Just as Europe was recovering from the initial shock of the conflict on its eastern borders and trying to come to grips with its fate, another war was knocking at the door of the continent. On 7 October 2023, Hamas gunmen struck Israel with biblical ferocity, setting the already troubled region ablaze. European decision-makers are now increasingly turning their attention southwards to prevent an escalation of the conflict. At the same time, the special focus on the region can be strongly justified not only by the fierce fighting, but also by the security of supply as well as economic and energy market realities. In our previous analysis of the Eastern Mediterranean, we looked in detail at the hydrocarbon wealth of this part of the region and the fierce competition for its extraction. While the information revealed suggests that the eastern Mediterranean could offer unparalleled opportunities for Europe, we should also look to the Maghreb region, a major North African region to the west. Today, this part of the North African region has been in the news mainly because of illegal migration and bloody revolutions, but we should not forget the significant hydrocarbon reserves and demographic reserves there. The right mix of cheap energy and abundant labour, combined with political stability, can rocket the competitiveness of some countries in the region. This could not only offer significant economic opportunities for Europe, but could also alleviate the increasing pressure from illegal migration. But which countries in the region have these huge hydrocarbon reserves and could they be involved in strengthening Europe’s security of supply? Our next analysis of the Maghreb region will seek to answer this question by looking at the hydrocarbon production and energy specificities of the countries that make up the region.

Significant hydrocarbon reserves could be hidden in the Maghreb

The North African region has always been a priority for Europe, especially at a time of migration and energy crisis. Most of the countries in the area have rich hydrocarbon reserves, which offer attractive opportunities for the European continent, not to mention as yet unexplored shallow coastal areas. The term “Maghreb” means “west” in Arabic, which is used to distinguish the western and eastern regions of the Arab world in North Africa. This region is the area west of the Nile and north of the Sahara. Countries here include Morocco, Algeria, Libya, Tunisia and several Spanish exclaves, and sometimes Mauritania is also considered. These countries, with the exception of Morocco, have significant oil and gas reserves, as well as a large number of pipelines and offshore infrastructure to transport gas and oil to Europe.

In the web of addictions: Morocco

Although the North African kingdom is far from having fabulous hydrocarbon reserves, it is worth taking a closer look at the country’s energy characteristics, given its dynamic economic development and its involvement in migration. Morocco is poor in energy resources. Although there have been a few minor discoveries in recent years, these offshore oil fields have not been able to significantly alleviate the country’s dependence on imports.

However, there are plans that, if implemented, would significantly reduce security of supply risks, if not solve them, such as an offshore gas pipeline off the African coast connecting Nigeria to Spain. Such an infrastructure would also allow Morocco to have direct access to Nigerian stocks. Although this plan would mostly replace current coal imports, the country would still need massive imports of oil, as shown in the following figure.

Morocco’s oil consumption has been rising steadily since the 1990s, particularly in the transport sector: In 2020, it is already approaching 50% in this area. During this period, the country’s own oil production was minimal, although a few small oil fields were discovered that were not yet included in the IEA databases. By the end of 2020, the country’s demand for oil imports reached 480,000 terajoules, processed by refineries in the Casablanca and Rabat regions. The country’s use of natural gas is negligible, given the equally insignificant reserves of the energy source. Although Morocco’s lack of hydrocarbons means that it relies heavily on imports, it does have some raw materials that give it a significant position on the world market, such as phosphate.

The country is a leader in phosphate production, which could provide it with a significant economic and strategic advantage in the future.

Because phosphate is essential in the production of fertilisers and pesticides.

Even though the country of 37 million people is in dire need of energy imports, it does not necessarily face major resource supply challenges, as neighbouring Algeria has vast reserves of oil and gas.  But there is a deep conflict between the two countries that hinders effective energy trade. The main reason is that Morocco, after gaining independence from Spain in 1975, invaded the Western Sahara, which incurred the wrath of neighbouring Algeria. In 2023, hostilities escalated to the point where Algeria refused to renew European gas import contracts through Morocco. It has thus lost its status as a transfer country and the possibility of access to Algerian gas. Energy would be much needed in the Moroccan economy, as the country’s electricity consumption is growing dynamically, as illustrated in the graph below.

