EU bids to finalise Algerian gas deal

Efforts to tap into Algeria's vast natural gas reserves will intensify next month, as EU officials try to finalise an agreement to boost co-operation with the world's fourth largest exporter of gas.

EU officials are expected to finalise the details of the deal on 11 July, although no date has yet been set for the signature of the agreement.

Diplomats said the deal would help develop gas infrastructure and technology, as well as bringing Algeria's legislation closer to the EU's.

The move comes just weeks after the publication of joint Council-Commission proposals on the external aspects of energy security, which included the creation of an EU-based energy market from the Atlantic to the Ural mountains.

Since a series of energy crises early this year the EU's attempts to seek out new sources of energy have intensified.

This week the EU gave its backing to the long-planned Nabucco pipeline that would bring gas from the Middle East and Caspian to central Austria. Studies are also to begin later this year on a pipeline taking gas from Kazakhstan to Azerbaijan and on to European markets.

While central Asia is seen as a lucrative new market some member states, such as Spain, have lobbied for the EU to look to the southern Mediterranean, particularly Algeria, Egypt and Libya, for alternative energy supplies.

After decades of civil war, Algeria is now seen as a stable source of energy, lying largely outside Russia's sphere of influence and away from the volatile Arabian Gulf.

Diplomats said the deal, a 'memorandum of understanding', will not be legally binding, but could provide a stepping-stone to a more comprehensive and legally binding agreement.

"If some of the projects are realised then perhaps we could take things further," said one official.

The deal will focus on convergence of legislation, development of infrastructure for gas and electricity and the exchange of technology and experts.

Officials said that much of the deal is likely to focus on developing Algeria's ability to export liquefied natural gas (LNG).

The Commission hopes that increased supplies of LNG could pave the way for a market-based trading system for gas.

The gas market is currently constrained by the dominance of pipelines, which supply fixed-price gas for defined periods.

By increasing LNG supplies the EU hopes to create a world market similar to that for oil.

But the EU faces competition from Russia which has been courting Algiers since the beginning of this year.

In March President Vladimir Putin visited the Algerian capital, where he agreed an arms-for-debt deal worth billions of euros.

The agreement included a commitment from Moscow to write off Algeria's massive Soviet-era debt and support for joint energy projects.

Efforts to tap into Algeria's vast natural gas reserves will intensify next month, as EU officials try to finalise an agreement to boost co-operation with the world's fourth largest exporter of gas.