Morocco’s role in EU’s gas diversification push [Gas in Transition]

The EU is pressing forward with plans to reduce the bloc’s dependence on Russian natural gas, with the ambition of cutting imports from the country by two thirds before 2023 and then eliminating them entirely by the end of the decade.

This promises to be a massive undertaking. Data from the International Energy Agency (IEA) show that the EU’s member states imported no less than 155bn m3 of Russian gas last year, so if the bloc wants to slash that figure by two thirds, it will have to find a way to procure more than 100bn m3 of gas from other sources. It will also have to investigate multiple supply options, since no other providers are large enough to replace Russia.

For at least two reasons, North Africa is an obvious place for the EU to look for more gas.

 North African advantages

On the one hand, the region has the distinct advantage of geographical proximity to Europe. North Africa lies on the southern shore of the Mediterranean Sea, and at the Straits of Gibraltar, the distance between the continents is just 13 km. Routes between other points along the Mediterranean coast are longer, but in general, there are many options for delivering fuel to markets in Southern Europe. The distances are short, the seas are calm and the conditions are relatively predictable.

Secondly, North Africa is already a supplier of gas to Europe. Algeria, for example, has been delivering gas to Europe by pipeline and tanker for several decades. It has constructed several subsea pipelines across the Mediterranean to Spain and Italy, and its Arzew LNG and Skikda LNG plants send LNG to European buyers via tankers. Meanwhile, Egypt is actively working to increase its gas output and export capacity in order to establish itself as another major source of LNG for the European market.

At the same time, Libya has several important assets – namely, gas reserves that are already known to be commercially viable, a pipeline in place (the Greenstream link, which terminates in Italy) and spare capacity in that pipeline. The system has remained underutilised since 2014, but Libya’s National Oil Corp. (NOC) has expressed strong interest in bringing throughput closer to its design level of 11bn m3/yr.

In short, North Africa is relatively close to the EU, and some states in the region have already established themselves as reliable suppliers of gas to the European market. As such, the EU may view North Africa’s gas-producing states as good candidates for replacing some of the Russian imports that are slated to be pushed out of the market in 2022 and beyond.

But what about Morocco, which is also a producer of gas? Will it also have a role to play in Europe’s shift away from Russian gas?

 Morocco’s transit status

Until recently, Morocco was significant to European gas markets primarily because of its position as a transit state for Algerian gas deliveries. The country hosts a section of the Gas Maghreb Europe (GME) pipeline, which has a throughput capacity of 12bn m3/yr. GME originates at Hassi R’Mel, a gas field in Algeria’s Laghouat province, and then crosses Moroccan territory and the Straits of Gibraltar before making landfall and connecting to Spain’s domestic gas grid.

This pipeline has served as a (mostly) reliable source of supplementary gas supplies to the Iberian peninsula since the turn of the century. Last August, however, Algeria severed diplomatic relations with Morocco, citing a dispute over the latter’s alleged support for the Movement for the Autonomy of Kabylie, a Berber group seeking the right to self-governance in Kabylie province. Rabat, for its part, reiterated its claims that Algiers was backing the Polisario Front, a separatist group asserting Western Sahara’s independence from Morocco. Tensions ratcheted up even further when the US government opted to back Morocco’s claims in Western Sahara in exchange for that country’s normalisation of relations with Israel.

In response to these developments, Algeria declined to renew its agreement with Morocco on gas transits through GME. As such, after that agreement expired on October 31, 2021, the volume of Algerian gas arriving in Spain dropped immediately.

Since then, Algeria’s national oil company (NOC) Sonatrach has covered some of the resulting supply gaps in Spain by boosting the volume of gas delivered to Spain via another subsea pipeline – Medgaz, which also handles production from the Hassi R’Mel field. The link passes exclusively through Algerian territory before following a longer underwater path from Beni Saf to Almeria. Sonatrach has also talked about increasing LNG exports to Spain, but this does not appear to have happened; instead, Spanish gas buyers have turned to other suppliers, including US sellers.

 GME pipeline likely to stay closed

In the immediate aftermath of the suspension of transit shipments last autumn, Algeria showed little interest in re-opening GME or in resuming negotiations with Morocco. Instead, it focused on expanding exports to Europe via other routes such as Medgaz.

Its stance has not changed since the Russian invasion of Ukraine in late February. If anything, it has been concentrating even more intently on European market opportunities in response to announcements of the EU’s plan to wean itself off Russian gas as quickly as possible. It has been holding talks with multiple customers in Southern Europe in the hope of selling more gas in Greece, Italy, Spain and Portugal, and it has enjoyed some success – especially in Italy, which has now arranged to buy more Algerian supplies starting in 2022.

Morocco, meanwhile, has remained on the sidelines. Officials in Rabat and anonymous sources cited by press agencies have talked occasionally about reopening GME – but they have suggested that it could be operated in reverse mode to import regasified LNG via Spain. They have outlined plans for building LNG terminals – but they have stressed that the country needs floating storage and regasification units (FSRUs) capable of importing gas, not export facilities capable of selling it abroad. International oil companies (IOCs) have talked up their commercial discoveries at new upstream sites such as Anchois, and some hints have been dropped about the possibility of linking fields such as Tendrara to the GME pipeline for future exports. For the most part, however, the operating assumption seems to be that Morocco expects to direct all of its currently anticipated gas production to the domestic markets.

 Assessing Morocco’s prospects for exports to Europe

In other words, Morocco is probably not in a position to follow Algeria’s example, in that it does possess commercial quantities of gas but is not likely to become a net exporter of gas to Europe.

Ross Cassidy, the vice president of MENA research at Welligence Energy Analytics, points out that Morocco simply did not have enough gas, even after its most recent discoveries, to consider large-scale exports. Instead, he says, Rabat is likely to put a higher priority on replacing the volumes of gas lost when Algeria halted transit shipments through the GME pipeline last autumn.

“Morocco does not have enough gas for its domestic market. The country will likely want to replace Algerian gas with any future domestic production,” he tells NGW.

Hamish Kinnear, a Middle East and North Africa (MENA) analyst for Verisk Maplecroft, goes into further detail, saying that he expects Moroccan authorities to direct gas from local fields to domestic business and industrial consumers. “There have been recent discoveries in Morocco, though the amount of recoverable gas is still unclear. Whether there will be enough for export or just to satisfy domestic demand is therefore uncertain,” he states. “Rabat may also choose to use the gas predominantly for industrial purposes instead of household supply or exports – in the creation of fertilisers, for example.”

In short, there is little reason to believe at this point that Morocco will make any major contributions to the EU’s gas supply in the near future. Unless the North African country makes some major gas finds and takes the steps necessary to bring such discoveries to market correctly, it is likely to remain an outlier for the time being, focused mostly on meeting its own internal demand for gas.