Rome Energy Meeting

Statement

Dr. Chakib KHELIL , Minister of Energy and Mines, who is unable to attend this meeting, given the circumstances, has entrusted me to convey to you all his thanks and wishes of success as well as to present to you, on his behalf, the statement he was expected to read out to your honourable assistance.

Allow me first of all to express my gratitude to the organisers of this meeting who offered me the opportunity to address such a prestigious audience and tackle the liberalisation of European energy markets theme; a topic which has been at the core of the preoccupations and discussions of all economic operators, consumers and producers-exporters alike.

As Algeria, is essentially a gas exporting country, I am going to focus on this source of energy, which, since the past few years has become "The" prime energy on the global scene.

It is the convergence of several factors that set the background of the current situation; to name few of them: the liberalisation of gas markets, environment concerns and recurrent energy security supply as a major preoccupation for consumer countries.

It is generally accepted that liberalisation process in Europe since 1998, has largely reshaped the environment of the gas industry in the region.

It has prompted many queries and concerns in the mist of gas importers and exporters. Later on I shall dwell on this matter.

Although, two years ago, liberalisation seemed to be the panacea, the solution to all energy issues (security of energy supply, lower prices for end-users) the crisis in California and the bankruptcy of the biggest energy trader, Enron, invites to a more sober cautious attitude.

There is no doubt that the intention of the European Union is to pursue the process to its end. However, experiences carried out by other countries, such as the US and the UK with a clearly more favourable energy pattern, demonstrate that thorough changes require more time and caution.

In this respect, I would like to dispel any misunderstanding or ambiguity : it has never been our intention to question a strategic choice adopted by a sovereign state.

However it is essential to acknowledge that the impact of such decision or choice will be felt not only by members’ states of the European Union but also by all suppliers’ countries from the region.

A concerted and rigorous management of the transition phase, before establishing a unique and truly open European gas market, will be a decisive factor to ensure the sustainability of our industry.

I am confident that the consensus, about the essential and unavoidable " take or pay provision " under long term contracts will guaranty the financing of gas projects and their sustainability, this outcome was reached thanks to the negotiations held between the European Commission and exporting countries.

After defending for a long period the short term pattern of gas market, the European Commission has finally adopted an energy policy based on long term " take or pay " contracts.

The Commission has underscored the fact that those contracts will be indispensable to ensure the long term supply of gas to its member countries.

However there is still an issue to settle that is’’ the territorial restriction provision ‘’ of contracts. Under this clause, European gas market is divided into tightly separated entities, each one witch its specific conditions, and we believe that this situation will prevail for many years to come.

Against this background, Algeria’s position has always been a coherent and a constructive one : we have made known our permanent willingness to replace this provision by other mechanisms in order to ensure the initial economic balance for gas contracts. We made proposals and offered several options that were considered by the Commission which recognised the merits of the Algerian request for economically balanced contracts. Our position is not prompted by any, dogmatic stance ; it is dictated by strictly economic considerations.

In this respect, the recently held discussions between high officials of the Commission and their Algerian counterparts enabled us to reiterate our common determination to promote dialogue and look for mutually acceptable solutions.

We have made known our availability to look for and reach, with the assistance of other actors of the market, a fair and equitable regime applicable to future contracts and to gas sales from gas pipes or LNG sales contracts.

It is essential that we ensure a fair and a stable long term environment since we have to meet the increasing demand and, as gas suppliers, we have to develop new gas chains and raise huge amounts of capital to finance them.

The commitment of all stakeholders including those operating away from European borders is equally indispensable.

All member countries of the ‘’Gas Exporting Countries Forum ‘’ share our determination to enhance dialogue with consumer’s countries ; the matter has been discussed at length during the ministerial meeting held last February in Doha. A round table on European gas market trends was convened last September 2002 in Algiers by the Gas Exporting Countries Forum ; it was the first initiative of the kind.

All concerned parties had the opportunity to express their views and build upon an improved mutual understanding of their respective concerns.

Dialogue and consultations remain more than ever ideal approach to reach and secure harmonious development of the gas industry without jeopardising the interests of all parties concerned.

Today’s meeting is a wonderful opportunity to gather in this informal and friendly atmosphere conducive to open and fruitful discussions.

I thank you for your attention.