What do you know about TSGP (The Trans-Saharan Gas Pipeline)?

February 11, 2024

Mr. Choeib Boutamine

A promising pipeline project supplies Europe with natural gas, starting from Nigeria and passing through Algeria.

Piped natural gas has been the backbone of European industries (agriculture, and energy, among other uses).

The steady supplies through pipelines have proven their efficiency and affordability over the past decades, paving the way for investors to build adequate strategies based on availability and, most importantly, the ROI (Return on Investment). This stability has eased the way for many European countries to develop a diversified industry, which enhanced the growth rate.

For instance, the German economy became the largest in Europe in several sectors, especially the car industry and machinery.

Before 2021, piped natural gas was the primary source of natural gas supplies to Europe, with a share of 80% compared to 20% for LNG. Over just a couple of years, the LNG share increased to 42% as the construction of FSRUs and LNG terminals increased remarkably.

The advantage of LNG is its short-term building infrastructure in the importing countries, as FSRUs do not require a long time to be built.

But what is the price of LNG compared to piped natural gas?

Since 2021, we have seen instability in natural gas spot deliveries, as the share of LNG was replacing piped natural gas at a quick pace. Today at the TTF, the prices of LNG reached €57.7/MWh, the highest since January 2023.

This uptick in cadence and volatility was intensified by the US administration’s decision to pause LNG export approvals in January 2024, which put investors in a skeptical scenario as energy prices kept rising.

Some investors turned their attention towards China and the US, where the market is more attractive for investment due to lower prices.

In December last year, a contract for piped natural gas between Russia and a few European countries expired, halting supplies of roughly 16 BCM per annum, raising concerns about the lack of steady supplies and stable prices.

Before 2021, Europe was receiving 40% of its piped natural gas from Russia, but currently, that share has shrunk to only 8% and may drop even more in the near future. Here, comes a major project that is worth shedding light on: The Trans-Saharan Gas Pipeline (TSGP).

The pipeline is approximately 4,000 km long, starting in Nigeria, passing through Niger and Algeria, and ultimately reaching Europe. Of this total length, 2,200 km have already been completed, leaving 1,000 km to be constructed in Niger, 700 km in Algeria, and 100 km in Nigeria.

The TSGP project presents a great opportunity and a lasting alternative for Europeans to diversify their piped gas supplies, especially through medium- to long-term contracts that allow European firms to plan investments easily, given that the countries involved in the project are not subjected to significant geopolitical risks, especially Algeria, which is home to the longest part of this pipeline and has a solid natural gas infrastructure.

There is another project also stemming from Nigeria to Europe to transport the same volumes but across 13 coastal countries, where the risk is very high and no infrastructure is available.

Europeans are seeking realistic projects that add value and rule out risks; in other words, shareholders look for the profitability of projects.

The TSGP is another milestone in tightening African-European cooperation. Algeria, the largest producer of natural gas in Africa, continues to play its crucial role as a trusted and reliable source of natural gas, and even hydrogen in the future.

Article by Choeib Boutamine