Europe, the main export market for Algerian gas, is preparing to put in place new regulations which could upset the current energy balance. The EU Sustainability Directive, scheduled to come into force in 2027, imposes strict conditions on exporting companies, requiring them to demonstrate that their activities meet rigorous environmental and human rights criteria. For Algerian gas, this change could represent a major challenge.
The EU Sustainability Directive, also known as DSDDD (Corporate Sustainability Due Diligence), aims to ensure that all stages of the business supply chain comply with EU ecological and social standards . Violators risk fines of up to 5% of their turnover, a sanction that could weigh heavily on the finances of energy exporters, including Sonatrach, the Algerian gas giant.
This European initiative is part of a context of energy transition, where the EU seeks to reduce its carbon footprint and diversify its energy sources. If the objective is ambitious, the implications for traditional gas suppliers, including Algeria, are potentially disruptive.
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Competitors under pressure
Algeria is not the only country that is worried about the consequences of this new legislation. Qatar, another major supplier of liquefied natural gas (LNG) to Europe, has already threatened to stop its deliveries if sanctions were to be applied to its exports. According to the Qatari Minister of Energy, losing 5% of revenues generated by exports to Europe is not a viable option. This discontent illustrates the growing tensions between gas producers and Europe’s new climate ambitions.
The United States, which now dominates the European LNG market, could also be affected, particularly due to the high carbon footprint associated with shale gas production. For Algeria, whose economy is closely linked to gas exports, the stakes are even more crucial.
Sonatrach facing the environmental challenge
To prepare for these new requirements, Sonatrach has launched an ambitious plan to reduce its carbon footprint. Among the most notable initiatives is an unprecedented reforestation project, aiming to plant more than 423 million trees over a 10-year period. This approach, which requires an investment of one billion dollars, will also allow Sonatrach to generate carbon credits, thus improving the attractiveness of its products on the European market.
At the same time, the company has stepped up efforts to reduce gas flaring, a practice that contributes significantly to methane emissions. Since 2020, Sonatrach has reduced its emissions linked to flaring by 28%, and aims to reduce them further to achieve carbon balance by 2050. The transition to cleaner energies, such as green hydrogen and solar, constitutes another key part of its strategy.
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Economic and strategic implications
In October 2024, Algeria became Europe’s leading natural gas supplier, with a market share of 21%. However, this dominant position is threatened by increasing EU demands and fierce competition from other producers. The European directive on sustainability could not only lead to a drop in Algerian exports, but also affect economic relations between Algiers and Brussels.
To protect its interests, Algeria will not only have to continue its sustainability efforts, but also strengthen its negotiations with the EU. A review of existing trade agreements could be considered to mitigate the impact of new European rules.
Opportunity or threat for Algerian gas?
Faced with increased international competition and increasingly strict regulatory requirements, Algeria finds itself at a strategic turning point. If Sonatrach manages to align its practices with the new Algerian gas production standards, it could not only preserve its market share in Europe, but also strengthen its competitiveness on a global scale. Otherwise, the country risks losing a crucial source of revenue.
The entry into force of the European sustainability directive represents an opportunity as much as a threat. For Algeria, it could be an opportunity to modernize its energy sector and position itself as a key player in the global energy transition. But for this, significant efforts remain to be made, in a context where time is against it.
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