years for new hydrocarbon discoveries, both in Algeria and internationally. An effective fight against bureaucracy is essential to attract foreign investment in a win-win partnership framework.
5. Construction of the Nigeria-Europe gas pipeline via Algeria
This strategic project, with a capacity of 33 billion cubic meters, represents an investment estimated at 20 billion dollars. However, its profitability depends on several factors:
- Mobilization of financing,
- Evolution of gas prices,
- Infrastructure security,
- Agreement from European customers, whose future demand will be decisive.
6. Construction of a nuclear power plant
Algeria plans to build its first nuclear power plant for peaceful purposes by 2025. With uranium reserves estimated at 29,000 tonnes, the country could power two plants of 1,000 MW each for 60 years.
7. Shale gas development
With shale gas reserves estimated at 19,500 billion cubic meters, Algeria has the third largest potential in the world. However, this development requires:
- Mastery of new technologies,
- Significant investments,
- A social and environmental consensus,
- Careful management of water resources, because the exploitation of shale gas consumes significant quantities of fresh water.
8. Relaunch of the GALSI project (Algeria-Sardinia-Italy gas pipeline)
This project, still under negotiation, aims to transport 8 billion cubic meters of gas to Italy and Corsica. Initially planned for 2012, its cost has increased considerably, requiring technical and financial adjustments.
Conclusion
Algeria’s energy policy must adapt to the challenges of global warming and the energy transition. Reducing emissions, developing renewable energies and technological innovation are essential to ensure sustainable growth. Proactive governance and judicious investments will allow Algeria to enter a responsible and competitive energy future.
