Algeria’s proximity to Europe and abundant renewable and hydrocarbon resources position it as a critical energy supplier to European markets. The country’s favorable policies and revamped regulatory framework have catalyzed international partnerships and investments, particularly in its energy sector, which contributes 25% of GDP, over 90% of exports and 40% of government revenues. Algeria’s GDP is forecast to grow by 4.5% in 2025, underscoring its strong fiscal health and appeal as an emerging market economy.
Green Hydrogen: A Game-Changer for Energy Transition
With its strategic location just one day by cargo from Europe, Algeria’s 1,300-km Mediterranean coastline and significant solar and wind resources make it an attractive hub for green hydrogen development. Algeria aims to meet 10% of Europe’s green hydrogen demand by 2040. A recent MoU between state-owned Sonatrach and Sonelgaz and a consortium of European firms – including Germany’s VNG, Austria’s Verbund, and Italy’s SNAM – outlines plans for the SoutH2 Corridor, a 3,330-km pipeline capable of transporting 4 million tons of green hydrogen annually from Algeria to Italy, Germany and Austria.
In parallel, Algeria and Germany have established a bilateral task force to accelerate green hydrogen infrastructure development. A February 2024 agreement formalized plans for a hydrogen pilot plant, with a $22-million, 50 MW green hydrogen project in Arzew supported by German development bank KfW. These initiatives reinforce Algeria’s role in Europe’s energy transition and highlight green hydrogen’s potential to become a cornerstone of Algeria’s future economy.
Hydrocarbons: Expanding Traditional Energy Exports
Algeria’s hydrocarbon resources remain a vital pillar of its economy, with an estimated 159 trillion cubic feet of natural gas reserves and 12.2 billion barrels of crude oil. Two major gas pipelines – the Medgaz Pipeline to Spain and the Trans-Mediterranean Pipeline to Italy – solidify Algeria’s role as a primary supplier of natural gas to Europe. Recent agreements with European companies include partnerships between Sonatrach, Italy’s Eni, Norway’s Equinor and France’s TotalEnergies to explore and develop gas resources in regions such as In Salah, In Amenas and Timimoun.
Sonatrach has also expanded its reach to Germany through a medium-term gas supply agreement with VNG Handel & Vertrieb GmbH, marking a milestone as the first German company to purchase Algerian pipeline gas. Meanwhile, Russian energy giant Gazprom is set to drill 24 wells and establish gas processing facilities for the El Assel project in 2025, positioning Algeria to further increase gas exports.
To capitalize on rising demand, Algeria plans to boost hydrocarbon production by 2.5% in 2025, targeting an output of approximately 26 million tons of oil equivalent. Between 2020 and 2024, gas sales surged by 25%, while oil equivalent production in 2024 rose by 3.5% compared to the previous year. These efforts underscore Algeria’s commitment to strengthening its position in the global energy market and driving economic growth through its vast natural resources.
