‘Europe is looking for security of supply, but we don’t have security of demand,’ he told the Offshore Northern Seas conference in Norway on 27 August. Speaking via a satellite link-up from Algiers, he told the conference that gas producers outside the EU ‘need a clear signal from the European Commission’ that they can have access to final consumers.
Non-EU gas suppliers are concerned that the liberalisation of the EU energy market will result in a dramatic decline in upstream gas investment since the open market will favour short-term contracts over long-term sales agreements, which are more likely to include upstream development and investment commitments by the offtaker. In his speech, Khelil complained that Algeria was not consulted when the EU liberalised its energy markets. ‘We were asked suddenly to change the conditions we play under,’ he said. ‘I’m expected to spend $2,000 million-3,000 million [for the development of gas facilities] and I don’t have any commitments on the other side.’
Algeria has encountered stiff opposition from the EU over its insistence on including a destination clause in long-term take or pay contracts, to prevent the offtaker from selling on surplus imported Algerian gas. Under pressure from Brussels, which says the destination clause contravenes the single market logic of EU gas liberalisation, Russia has said it may drop the destination clause in its overseas gas sales contracts (Oil and Gas, MEED Special Report, 15:3:02).
There are also concerns that the liberalised market will lead to a price war between gas exporters. But Khelil ruled out the idea that Russia, Norway and Algeria, who are due to meet in Algiers on 6-7 September together with representatives from Libya and Egypt, would set up a gas producers’ equivalent of OPEC. The September meeting will be the second time since the start of the year that representatives of gas producing countries have gathered for discussions in Algiers.