Draghi Heads to Algeria as Italy Seeks to Cut Russia Gas Imports

Algeria to Expand Natural Gas Exports to Italy by Almost Half

Mario Draghi will visit Algeria on Monday as part of a plan to wean Italy off Russian natural gas.

Algeria will agree to boost gas exports to Italy by 50% as part of a deal that will be signed during the prime minister’s trip, people familiar with the matter said.

The North African nation will aim to increase supplies to Italy by 9 to 10 billion cubic meters on an annual basis by as early as the end of 2022, the people said. Italy received around 21 billion cubic meters from Algeria in 2021. That made it the biggest source of imports after Russia, which sent 29 billion cubic meters.

A spokesman for Italy’s government declined to comment.

The export boost would probably see Algeria replace Russia as Italy’s largest gas supplier. Still, it may be an ambitious target. Algeria’s energy industry has been hindered in recent years by a lack of investment and political instability. The country is also trying to meet growing domestic demand as its population rises, leaving less room for exports.

Algeria’s state energy firm, Sonatrach, in early April said it only had a “few billion additional cubic meters” of gas, according to Algerian state media. Still, it said it was stepping up gas exploration and that it may be able to double production capacity in four years.

European Union states want to reduce their dependence on Russia -- which supplies the bloc with about 35% of its gas needs -- following President Vladimir Putin’s invasion of Ukraine in late February. While the EU has banned imports of Russian coal, oil and gas have not yet been sanctioned. Italy has said it would support a ban on Russian gas if the EU united behind such a move.

In Algeria, Draghi is due to meet President Abdelmadjid Tebboune. Their agreement will include joint investments in renewable energy as well as gas, Bloomberg reported Friday.

Algeria sends gas to Europe via three pipelines. Two land in Spain and another, called TransMed, arrives in Italy. One of the Spanish pipelines runs through Morocco and was recently shut off amid a diplomatic dispute between Algiers and Rabat.

Italy’s Eni, which has long-term gas contracts with Algeria, has been in discussions with Sonatrach over how to boost supplies. Foreign Minister Luigi Di Maio and Eni’s Chief Executive Officer Claudio Descalzi have already traveled to Algeria since the start of the Ukrainian war.

Last month, Eni and Sonatrach announced a large oil and gas discovery in the Berkine North Basin in the Algerian desert. In December, they signed a $1.4-billion production sharing agreement for oil and gas output from the southern part of the basin.

Eni and Sonatrach declined to comment about Monday’s agreement.

©2022 Bloomberg L.P.