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Khelil: European demand potential remains huge

Gas will be more competitive than other energy sources says Algeria's Chakib Khelil

By Tom Nicholls

Algerian energy minister Chakib Khelil has brushed aside fears that weaker European gas demand could cause long-term difficulties for the continent's main suppliers.

"The potential for demand for gas in Europe in particular is huge," he told WGC News in an exclusive interview. "There is room for everybody."

That includes the speculative trans-Sahara gas pipeline (TSGP), which would stretch almost 4,500 km from Nigeria to Europe, through Algeria. Despite Europe's weakening gas demand, TSGP remains on track for start-up in 2015, said Khelil, adding that its gas would be "more competitive than other sources".

And he criticised the European Commission and other developers for not showing interest in the project earlier. "If you think a project is very important for Europe – which I think this is – it's surprising that the Europeans weren't much interested in it."

But the pipeline's future depends on its developers, Nigeria's NNPC and Algeria's Sonatrach, signing up long-term buyers. "We're not going to build this pipeline without long-term contracts and if somebody values diversification and security of supply, then he's going to have to pay."

Algeria's gas exports stand at 62bn cubic metres a year (cm/y), but that figure will soar to 89bn cm/y over the next three years, with two under-construction pipelines to Europe adding 15bn cm/y next year and two LNG plants adding another 12bn cm/y – in 2012 and 2013.

Meanwhile, Khelil played down the idea of a gas Opec, saying manipulating prices was not the role of the Doha-based Gas Exporting Countries Forum (GECF), of which Algeria is a member. A GECF meeting will coincide with next year's LNG 16 conference in Oran, Algeria, he added.

Khelil also said full delinking of gas and oil prices would not be possible, despite partial delinking in some markets, such as the US. "In general, gas is a substitute for oil or oil products, so I don't see how you can delink it completely."

•?Oil prices are unlikely to rise above the $70-80 a barrel range for the next 12 months, according to Algeria's energy minister, Chakib Khelil.

Having stabilised at $65-75 a barrel over the last three months, the oil price looks likely to remain at that level for the foreseeable future, he said. But with support coming from financial institutions speculating on a rise in oil prices as a result of assumed economic recovery, a pick-up in oil prices is more likely than a fall, he added.

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