Natural Gas and the Euro-Maghrebian partnership perspectives for the production of Electricity.

Mokhtar Bouanik, Engineer, SONATRACH / RTE, Skikda, Algeria; Abdelkrim Ainouche,Engineer Gas Department Manager, SONATRACH / RTE, Skikda, Algeria. Abstract.
For more than thirty years, Natural Gas plays an ever increasing role between Europe and the Maghreb. Maghrebian Natural gas ( essentially Algerian ) now ensures 15% of the European gas consumption. This article focuses on the influence of the Euro-Maghrebian partnership in strengthening energy policy and examines the energy and power markets from global and regional perspectives. In the Maghreb, electricity demand in the horizon 2010 will increase by 150% and will require the installation of new power export capacities ( 17000 MW ) and very important capital expenditure. Algeria in its part is developing an ambitious power plant construction program. The paper illustrates how the liberalisation of gas and electricity markets is fundamentally changing the competitive environment for the gas and electricity market. Natural Gas, that is required to contribute to an important part of the new electricity production capacities can be the common denominator for a regional approach. Two different alternatives can be considered. - Produce electricity in the proximity of the gas field and transport it to the consumption point. - Transport Natural Gas and produce electricity near the consumption zone in each country. The choice of one of the alternatives depends on numerous factors, but the difference of transportation costs of electricity and Natural Gas is the most determining. Because the electricity market is developing strongly, and for economic and environmental reasons the use of Natural Gas in the production of electricity is unavoidable. Thus having a competitive gas market is necessary for a proper functioning of the electricity market.

Introduction
Algeria has always played a privileged role on the worldwide energy scene. The example of natural gas , whose expansion was mainly due to its contribution is, in this way, quite eloquent1. With the start-up of the Arzew GL4Z plant in 1964, Algeria became the world's first LNG producer.This plant is still providing the world Market. Algeria is reinforced in his natural gas strategy by the interaction created between natural gas and electricity, due essentially to a certain worldwide awareness, and the focus of its ecological interest. Compared to the other fossil energy, natural gas is considered as the least polluting. The nuclear fear is an other argument of great size. The Tchernobyl drama has always been here to recall it to the whole Humanity. The statistics2 show clearly that the fastest evolution in terms of natural gas consumption comes from the electricity generation. The great technological breakthrough of the cogeneration is reinforcing the position of gas as the 21st centurys energy source. Therefore, the 21st century has began with the total conviction that the osmosis Gas & Electricity is a factor of the life quality improvement, it has even became a claiming element of Human Rights. This osmosis was always the key element of the Algerian development strategy in energy sector, by reforming this sector, Algeria is inviting the foreign partners (essentially European) to adopt its strategy, and to reinforce the partnership.

Results of Algerian Natural Gas policy

Commercial production of natural gas began in 1961. Algeria has 4520 Bcm of proven natural gas reserves in 2000 (3520 Bcm in 1990)3, ranking it in the top 10 worldwide(Seventh). In 2000, Gas reserves representing 56% of the global hydrocarbon reserves. Algeria is the fifth NG producer, Natural gas

production increased by 8.3% to a record 139.5 Bcm (Net traded 81 Bcm), Accounted for about 65% of Algeria's total hydrocarbons production in 2000 (5% in 1970, 33% in 1980). Algeria is the third NG exporter and the second LNG exporter in the world. Exports have doubled within no more than decade. From 30 Bcm in 1989 to 61.7 Bcm (57% by gas pipeline and 43% by LNG tankers). The domestic demand has reached 19 Bcm 4.

Natural gas as factor of maghrebian integration

Morocco contains only small natural gas reserves -- around 2.82 billion cubic meter (bcm). Besides its own domestic gas reserves, Morocco is a major transit center for Algerian gas exports across the Strait of Gibraltar to Spain, via the 8-bcm/year, Pedro Duran Farell pipeline5. Morocco levies 7 percent of the gas carried by the pipeline as royalties. Morocco's gas strategy consists in taking advantage of the GPDF on its territory to introduce natural gas as an energy option. The cost of this development program is estimated at US$400 million6. A natural gas pipeline also is set to link Libya and Tunisia by 2003, with Libyan natural gas supplies being sold to Tunisia. The Enrico Mattei pipeline that transports 25 Bcm Algerian natural gas to Italy per year runs through Tunisia. Tunisia receives some royalties from this pipeline as payment for access through its territory.

