I hope you will allow me first to convey my thanks and my congratulations to the organisers of this major conference, particularly to Italy in its capacity as host country, and to the European Commission.

My thanks also to the members of the Regional Technical Group who have spared no effort to ensure the success of this conference.

Mr Chairman,

The theme of this conference epitomises in itself the significance of the programme of action that lies before us, inviting us as it does to move: "towards a new Euro-Mediterranean partnership in the areas of promoting investment, financing infrastructures and securing energy supplies".

Since energy is acknowledged to be the linchpin of the Euro-Mediterranean partnership, I dare to hope that the work we do here will allow us to depart from the confines of mere intentions and to commit ourselves at last to some positive action.

It is important at this point to take stock of all the reciprocal commitments we have entered into and the results we have achieved since the Barcelona Conference in 1995. I feel that it is essential in fact for us to remember a few fundamental benchmarks so that we can further strengthen the foundations of our energy partnership by finding some immediate solutions to some long-standing problems.

It has been more than eight years, in fact, since the Euro-Mediterranean Ministerial Conference in Barcelona, held in November 1995, at which our countries agreed to establish an economic and financial partnership, taking into account the different stages of development in our respective countries.

These were the principles underpinning the first Energy Conference held in June 1996 in Trieste which highlighted the need:

• to harmonise the legal and contractual rules governing the energy sector in the countries of the south and east Mediterranean,
• to develop an interconnected Euro-Mediterranean network in the gas and electricity sectors, and
• to identify effective ways of promoting international investment.

The second Energy Conference held in Brussels, in May 1998, laid down the three principal objectives of cooperation in the energy field, namely: the security of supplies; the competitiveness of energy-related industries with a view to full deregulation of the sector in 2010; and environmental protection.

The action plan, covering the period 1998-2002, adopted at the end of that conference provided for co-operation at the political, administrative and industrial level and contained a certain number of specific initiatives aimed at prioritising reform in the energy, market integration and interconnection development sectors.

The function of the "Euro-Mediterranean Energy Forum", which was reasserted on that occasion to boost co-operation between us, was to form, as such, the appropriate framework to guarantee continuing dialogue between all partners and to promote energy policies beneficial to the region. Its secretariat was given the responsibility, under the aegis of the European Commission, for the implementation of an action plan and especially for creating regular contacts between companies and the various financial backers.

Mr Chairman,

We felt bound to note at our last Conference on the 20 and 21 May 2003 in Athens, that our action plan had not been successful and that regional infrastructure development had failed to materialise and had not lived up to the expectations of the Barcelona conference or to the objectives of subsequent conferences.

But the spirit of responsibility that prevailed during our discussions produced some encouraging results.

We thereby agreed that it was necessary to go beyond this simple observation, and to move towards precise objectives which had every chance of success.

This is how we came to identify priority projects intended particularly to strengthen co-operation in securing energy supplies in the Mediterranean area. Including these projects in the new 2003-2006 plan is our way of expressing our hope of seeing the present conference give a real boost to the Euro-Mediterranean energy partnership by taking the concrete decisions needed to see them through.

The decisions that will be taken at the end of our conference must therefore revive this Euro-Mediterranean energy partnership and give it the impetus it needs.

Creating a coordination structure able to support and monitor priority projects, as agreed, is itself an important act, but the mechanism will not suffice on its own as long as significant pre-conditions remain unresolved, particularly as regards investment and financing.

On this point, I will simply remind you of one of the conclusions of the Council of the European Union on energy dated 7 May 1996 which asked for the analysis of existing mechanisms to be speeded up and for research into possible additional mechanisms to promote investment in the region, including, where necessary, the development of a system of guarantees. This recommendation is now more relevant than ever. It must be applied as a matter of urgent necessity.

From a practical point of view, I am pleased to be able to quote in this respect the encouraging example of our negotiation with our European partners on the matter of the destination clause.

Our discussions are now at a very advanced stage, in respect of identifying alternative solutions to the contractual so-called "territorial restriction" provisions, which are acceptable to all parties involved. We are convinced that it will be possible to implement a definitive solution before the end of the year and at the latest during the first quarter of 2004.

These efforts, which have been on-going for a number of months, also demonstrate Algeria’s continued willingness to act as Europe’s traditional and reliable supplier while adapting to new demands and to the new gas market environment.

We have thus undertaken major reforms in the energy sector. The foundation of these reforms is the establishment of an internal energy market that is free, open and transparent. To this end, Algeria has already put the necessary instruments in place through the law enacted in February 2002 on electricity and on gas distribution by pipeline. This law, which meets the requirements of an open and competitive market, gives freedom to import and export electricity. It also offers an appropriate legal framework within which to begin integrating Algeria’s North African regional markets with those of Europe.

Mr Chairman,

We note, however, as we have pointed out on numerous occasions, that the establishment of a genuinely open market is directly linked to the capacity of networks to transport energy flows without restriction and without discrimination from producer to end consumer.

