Spain and Algeria close to solving energy dispute - report

Jul 30, 2007, 10:31 GMT

Madrid - Spain and Algeria are about to settle their disagreements over sales of Algerian gas to Spain, the daily El Pais reported Monday.

The Algerian gas company Sonatrach is prepared to allow Spain's Gas Natural to take a stake in a new sub-Mediterranean gas pipeline in exchange for charging higher prices for gas it is exporting to Spain, according to the daily.

Algeria had earlier threatened to raise prices and to sell its gas elsewhere amid political disagreements with Spain over the Western Sahara conflict.

Medgaz, a new pipeline passing from North Africa under the Mediterranean to Almeria in southern Spain, will be able to transport 8,000 million cubic metres of gas annually after it becomes operational in 2009.

Spain's top gas supplier Algeria is currently exporting gas to Spain over the Duran Farrell pipeline which passes through northern Morocco.

The relations between Madrid and Algiers deteriorated after Prime Minister Jose Luis Rodriguez Zapatero's Socialist government took office in 2004.

The Socialists appeared closer to Moroccan than Algerian views in the conflict over Western Sahara, a territory annexed by Morocco after the former colonial power Spain withdrew from there in 1975.

Western Sahara is seeking independence with Algerian backing, while Morocco is only willing to grant it an autonomy status.

Now, however, Spanish diplomats have brokered a likely solution to the energy dispute, according to El Pais.

Algeria would thus grant Gas Natural a 10 per cent stake in Medgaz in exchange for raising gas prices by between 10 and 12 per cent, which would mean a 2.5 to 3 per cent hike for the Spanish consumer.

It was not clear, however, how interested Gas Natural was in participating in the pipeline project.