Euro-Maghrebian partnership in strengthening energy policy

Algeria's total natural gas export capacity, via pipeline and LNG tanker, was 61.7 Bcm . Accounting for 29% of EU natural gas imports in 2000. it represents 15% of EU natural gas consumption. The main customers of NG are: Italy:73%, Spain:18%, Portugal:6%, Tunisia:1% and Slovenia:1% . Seventy-six percent(26.88 Bm) of the total natural gas(35.08 Bcm) was shipped through the Enrico Mattei (formerly TRANSMED) gas pipeline; the remaining twenty four percent(8.2 Bcm) was exported through the Pedro Duran Farell (formerly GME) gas pipeline. Algeria was the second largest exporter of LNG (behind Indonesia) in 2000, with 19% of the world's total, exported mainly to Western Europe (France:33%, Belgium:17%, Spain:16%, Turkey:14%, Italy:13% and Greece:2%) and the United States(5%). The European market represents 97% of Algerian NG & LNG exports. The proportions of the Algerian gas in natural gas balance of main customers are : Portugal : 86%, Spain : 61%, Italy:49%, Belgium:26%, France:25%, Turkey:21% At horizon 2005, Algeria will invests 10 Billion$, from upstream to downstream. Upstream : Development of new natural gas fields Downstream : Expansion of east(GEM) &west (GPDF) gas pipelines, New direct routes(Algeria to Spain, Algeria to Italy), Acquisition of new fleet of LNG tankers, New LNG plant. With this ambitious program, the aim is to reach 150 Bcm/y (139.5 Bcm in 2000) of production and 85 Bcm/y (61.7 Bcm in 2000) of exports. 7

Gas & Electricity Sectors in Algeria and perspectives at horizon 2010

The number of total deliveries of gas went up from 4,O7O millions to 108,029 million of thermal units in 1999, that is to say 11,371 Bcm divided as follows: Power stations:65%, Public distributions: 22% and industrial customers: 13%. Concerning public distribution, deliveries soared up: from 677 millions of thermal units to 24,121.9 millions, that is 35 times the 1968 deliveries.8 From 1970 to 2000, both gas and electricity sectors have increased strongly as shown below: 1970 650 MW of installed power 26 000 km of electricity network 2 000 km of gas network 0.7 million of electricity customers 0.2 million of gas customers Physical investments: Electricity : 15 power stations(total: 5 300 MW), 105 sub-stations, 13 600 km of transmission network and 175 000 km of distribution network. Gas : 3400 km of transmission network and 18 000 km of distribution network Financial investments : 26 Billion US Dollars99 (22 for electricity and 4 for gas)9 2000 6 000 MW 200 000 km 20 000 km (capacity of 11.5 Bcm) 4.5 millions 1.4 million

The investment at horizon 2010

The sector investment perspectives in the period 2000-2010, will concern the production means, and the conveyance and distribution networks. 12.2 billion US Dollars99 are required (Gas conveyance: 0.6, Gas distribution network: 1.3, HV/VHV conveyance network : 2.2, Electricity distribution network : 2.7, and Electricity generation: 5.4) Production means : Thermic steam power plants: this period will assist to a downgrading of 750 MW Combined cycle power plants: The capacity in the work site in this period will be about 6600 MW from which 4200 MW will be put in service Gas turbines power plants: 1400 MW will be under construction and will be effective. Conveyance network: VHV Lines and HV an added capacity of 5300 Km. Distribution network: 80,000 Km MV and LV lines, 2 000 000 (customers) 10

Ambitious program for Electricity generation in Maghreb at horizon 2010

The power demand of the Maghreb , which includes Algeria, Morocco, and Tunisia (Mauritania : not significant), is growing annually at : 7%( Morocco), Tunisia(7%), 6%-8%(Libya), and 5%(Algeria) In 1999, the potential of electricity sector were: Electric Generating Capacity(Gigawatts) : Algeria : 6.0, Libya: 4.6, Morroco: 4.1 and Tunisia: 2.0 Energy production (TWh) : Maghreb: 59 (including Algeria: 24)

Customers (millions): Maghreb: 9.1 (including Algeria: 4.4) Installed Power (MW) : Maghreb: 16000 (including Algeria : 6000)

The investment at horizon 2010

Investment Production at 2010 (MW): Maghreb: 17200 (including Algeria 7000)11 Financial investment (Billion US $) : Algeria: 5.4, Morocco: 4.2, and Libya: 3

