New Gas Pipelines Likely to Boost Europe's Dependence on North African Resources

IT'S a sunny Friday in this suburb outside the Algerian capital, but even on his day off Rachid is ready to talk oil and gas.

"I'm not for the [Islamic fundamentalists], but even if they came to power, Algeria would still pursue development of its oil and gas potential with foreign participation. I'm sure of it," says the technician with Sonatrach, Algeria's well-regarded oil and gas monopoly.

"Whether it's the government we have now, the Islamists, or somebody else in charge, they're all smart enough to realize that we have the resources, the West wants its, and together we can develop them, as long as there's a sense of partnership."

The subject comes up increasingly these days, both in Algiers and across Europe, because Western Europe, and particularly Italy, are laying the groundwork for a stronger dependence on Algerian natural gas in the years ahead.

That dependence is taking form in new trans-Mediterranean pipe-lines and gas contracts, even as doubts grow over the stability of Algeria's government. The military-backed regime of Prime Minister Belaid Abdesselam is waging a daily battle against Islamic fundamentalists whose political movement was driven underground after cancellation of multiparty elections a year ago.

At a rare press conference last November, Mr. Abdesselam emphasized, as much for foreign as for domestic ears, that development of Algeria's oil and gas potential would not be slowed. "Investments in the hydrocarbon sector will be maintained," he said, "despite the austerity policy to be pursued over the next three years."

The end of that three-year period will coincide with the doubling of gas-pipeline capacity to Italy, and with an anticipated $2 billion addition to Algeria's $12 billion in current annual oil and gas revenues. Future improvement in Abdesselam's budgetary margin of maneuver depends on keeping the oil and gas development going.

Europe's worries about the stability of its natural gas supplies are growing, as environmental concerns are pushing it to place a greater emphasis on natural gas for future energy needs.

The memory is also still fresh of a sudden 50 percent drop in natural gas deliveries to Western Europe from Russia last October. The disruption, which resulted from a payment dispute between Russia and Ukraine, had no critical repercussions because it was resolved before winter. But with Western Europe dependent on Russia for 25 percent of its natural gas, the incident had Europeans wondering about the reliability of their other suppliers. For Italy especially, that means Algeria.

"Right now we depend on Algeria for a third of our oil and gas, but that percentage will continue rising," says Roberto Aliboni, a Mediterranean specialist with the International Affairs Institute in Rome. Italy's dependence on Algeria will pass 40 percent once its new Mediterranean pipeline begins operation in 1995.

Political turmoil in Algeria has fed discussion in Italy about the wisdom of such heavy dependence. The general thinking, Mr. Aliboni says, is that an Islamic government in Algeria would not follow the pattern of Shiite-Muslim Iran, but would more closely resemble Saudi Arabia. "The feeling in the business community is that it might complicate, but not fundamentally change things," he says.

But Aliboni says he is "not so optimistic," in part because Algeria's Islamic movement has become radicalized as it has gone underground.

One reason for Italy's heavy investment in Algeria, which involves a variety of sectors beyond oil and gas, officials say, is specifically to develop a more stable Mediterranean region.

From a self-interested standpoint, they add, Algerian gas has direct access to Europe, while Russian gas must cross former Soviet republics which could experience instability for years to come.

Both the proximity and regional-development arguments factor in Spain's effort to develop another 1,000-mile-long gas line to take 10 billion metric tons of natural gas across the Strait of Gibraltar by the end of 1995. The project is part of an effort by Spain, where coal consumption is high and use of gas is minimal, to develop a cleaner energy source.