As the figure shows, electricity consumption has risen dynamically over the past decades, as has oil consumption. By 2020, the total volume of consumption was already around three times the 1990 baseline.

It is legitimate to ask: if the country uses almost half of its oil imports for transport, while its use of natural gas is negligible, how will it provide the electricity it needs? The answer is coal. However, it is worth noting that Morocco now has only a modest supply of this energy source. The history of coal mining in Morocco is relatively short, having begun in the early 20th century, but the economically viable reserves quickly dried up and the mines there closed. Today, the country is already dependent on significant imports of this energy source, with South Africa and Russia being its main trading partners. Morocco appears to be taking a cautious stance on the conflict between Russia and Ukraine, as its energy dependence could jeopardise one of its most important sources of coal, in which both Russia and countries friendly to the Russian leadership play an important role.

Algeria has benefited greatly from the rise in energy prices

The energy sector plays a key role in Algeria’s economy. The country has significant hydrocarbon reserves, the extraction and sale of which is the engine of its national economy.

Almost 95% of Algeria’s total revenue comes from energy exports, with oil and gas as the main commodities.  The country ranks highly in this field, not only regionally but also internationally. It is a member of OPEC (Organisation of the Petroleum Exporting Countries) and plays an important role in maintaining stability in the global energy market, especially in Europe. Although it is hard to imagine, given what has happened in recent years, this could also be a risk factor.

Oil price fluctuations can have a significant impact on Algeria’s budget, so any fall in global prices could hit the budget of this country of 44 million people hard. However, a possible rise in oil prices could have a very positive impact on the revenue side, as has been seen in the energy crisis.

Moreover, according to preliminary expert estimates, the volume of recoverable reserves could increase significantly. According to the latest figures, Algeria is one of the countries with the largest proven reserves of natural gas in the world. Natural gas reserves in the region could reach 2,400-2,500 billion cubic metres, and new exploration is ongoing.  This volume would be enough for Hungary for 240 years, but the EU as a whole could operate for nearly 5 years with such a volume. But the age of discovery is far from over. For example, Sonatrach recently discovered another extensive field of about 100-350 billion cubic metres.

The figure above clearly shows the presence of potentially exportable quantities, with the surplus almost certainly finding a buyer on the global market. However, as the years have progressed, the country’s own consumption has also increased significantly, which will only be further boosted by dynamic industrialisation and rising living standards. Consequently, from 2005 onwards, the volume of potential sales has been gradually decreasing. Of course, given the country’s existing reserves, the North African country will continue to be a net exporter for a long time to come. Moreover, Algeria has nothing to be ashamed of when it comes to oil, with an estimated 12 billion barrels of extractable reserves. In addition, last year 6 new oil fields were discovered near the Libyan border. Our data series for the country are illustrated in the following figure.

It is worth noting, however, that a number of anomalies have been found in the processing of publicly available data for this energy carrier. According to the IEA, although the country’s production is significant, the volume extracted is exactly the same as the volume consumed domestically, despite the fact that OPEC data show that it was able to export around USD 13 billion in 2020 alone. Based on the information that has emerged, the rising oil prices caused by the energy crisis have had a very positive impact on the development of Algerian oil revenues.

By maintaining the 2020 export level, Algeria could increase its oil export revenues by more than USD 19 billion. And in addition to oil, natural gas exports are also a major source of revenue for this dynamic country. LNG terminals are already operational in Oran and Skikda. In addition, three gas pipelines support gas exports to Europe:
  • the Trans-Mediterranean gas pipeline link to Tunisia and Italy,
  • the connection to Spain via MEDGAS, and
  • connection to Morocco via MAGHREB.

However, it is worth noting that there is little or no gas trade between Morocco and Algeria due to political conflicts.

Tunisia is falling behind the pack

Tunisia, like the other countries in the region, has substantial hydrocarbon reserves, although nowhere near the volume that neighbouring Algeria or Libya can boast. Looking at the energy geography of the country, there are small to large reserves of natural gas and oil in the Gulf of Gabès, and other significant oil reserves in the Ramel El Abiod plain. The Gabès LNG terminal plays a key role, not only because it is an important transit hub, but also because it is the intersection of the inland gas and oil pipelines that transport energy carriers from the sparsely populated south to the more densely populated north, for example to refineries in Bizerte.

