Rekindling old flames
Published: 08 April, 2009
The El-Assel deal in Algeria is more politically significant than anything else, he adds. L “It’s not the most attractive block and it’s not the most attractive fiscal terms either. It’s probably more along the lines of they’re trying to persuade the Algerians just how interested they are in investing in their upstream sector,” he says.
Algeria, and its national gas company Sonatrach, already count Europe as their major customer. While there is a history of cooperation between Gazprom and Sonatrach, Mr McMahon notes that it has been largely fruitless.
“There was a memorandum of understanding in place, which has since expired without anything really happening, and I think Sonatrach as a company and Algeria as a country are still wrestling with to what extent they believe in gas export cooperation between different nations. There’s obviously potential to impact on pricing and control of future pricing, and I think that’s still a question that the Algerians are wrestling with at the moment.”
Algeria will be central to any Russian – or indeed European – plans to bring African gas to Europe. The trans-Saharan pipeline would need buy-in from Sonatrach. One analyst explains that, while Gazprom might have attracted interest from Nigeria at the bottom end of the pipe, there is next to no strategic reason for Sonatrach, at the top end, to be interested in involving Gazprom.
“The strategic motive for that pipeline is to try to source cheap gas for Sonatrach to target at the European market,” the analyst says. “Why they would be willing to give a piece of that action to their main competitor in that market would make little sense. Despite the fact [Gazprom] would be very interested, I think it’s highly unlikely that they would ever see any of that action.”
Gazprom’s spokesperson says the company is considering an offer of a partnership in Nigeria as an extension of a deal, signed in June, to build domestic pipelines. The involvement of Gazprom as a partner in construction, but not supply, is not unfeasible, the analyst says, however. “The circumstances would have to be acceptable to Algeria, and I think that the Algerians would have some pretty big questions to ask about Gazprom’s involvement. We just don’t see [the trans-Sahara pipeline] happening,” the analyst concludes. “We’ve never seen the likelihood of it happening. To be frank, we just don’t see what’s in it for [the Nigerian National Petroleum Corporation].”
Politicisation
Regardless of Gazprom’s actual position in Africa, the EU appears to have perceived a threat in the company´s recent diplomatic push. In the wake of public negotiations between Russia and Nigeria, the European energy commissioner Andris Piebalgs visited Abuja and offered financial and political assistance to President Yar’Adua.
For Amelia Hadfield, associate fellow at Chatham House, this approach highlights the confusion in the current EU position regarding its African energy interests. “I wonder if in fact that was necessarily the right way to get in on the ground there, because I don’t know if the EU should be going in there with the financial handout, certainly Nigeria doesn’t want for money at this point,” she says.
“What they need are structures of good governance, and structures of leverage which allow them to use the development agreements that they’ve already signed with the EU to their benefit. And that’s something that Russia doesn’t have.”
It is also important to consider whether it is fair to conflate, as many do, Gazprom’s interests with Russia’s. “It is very tempting, especially when [Russian president] Mr Medvedev was the previous head of Gazprom. It’s not easy to try to separate out the two,” Ms Hadfield says. “Perhaps the real question is how dependent are we on Russian gas?” she says. “Those who believe that the EU is somewhere between 30-50 percent dependent on Russian gas tend to see Russia as a rather more muscular actor in the region, and something to be taken seriously, and see the slings and arrows of Russia’s machinations rather more deeply.”
