Algeria and Spain agree to review gas prices by 2022

The Algerian company Sonatrach and the Spanish energy group Naturgy revised gas prices for 2022, but postponed talks on prices for next year and the following, in a context of increasing demand and after a diplomatic standoff between the two countries.

Sonatrach supplies some 5,000 million cubic meters of gas a year to Spain through contracts signed more than two decades ago and valid until 2030 with periodic price reviews.

Naturgy said the companies had set a new price applicable retroactively for volumes supplied until the end of 2022, and had also agreed to continue negotiating prices applicable from next year.

A Sonatrach statement said the companies had agreed to review prices without giving further details, but Algerian television Ennahar TV reported that Sonatrach CEO Tewfik Hakkar said the price review was part of a three-year contract. .

"The contract has just been renewed for 2022, as currently high volatility and uncertainty around gas prices do not allow for great visibility in the medium term," a source with knowledge of the matter said.

Neither Sonatrach nor Naturgy gave details about the new price agreements, but both referred to market conditions. World gas prices have risen sharply this year as Russian supplies to Europe dwindle following its invasion of Ukraine.

"The predisposition of both parties is very good to favor two things: not putting the security of supply at risk and achieving price stabilization," Naturgy CEO Francisco Reynes said early on Thursday.

"Prices are going to go up," he said, but not by an "exorbitant" amount, he added.

Algeria, where the drop in energy prices from 2014 raised fears for the long-term future of its public finances, wants to take advantage of the increased demand for its gas and has signed new supply agreements with Italy.

He has also said he will fulfill his contractual obligations to supply gas to Spain, despite withdrawing his ambassador from Madrid in June, amid a dispute over Western Sahara, where Algeria is backing a pro-independence movement.

Madrid angered Algeria by saying that Morocco's plan to offer Western Sahara no more than autonomy as part of its own territory was the most serious, credible and realistic proposal to end the conflict.

Spanish Prime Minister Pedro Sánchez said last month that he supports a "mutually acceptable political solution" to the Western Sahara conflict.