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Interview

Alejandro Polanco – Spanish Ambassador to Algeria

30.07.2015 / Energyboardroom

The Spanish ambassador to Algeria discusses the ties that bind the two nations together, from an economic and cultural perspective.

What is the importance of the Algerian embassy to Spain?

Algeria is a very close neighbor, and Spain has historically had a significant presence in the country, throughout history. Currently, Algeria is a first-order economic partner for us, a strategic ally. Our relations since the 2000s have been very good, especially since the signing of the “Treaty of Good Friendship, Neighborliness and Cooperation,” which inspired the bilateral relationship with a fresh impetus. Our relations are organized at the highest level: the heads of our governments meet every two years to keep this excellent relation alive. The King of Spain came on official state visit in 2007, and regarding economic matters we have become Algeria’s first trading partner: its first client, and fourth supplier. There is an important relationship in the energy sector.

You have told the press that you call for a truly win-win relationship. What is your definition of “win-win” for Spain?

For us, this is more than a strictly commercial exchange. First, regarding trade balance, we purchased around USD 10 billion of Algerian products in 2013, and exported USD 5 billion of Spanish goods to Algeria. This has developed seriously in recent years: in the 2000s the figure stood at USD 800 million in exports, so this 600 percent evolution has been very fast indeed. This is also connected with the historical evolution of demand in Algeria for all sorts of products and for internal development in the country.

When I say “win-win”, I mean that there are many opportunities for Algeria to find development partners in Spain, and to invest in both countries; the increase in relations, in the number of flights, the number of Spanish SMEs coming to Algeria to sign partnerships, to start joint businesses, the intensification of cooperation in culture and education through universities; these are truly positive things which are part of this win-win exchange.

Last year, 50 percent of the gas consumed in Spain came from Algeria, a growing figure. Is this heavy reliance a matter of concern to Spanish leaders? What about your relationship with Morocco, through which one of the pipelines arriving in Spain passes?

Our energy model is rather stable and complete, considering the proportion of gas and electricity: gas accounts for 21 percent of the Spanish energy basket, which is fairly balanced compared to other countries. Moreover, the origin of Spain’s supply is reasonably apportioned throughout the world: we have suppliers in Latin America, the Middle East, and increasingly important partners in West Africa.

However, you are correct that the proportion of Algerian gas is indeed relatively large. This is a natural consequence of the existence of two major facilities: the Duran-Farell pipeline, built in 1996, and Medgaz’s direct Algeria-Spain pipeline, which began operating in 2011. When the latter started working, operated by a company owned both by Spanish companies and Sonatrach, it triggered an increase of the consumption of Algerian gas in Spain. But we should also mention that our LNG regasification capacity is important as well: it is one of the largest in Europe. Furthermore, our energy import relationship with Algeria has been going on for quite some time; it has experienced occasional difficulties, but remains a strong and solid relationship between trusted partners.

The question of tripartite transit is very well handled by the companies. I was personally posted in Morocco at the time of construction and inauguration, from 1995 to 1999. If anyone had any concerns, they were quickly dispelled. Major strategic projects like this are managed with caution by the three governments; each of them could see the added value: it was a major interest for Algeria and Spain, and had advantages for Morocco.

Do you think the Medgaz project has led to a new rise of Spanish companies, proving more enterprising in exploration? Moreover, after the implementation of the 2003 European regulation on gas resale, has Spain found a more lucrative model for itself, rather than to confine itself to gas transportation only?

For sure, from a strategic perspective, such facilities strengthen a relationship within the value chain, be it upstream or downstream. It is striking especially with pipeline management, which is handled by the companies that own it. Sonatrach is not the only shareholder in this project; it joined other Spanish companies to deal with management. Ultimately, this is a joint strategic investment.

Medgaz makes it possible for large quantities of energy resources to arrive in Spain, with the possibility for Spain to use that gas to an extent that was not possible before. For instance, it provides an opportunity to connect with Europe, which is a big issue on the table and should find a solution aligned with what the European Council adopted in October 2014. Algeria, and through it other distant African projects like those in Nigeria, could benefit from such facilities within the opportunity of further interdependence between Africa and Europe. This is one of Spain’s objectives, and we hope that Spain can become an energy hub for Europe. We have liquefaction capacities as well and interconnection between Spain and Europe offers an interesting opening.

What role do you think Spain should take? Does the globalized contemporary context show maturity enough to adopt a more comprehensive solution, rather than one that promotes individual opportunities?

These decisions are made on the long- and very long-term, 15 to 20 years. The European energy market is highly compartmentalized. This market does not work like a single market, but with different suppliers, sometimes in sectors that do not coordinate enough. This is precisely where a lot of work needs to be done on the European side, and the idea of an interconnection between the Iberian Peninsula and the rest of Europe can just be meaningful with regards to the rationalization of the European energy market: it never ceases to be surprising when we see the pattern of European suppliers, which stops right at the feet of the Pyrenees, and the connections which are stronger on the side of the Iberian Peninsula, North Africa and Maghreb. This does not only concern gas production, but also renewable sources, which are very important in Spain. It is amazing that this overcapacity cannot serve a market which would sometimes require it. These are issues that need to be rationalized to help redefine the European energy market.

Apart from Spanish infrastructure, what are the skills in the Spanish energy sector today?

Spanish companies have significant expertise in civil engineering, both in construction of large operational or management structures and in management itself. Another area is the maintenance and management of major oil platforms, where our experience is significant thanks to historical contracts, in West Africa especially.

You have been stationed here for one year now. According to your observations, which image does Spain convey with the Algerian authorities and people? What would you like to catalyze during your term, and find as a final conclusion when you leave?

The Algerian people speak highly of the Spanish in general. There is a very good relationship, for historical reasons. The Algerians are just getting to know our companies, and realize that the engineers and master technicians of our country have a capacity, and an expertise, that they were not originally aware of, and expected to find only in other countries.

We must consolidate this knowledge, and also open areas that are not known to Algerians today, to strengthen the cooperation between the two countries. Energy takes a large part, it is true, and this will continue, but there are other major sectors where the relationship between Algeria and Spain may become stronger: hydraulics, food, infrastructures and transportation management, for example. We must not forget that our companies manage a global system of transportation in Europe and in the United States.

We can definitely work more on the potential of our relationship. Algeria has got great investment potential, and it would be very good for both countries if shared investments could take place, even on the side of Spain: there are several companies that have already invested there. This would help a lot, I believe, weave a thicker weft for this relation. This will happen gradually, and I wish this period of history between our countries will inspire a strong impetus to our relations in all fields.

Click here to read more articles and interviews from Algeria, and to download the latest free oil and gas report on the country.

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