Deregulation and euro-maghrebian partnership in electricity generation

The 2000 MW project is the first project that realise the deregulation of Algerian electricity sector. The project consists in the construction of one or several power plants with a total of 2000 MW(800 MW for the Algerian market and 1200 MW for export). For the Spanish and Italian markets, the energy transmission will be made by a direct undersea power cable.Transits by Morocco or Tunisia are conceivable. The financial evaluation is about 1.5 to 2 billion $.12 Currently, Algeria has two links to the Moroccan electricity grid and supplies over 550 gigawatthours (GWh) of electricity to Morocco. In May 2001, Algeria has signed a contract to build the country's first privately financed natural-gas-fired power plant at Hassi Berkine. In September 2000, Spain and Morocco, which put in place a 350-MW interconnection in 1998, agreed to study the potential for further linkage of the two countries electricity grids. In December 2001, Spain had began to import electricity from Morocco.13

Natural gas as a common denominator of regional approach

In april 2001, the Conference of The African Ministers of energy agreed on the project for the creation of a trans-Saharian gas pipeline connecting Nigeria To Algeria. This pipe of 4000 km in length will convey, via the Sahara, Nigerian gas from the Abuja fields to Bebi Saf, near Arzew. It will supply the whole West African region with natural gas, and coupled with the grid existing in Algeria, it will supply Southern Europe.14

EU gas demand at horizon 2000, infrastructure requirements , Liberalisation market and maghrebian natural gas supply costs.
Based on the study made by OME in 2001, the results were:15

According to the results of the study, natural gas demand is expected to increase strongly in European countries. Gas demand is projected to increase from 386 bcm in 1999, 500 in 2010 to some 600 bcm in 2020, at an average rate of 2.1 % per annum over the two decades. Increasing gas demand is determined by the dramatic surge of gas for power generation. In 2020, power generation will account for 41 % of the total gas demand in the EU, from 26 % in 1999. Infrastructure requirements
Major gas pipelines and LNG plants have been built in the past to export gas from Algeria to Europe. In the future new projects are needed to develop export capacities from North Africa and the eastern Mediterranean : Expansion of the GPDF pipeline from Algeria to Spain via Morocco ( +10bcm/yr) Expansion of the GEM pipeline from Algeria to Italy via Tunisia (+5bcm/yr) New direct pipeline from Algeria to Spain (MEDGAS project) (10 bcm/yr) New pipeline from Algeria to Sardinia and Corsica and mainland Italy and France (10bcm/yr) Expansion of LNG plants in Algeria New pipeline from Libya to Italy (10 bcm/yr) Expansion of LNG plants in Libya

Maghrebian natural supply costs

North Africa and in particular Algeria, due to its geographic proximity, is and will continue to be the least cost supplier to the EU. supply schemes studied, the four cheapest ones are pipeline gas from Algeria, followed by pipeline gas from Libya. All of these schemes have supply costs below 1.7 $/MBTU with the planned Medgaz pipeline being able to carry Algerian gas to Madrid or Barcelona at a total technical supply cost of 1.1 $/MBTU. Supply Costs Maghrebian Gas Pipeline Algeria via Medgaz Algeria via GPDF Algeria via Sardinia-Corsica Algeria via GEM Libya via pipe to Sicily

Production Transport Transit Fees 0.45 $ 0.63 $ 0.45 $ 0.67 $ 0.22 $ 0.45 $ 0.90 $ 0.45 $ 0.99 $ 0.20 $ 0.50 $ 1.18 $

All new LNG supplies are above 2.4 $/MBTU, starting with North African LNG (between 2.4 and 2.6 $/MBTU), and Nigeria LNG (around 3 $/MBTU).

Electric Supply Costs (Compared to gas supply costs) Based on the study made by OME in November 1994, the results were:16 The electric costs supply are the same as the gas supply costs , when the length of gas pipeline is 1000 Km and the capacity is less than 3 Bcm/y. When the capacity is great than 3 Bcm/y, the gas supply costs are more competitive.

More efficient results will be given. Conclusion

The economic convergence between the maghreb and Europe is unavoidable , even imperative. The investments to be engaged in the countries which produce natural gas (essentially Algeria) will be colossal, the partnership between the Maghreb and Europe has been proved indispensable. The economical prosperity of both Europe and the Maghreb get outlined. Arent they dependant from each other?

References
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