Algeria unrest unlikely to stir Europe gas supply analysts

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The Algerian hostage crisis is unlikely to threaten European gas supplies too heavily, which relies mostly on Russia for its imports, analysts said as markets brushed aside the mounting unrest.

Algeria’s gas deliveries to Italy have fallen by 17 percent, a spokesman for Italian gas transport group Snam said on Thursday, following a crisis at the In Amenas field in which Islamist gunmen took dozens of foreigners hostage.

But analysts downplayed the threat posed by the violence, pointing out that Algeria’s gas exports have been falling for a number of years owing to decreased production and rising consumption in the north African country.

“At the moment... (the unrest) doesn’t have a massive impact,” on gas prices, Barclays analyst Trevor Sikorski told AFP.

Societe Generale analyst Thierry Bros said that even if the gas field, which supplies 18 percent of Algeria's gas exports, was to completely shut down, “this would represent (only) two percent of European demand.”

Bros added that Algerian gas exports had been declining since 2005.

“The EU’s main external sources of gas supply are Russia, with 24 percent, and Norway with 19 percent. Algeria comes third,” he said.

While analysts at the JBC energy research group said the unrest was a “blow” to Algeria’s gas industry, they noted that “almost all of Algeria’s gas exports are tied up in long term contracts to Europe.”

Algerian troops launched an air and ground assault Thursday on the In Amenas gas complex seized by the Islamists. The kidnappers have threatened to kill their captives.

Algeria’s Communication Minister Mohamed Said said “several people” were killed or wounded in the operation, adding that an “important number” of hostages were freed.

He said the operation was ongoing at the remote desert site near the Libyan border, attacked Wednesday in retaliation for a week-old military campaign against Islamist rebels in neighboring Mali.

“Warplanes and ground units have begun an operation to take the complex by force,” one of the kidnappers told Mauritanian news agency ANI, threatening to “kill all the hostages if the Algerian forces succeed in entering the complex.”

The kidnappers claimed an army air strike killed 34 hostages and 15 Islamists. A foreign diplomat in Algiers confirmed that the rescue mission “did not go too well for the hostages.”

Barclays analyst Sikorski said: “It’s hard to know exactly how much potential gas supply disruption this could bring, but it’s clear the country will be evidently affected.”

On Thursday, the contract for UK Natural Gas for delivery in February rose to 68.80 pence a therm of natural gas per day, mainly owing to colder weather in the northern hemisphere, traders said.