EU, Algeria strike deal on gas sales contracts

BRUSSELS, July 11 (Reuters) The European Union has struck a deal to allow imported gas from Algeria, its third biggest supplier, to be sold on from one country to others in the 27-nation bloc, removing an obstacle to an EU-wide gas market.

The executive European Commission said today the deal with Algeria, years in the making, scraps ''destination clauses'' from all current and future gas contracts between EU companies and Algerian state-run energy company Sonatrach.

Such restrictions prevent the original buyer of gas from reselling it outside a designated area, usually national borders. The Commission has said that the clauses were anti-competitive.

''If a Spanish company buys up Algerian gas, it will now be free as it wants to sell it on to another (EU) member state,'' said Jonathan Todd, spokesman for Competition Commissioner Neelie Kroes.

He said Italy and Spain were the main receivers of Algerian gas, though other countries such as Portugal and Slovenia were also customers, to a lesser extent.

Spanish gas grid operator Enagas said it welcomed the possibility of more gas coming through its network.

Algeria is the bloc's third biggest provider of gas after Russia and Norway. Earlier this week the Commission said the EU would have strong demand for more gas from Africa if a planned Trans Saharan gas pipeline through Nigeria, Niger and Algeria to Europe comes to fruition.

SINGLE MARKET The Commission has pursued the agreement with Algeria for years after agreeing pacts with Nigeria and Russia over the same issue. An agreement in 2003 involving Italy's ENI and Russia's Gazprom allowed the Italian group to sell Russian gas outside of Italy.

Now that the Algeria question has been solved, Todd said he was unaware of similar outstanding disputes with other nations.

''The agreement reached constitutes a major breakthrough in our relations with one of Europe's most important suppliers for natural gas and eliminates an important obstacle for the creation of a single EU-wide market in gas,'' Kroes said in a statement.

''Algeria supports the establishment of Sonatrach as an active player in an open, transparent and competitive European Union gas market,'' Algerian Energy and Mines Minister Chakib Khelil said in the same statement.

Sonatrach won the right to share profits with European companies that sell on its liquefied natural gas (LNG) to further consumers when the LNG arrives in Europe by ship.

The EU is opening its gas and electricity markets to more competition and the Commission is pressing for more interconnectors to be built so can energy supplies can flow more easily between EU countries.

REUTERS SYU VV2309