These restrictions, which may be technical in nature or more subtly of a political nature, act against everyone’s declared wish to move towards the establishment of an integrated Euro-Mediterranean energy market.

Although, clearly, market regulations ought to ensure the free circulation of energy, I will quote four cases which show how far we are falling short of this ambition:

• The first case is related to the electrical interconnection between Algeria and Spain. The completed technical and economic feasibility studies were carried out with Algerian and Spanish funding. These studies demonstrated the advantage of this interconnection both in terms of security of supply and of European-North African market integration through the creation of a genuine sub-regional market between Algeria, Morocco and Spain.

This interconnection, which is part of the process of meeting the objectives of North African-European market integration, has not yet managed to resolve the issue of its funding.

This is an issue where we feel it is pertinent to learn from the example of the development of the electricity transport networks which was marked by the terms offered to investors in equalising transport charges. This is a procedure which spreads the investment over the whole transport network for an operation which, if evaluated in isolation, would not seem economically viable. This evaluation technique is today more relevant than ever when applied to operations ranked as priorities.

An approach of this kind adapted to the electrical interconnections will without any doubt give us much greater access to private sector finance.

We must draw lessons from this in order to find an appropriate response. If we cannot overcome this kind of constraint, we will be unable to bring about market integration. Trying to avoid lifting this type of restriction will also play into the hands of those who consider our meetings to be pointless and unproductive. All these considerations must prompt us to review this issue in the hope of finding potential new financial products to respond to it.

• The second case is that of Algerian gas. While European end customers show a clear interest in getting their supplies from Algeria and transport costs have been shown to be competitive, people talk in this instance of means of transport getting clogged, of the risk of gas surpluses and of protecting the interests of existing operators, all in order to delay the construction of new capacities between Europe and Algeria.

This position, which runs counter to the principles of an open market, in fact penalises the end consumer who in the final analysis is the beneficiary when supplies are plentiful.

Opening up energy markets must take precedence over corporate manoeuvrings since it is quite clear that the interests of companies are not necessarily the same as those of consumers. To seek to protect one’s market share, even if one is not extending it, by refusing to play the competition game is not in the long run good either for the consumer or for competitiveness.

• The third case is that of the access our company SONATRACH has to the end consumer. I would point out that the green light has not yet been given by the European Commission authorising us to set up in Europe, which is in the spirit of competition, on the grounds that discussions are not yet completed within its different structures.
• The fourth case, still on hold, relates to electricity produced from renewable energies in third countries and intended for the European market. Algeria requests, in this case, that it be allowed to benefit from the same incentives accorded by the European Union in developing its renewable energies.

For all these reasons, we think that the operations which have been identified as being a priority for market integration must be given all the attention and the financial support they deserve.

In this regard, the MEDA programme should be rethought in the light of the difficulties encountered in raising investment.

If we intend to wait for the intervention of private capital alone to build these infrastructures, we shall have to review both our timetable and probably our overall vision.

Private capital needs clear support and the declaration of the 20 November 1995 at the end of the Euro-Mediterranean Conference on Energy, which had taken on board the opinion of Mediterranean energy companies, is more relevant than ever on this point.

Agreement was in fact reached, as already recommended, moreover, on 7 May 1996 by the Council of the European Union, to: "Promote, in collaboration with companies in the energy sector and international institutions, the implementation of a system of investment guarantees".

We must pick up on this point and bring about the creation of an investment guarantee fund and probably, in order to boost this cooperation still further, move towards the creation of a Euro-Mediterranean Investment Bank that specialises in financing projects that benefit the region.

For this reason our message must be very clear. The infrastructures identified as necessary for the construction of a free exchange area must be given all our support if they are to be achieved. These are not economic but structural matters which give lasting shape to the longer term. Building the market we seek to achieve comes at a price and we shall have to pay it if we really want to see this great market operate as it was imagined by those who settled it before us, a market which we have committed ourselves to making a reality.

Mr Chairman,

Our meetings would lose their interest, and above all their credibility in the eyes of the public, if our discussions, which have started so well, did not in the end produce some tangible results.

Energy is one of the main motors of development for our economies and is also a formidable force for rapprochement and integration. Algeria, which has strong relationships with Europe in the energy field, since it supplies more than 24% of its needs, knows something about this. We want to go further and that is why we hope that our conference can produce results which will signal in a lasting way our desire to establish a global partnership.

It was in this same spirit that we signed, in Athens, the Memorandum Of Understanding (MOU) relating to the North African electricity market. With the support and help of the European Union, we will do all we can to ensure that a North African-European sub-regional electricity market made up of Spain, Morocco, Tunisia and Algeria takes concrete shape.

I am convinced that our meeting will contribute in a more general way to boosting and supporting the synergies that are required between Euro-Mediterranean countries if this energy partnership, which is so vital for the future of our region, is to thrive.

Before I finish, I would like to thank the Italian presidency once again for all they have done to bring about our meeting, and also for offering a seat to the Euro-Mediterranean partnership (REMEP) energy Platform which arose out of our 2003-2006 action plan.