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Algeria - Another Setback for the Galsi Pipeline

Situation: The much-heralded Galsi gas pipeline that would expand Europe’s reach to Algeria (and North Africa’s) gas reserves has undergone another setback—this time it may not recover.

Bottom Line: Competing gas pipelines to Europe are a bigger problem—and cause more uncertainty—than available gas reserves. In this game, everyone is hedging their bets, and the Galsi pipeline is the latest victim to be sidelined.

Analysis: The Galsi Pipeline was proposed nine years ago as a way to bring Algerian gas to Northern Italy. The pipeline’s proposed capacity would have been 8 billion cubic meters and would link the two Mediterranean coasts via Sardinia. Galsi would be a win-win for both Europe and Algeria, which would be given another export option, especially once it massive shale deposits are extracted. For Europe, it would be another alternative to Russia’s Gazprom and would have connected existing pipelines running through Morocco, Tunisia and Algeria, and traversing Spain.

The setbacks, however, have been many and the latest may render the project dead. Late last year, Algeria’s state-owned Sonatrach, which was supposed announce a final decision on the pipeline in November, delayed it until May 2013. Sonatrach insists this does not mean the project will not go ahead, but Italy thinks the Algerian company is using Galsi to force other concessions from Italy. 

What is Sonatrach really doing? It wants Italy’s help with the Trans-Adriatic and South Stream pipelines. Algeria is hedging its bets on which pipelines will benefit it more, and again Russia enters the theater. South Stream is a Gazprom project, and Gazprom is keen to keep Europe from expanding its gas alternatives. Also in the mix is the ITGI pipeline, which was another alternative for transporting Eastern Mediterranean gas to Europe. This pipeline lost the game to competitors Nabucco and TAP, but it is now using Algeria (and Cyprus and Israel) to attempt to revive itself. For now, the TAP pipeline is the only real player in the game and it will transport natural gas from the Caspian to Europe through Albania and Greece.




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