Tunisia is the first Maghreb country where the Arab Spring of the early 2010s has caused major political upheaval, leading to severe social unrest and economic hardship. The political changes had a negative impact on the country’s extraction, as Libya will show even more spectacularly. The figure below illustrates Tunisia’s oil production and consumption.

As can be seen, Tunisia’s oil production has been steadily declining since the 1990s, while its consumption has been rising. As a result, the country’s exportable oil supply melted away by the 2000s.

Subsequently, the country was forced to import oil, which it was able to partially offset by increasing production, but in 2010 the process stalled. The revolutions that began at that time caused serious disruption to the country’s oil industry, leading to a sharp drop in production.

Between 2010 and 2020, annual oil production fell by around 90,000 terajoules, equivalent to about 1.4 million barrels. Given the huge oil reserves in neighbouring Libya, it is likely that Tunisia will be able to get the oil it needs at “war” prices.  Imports from a neighbouring country affected by civil war may be at a price lower than the cost of its own extraction. However, the situation in natural gas production is more favourable, as can be seen from the country’s natural gas production and consumption data.

While Tunisia was typically an importer between 1990 and 1995, it subsequently became a net exporter of natural gas. Production increased dynamically until 2010, when the Arab Spring showed its negative effects. Although production fell sharply in the post-revolutionary period, the country still has significant export potential.

Natural gas consumption also increased strongly throughout the period under review, but declined and then stagnated during the chaotic years of domestic politics.

All these trends are also clearly reflected in the country’s electricity generation, which relies exclusively on natural gas. The country produces several times its own electricity from natural gas, which it exports to neighbouring countries. Although there has also been a decline in this area since 2010, it still has significant export capacity. When the revolution broke out, it was generating some 128 terawatt hours of surplus electricity over and above its own use, as the following figure shows.

Libya’s energy industry devastated by civil war

The last country we looked at was Libya. The country has incredible hydrocarbon reserves. It is one of the largest oil producers on the African continent, with estimated reserves of up to 48 billion barrels. It has several small onshore natural gas fields and a significant number of offshore fields around Tripoli. Notably, various expert groups estimate substantial additional reserves in coastal shallow waters, but their exploration and exploitation is significantly hampered by the country’s ongoing civil war.  It is easy to imagine that several European actors are seeking to establish good relations with one or other armed group, mainly in the hope of gaining access to these fields. The country is currently controlled by three different factions. Its southern border areas are controlled by various tribal militias, while the central and eastern areas are held by the western-backed government forces of Tobruk. The capital and surrounding areas are under the control of the rebel General Haftar and his forces of the Government of National Accord.

As a result of this division of the country, hydrocarbon extraction and transportation infrastructure is also only available separately, meaning that no single faction controls the entire energy infrastructure.

The figure below shows the location of the main extraction points and refineries.

The fragmentation of the relations and the necessary infrastructure shown in the figure above, while detrimental to the country’s extraction, does not completely paralyse it. According to the information available, the opposing parties are cooperating to a certain extent in this respect. The following graph illustrates the evolution of oil production in the country.

The country’s previously substantial oil production collapsed during the Arab Spring of 2010. While production was around 3.4 million terajoules in the period before the turmoil, of which around 3 million terajoules were exported, after the political destabilisation, production fell to 800,000 terajoules. Even though these extracted reserves are still sufficient to cover the country’s domestic needs and even to export, it is too early to talk about the profitable volumes that characterised the country’s energy industry before the 2010s. Notably, however, official extraction figures may be inaccurate in several places, given that we are talking about a country that has been affected by civil war. Actual extraction and exports may well exceed official levels, which are being channelled through less traceable routes to increasingly energy-hungry Asian economies. However, various databases on oil imports also show

a number of European countries on the buying side.

According to Eurostat’s 2021 oil import figures, the EU imported a total of 46.6 million tonnes of oil from the Maghreb. This covered about 10.5% of its total imports. Of the countries in the region, Libya is the largest purchaser of this energy source, with 35.5 million tonnes.

