Algeria, Spain in advanced talks to expand natural gas delivery

Spain and Algeria are discussing a potential increase in natural gas supply through the Medgaz pipeline, with the flow possibly rising by as much as 10 percent, according to two sources familiar with the talks.

The discussions are in an advanced stage, one source said, adding that a preliminary agreement could be reached during Spanish Foreign Minister Jose Manuel Albares’s visit to Algiers this week. The pipeline, which connects the two countries, has the capacity to carry an additional 1 billion cubic meters of gas per year.

Europe leans on Algeria amid energy tension

The proposed increase echoes past reliance on Algerian gas. In 2022, Europe turned to Algeria after diplomatic tensions with Morocco and Spain disrupted trade. The timing comes as energy markets face new pressures. Rising oil prices—approaching the highest levels since June 2022—reflect growing uncertainty over a potential U.S.-Iran deal to end hostilities.

Reports indicate the Pentagon is considering sending up to 10,000 additional troops to the Middle East, while Iran is reportedly mobilizing more than 1 million personnel. Meanwhile, former President Donald Trump extended the deadline for a planned strike on Iranian energy infrastructure to April 6, saying negotiations with Tehran were progressing “very well.”

Algeria eyes relief from higher oil

For Algeria, the continent’s largest country and the world’s 10th-largest by area, higher crude prices above $100 per barrel could offer a temporary financial reprieve. Rising revenues could ease budget pressures caused by shrinking reserves and higher import costs.

Algerian officials previously benefited from a surge in energy prices following Russia’s invasion of Ukraine, which helped stabilize the country’s finances. With the new price gains linked to Middle East tensions, Algeria may again find relief. The nation of 47 million relies heavily on its oil and gas exports to fund domestic subsidies.

2026 spending relies on $70 oil

Maintaining a balanced budget has been challenging since the 2014 oil price crash. To meet projected spending of 7.69 trillion dinars ($58.5 billion) in 2026, 5 percent higher than 2025, the government issued its first local sovereign Islamic bonds and is seeking an African Development Bank loan to support infrastructure projects.

Algeria earned $59.5 billion in oil revenue in 2022, which fell to $45 billion last year. With the 2026 budget set against a $70 per barrel oil price, Minister of Hydrocarbons and Mines Mohamed Arkab said prices between $70 and $80 would allow the government to cover spending.