North Africa and energy prices in Europe

energy prices

The North African region has played a decisive role over the past few years in shaping global political agendas. It is the birthplace of the Arab Spring (Tunisia) and the region often most affected by Islamist terrorist groups in the wider MENA area. Terrorism impacts the energy security of the European Union, and has the potential to become a source of significant instability in the near future.

The terrorist attacks at the In Amenas natural gas site in Algeria presented a sign of the danger ahead. The attack lasted for four days, with hundreds of workers held hostage and resulting in the deaths of more than 80 people. The landscape of the region, which is characterized by a desert stretching thousands of kilometers, poses a substantial burden for security authorities bracing themselves for more attacks of this nature by organizations such as AQIM, an al Qaeda offshoot in the Maghreb.

The Algerian government is one of the few that escaped destabilization and domestic turmoil over the past few years, but it also depends critically on the country’s ability to produce and export oil and gas, which contributes about 80 percent of its annual budget. Just before the attack a massive $261 billion investment program on energy resources was announced by Algiers. Thus the attacks against energy installations are targeting this country’s capability to sustain itself.

Algeria produces about 1.9 million barrels of oil per day and 75 billion cubic meters of natural gas per year, with the majority of exports directed to Italy, France, Spain and Portugal. In 2012 Algerian gas supplied about 15 percent of E.U. consumption. Algeria and Norway are the two main contesters of Russian natural gas imports to the European Union. Reports forecast that the terrorist attack will affect 2013 outputs.

The World Energy Outlook agency estimates that between now and 2035, more than 90 percent of future growth in oil production will come from countries in the Middle East and North Africa. “If, between 2011 and 2015, investment in the MENA region runs one-third lower than the $100 billion per year required, consumers could face a near-term rise in the oil price to $150 per barrel.” Therefore the destabilization of Northern Africa and the surrounding territory has extensive consequences for the energy security of Europe, with ramifications linked directly to its ongoing debt crisis.

The main challenge ahead is the containment of radicalism in the Maghreb, more specifically containment of the re-emerged presence of al Qaeda networks in the region. According to Stratfor, “Efforts by European countries, particularly France, to stabilize the Sahel will probably continue—especially as the United States disengages from foreign interventions.” Meanwhile, France and the United Kingdom, along with other debt-ridden E.U. states, are decreasing their military budgets and are mostly incapable of sustaining expedition forces for a long period. The main assumption that arises is that terrorist groups will try in the short- and mid-term to “test” the resolution of the European Union, while the bulk of security and defense responsibilities fall on Algerian forces.

* Original source.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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