It is clear that, although both Algeria and Tunisia have extractable and marketable reserves, Europe is still buying the largest quantities from a country in civil war.

Italy is the leading buyer with around 10 million tonnes, followed by Spain with 6 million tonnes and France with 3 million tonnes.  Significant quantities were also exported to Austria, the Netherlands and Greece. While we cannot state beyond any doubt that geopolitical interests are the sole and exclusive motive behind the purchases, it is worth looking back to the beginning of the chapter, where we presented the location of infrastructure, extraction sites and the areas dominated by the factions. Accordingly, we can assume that buying oil from the country may be more favourable for the opposition forces, as the related infrastructure and extraction sites are predominantly in their possession.

They can use European exports to buy weapons and continue the fighting.

In the case of natural gas, exports may be more advantageous for government forces, as the associated extraction sites are typically in their possession, although in this case there are also European imports of around 130,000 terajoules.

As the figure above shows, the country’s natural gas production has expanded dynamically since the 2000s. While in the early 2000s, only 223,000 terajoules of natural gas were extracted annually in the shallows around Tripoli, by 2020 production had reached 494,000 terajoules. Unfortunately, the Arab Spring and the ensuing civil war had an impact here as well, bringing production down significantly after 2010, but it still has a significant potential export potential of 469,000 terajoules.  Consumption rose steadily until 2005, but according to IEA data, there has been a marked decline since then. This is very striking when compared to the country’s electricity consumption/production data, as illustrated in the following figure.

Libya’s electricity consumption increased steadily until 2015. Natural gas appeared in electricity generation only in 1995, and its role increased year by year. Based on the latest 2020 figures, electricity demand is already almost entirely covered from this energy source. The use of other sources, possibly electricity imports, has fallen sharply since 2005. However, it is notable that the country’s total gas consumption started to decline again after 2015, while its use in electricity generation increased significantly. The latter could easily be the result of incorrect or incomplete information provided by the war-torn country. This is also implied by the data on annual electricity consumption per capita.  This value is also closely correlated with the overall level of development of a country, as developed and affluent societies typically have very high electricity consumption per capita. The relevant Libyan figures have been compared with the German figures, so that the following figure shows how the two countries’ consumption compares.

Before the 2010 Arab Spring, the country’s per capita electricity consumption was only around 45% of the German reference level. Although this is still far below the consumption level in developed countries, it is one of the highest in the Maghreb.

This confirms the view that in the Gaddafi era, before the civil war, Libya was one of, if not the most developed country in the region.

Although the data show an increase in energy use five years after the fighting, the figures should be treated with some caution, or at least separated from the parallel on development mentioned above. Given the country’s current economic and social situation, it is most likely that the standard of living in the country has declined.Should the chaotic and unjust situation in the country be resolved in the foreseeable future, Libya could become a very important trading partner for Europe.

The huge hydrocarbon reserves here could significantly enhance the security of supply of the European continent, not to mention the funds that could be used to rebuild the country, effectively reducing migratory pressure in the Mediterranean.

Future outlook: living standards and migration

Another interesting point to mention in the context of migration is the use of electricity. The countries of the region have a combined population of nearly 100 million, not counting the masses of people from Africa and the Middle East who are heading to Europe. As mentioned earlier, per capita electricity consumption is closely linked to the prosperity and development of a country, which is a key objective of governments.

As the figures above show, the average for the Maghreb countries is only about a third of the corresponding German benchmark. In other words, the 100 million people living here will at best only achieve 30% of the German standard of living based on the level of electricity consumption. For the citizens of the region to ever enjoy the current level of comfort and development in Europe, roughly 453,000 GWh of extra electricity capacity would need to be installed, almost as much as the total annual electricity production of Germany, the reference country. To build capacity on this scale would require astronomical amounts of money and take a very long time, while climate change and migration are already placing huge burdens on local governments.

It is feared that if these countries’ progress stalls as they face increasingly serious global challenges, their social and political systems will falter.

This could even trigger a new wave of emigration of tens of millions of people, presumably to Europe.