Algeria, October 6, 2018

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Algeria, Morocco to hold talks on natural gas supply, transit deal post-2021: source

London — Algeria and Morocco have agreed to begin talks over the future of Algerian gas supply to and gas transit via Morocco, an Algerian industry source said Thursday.

The move came amid concerns Morocco could opt not to renew either part of the contract after it expires in 2021, the source said.

Algeria last month started work building a new 200 kilometer pipeline that can divert gas away from the GME pipeline that ships Algerian gas via Morocco to Spain into its other Spanish export pipeline Medgaz after Moroccan authorities said they were undecided over whether to renew the supply and transit contract.

'Algeria and Morocco have decided to start discussions for the renewal of the contract that will end in 2021,' the Algerian industry source said.

The decision was made after a meeting on Monday in Marrakech between Algerian energy minister Mustapha Guitouni and his Moroccan counterpart Aziz Rabbah.

Morocco, which takes Algerian gas in lieu of payment for transit, has made significant gas finds in the east of the country in recent years, including finds by the UK-based exploration company Sound Energy. It is also looking to install an LNG import terminal, meaning it will have less need for Algerian gas.

'The meetings that will be organized will determine the terms of the contract for the supply of Algerian gas to Morocco,' the source said.

The source added that the ministers were 'very optimistic' regarding the prospect of further strengthening the partnerships between the two countries, particularly with regard to the supply of Morocco with Algerian gas.

MEDGAZ EXPANSION

The CEO of Algeria's state-owned Sonatrach said last month the company wanted to boost its gas exports to Spain to 10 Bcm/year through the expansion of the 8 Bcm/year Medgaz pipeline, while also maintaining supplies through the GME link via Morocco.

Medgaz capacity could be expanded to 16 Bcm/year at a later stage, meaning all current exports to Spain could be carried by Medgaz alone.

Algerian pipeline exports to Spain totaled 14.5 Bcm in 2017, according to data from S&P Global Platts Analytics. --Stuart Elliott, stuart.elliott@spglobal.com

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