Bankinter | Naturgy is about to seal a new gas price agreement with the Algerian state-owned monopoly Sonatrach, its main supplier. Both groups are finalising a pact that definitively fixes the price of supplies in 2023 retroactively and those of 2024.
In addition, the criteria for revisions from 2025 to 2027 are beginning to be established.for revisions from 2025 to 2027. This will put an end to years of tense negotiations for contracts that, according to current prices, amount to at least €3,000 million/year. The current contracts between Naturgy and Sonatrach – whose prices are reviewed periodically – were signed more than 20 years ago and run until 2030 for some 5 bcm (5 billion cubic metres) per year. These are firm volume commitments, both in terms of supply for Sonatrach, and in terms of obligatory gas withdrawal for Naturgy. This 5 bcm for Naturgy is equivalent to 15% of Spain’s consumption. Sonatrach also supplies other companies, by methane tanker and through the Medgaz pipeline. In 2022, in the midst of diplomatic tension between Spain and Algeria over Morocco and the Sahara, the USA overtook Algeria as Spain’s leading gas supplier (28% US share compared to Algeria’s 23%). In 2023 and so far in 2024, Algeria is once again the leading supplier (29% share in all of 2023 and 37% so far in 2024).
Analysis team’s view: Positive news. A price agreement between the two groups is good for everyone, and the more stable and long-lasting the better. Algeria is Spain’s largest gas supplier. The gas price agreement is very relevant at a business and political level. The gas negotiations had critical moments when the Spanish government took a historic diplomatic turn and supported Morocco in the Sahara conflict and the Polisario Front, against Algeria.
This led to months of deadlock in negotiations and mutual distrust. Now, the two companies have managed to rebuild their business relations. Sonatrach has a 4% stake in Naturgy, as compensation, years ago, for a settlement in the revision of supply tariffs. Sonatrach and Naturgy also share a stake in Medgaz, the major gas pipeline that supplies Algerian gas to Spain.
