ROME/BRUSSELS: The European Commission has said it was closely following Russian gas monopoly Gazprom’s co-operation deal with Algeria’s Sonatrach after Italy said it could lead to higher gas prices in Europe.

Earlier this month Gazprom and Sonatrach agreed to co-operate in the liquefied natural gas business, "upstream" asset swaps, and joint bidding for assets in third countries.

Italian Industry Minister Pierluigi Bersani said in a letter to EU Energy Commissioner Andris Piebalgs the deal would increase dependency on a limited number of gas suppliers and may push up prices.

Gazprom, the world’s leading gas producer, supplies Europe with a quarter of its gas needs, and Sonatrach is also a major gas exporter to the continent.

"We’re following it very closely," said European Commission spokesman Stefaan de Rynck, adding the Brussels body was not aware of the specific details of the deal. He emphasised that it was a commercial agreement between two companies.

The 25-nation European Union is sensitive to its dependency on foreign energy suppliers, which is forecast to increase.

Gazprom has 1.03tn cu ft of natural gas in reserves, while Sonatrach, the world’s seventh biggest gas reserve owner, has 149bn cu ft.

"The agreements between the two major suppliers of gas to Europe (...) though they do not have an immediate impact, raise the prospect of possible pressures on European gas prices," Bersani said in his letter to the Commission.

"(The deal) confirms the concern already expressed about the effects on gas supplies to the European system, and on Italy in particular, derived from the dependence on imports from a limited number of supplying countries, which is expected to worsen in the coming years," he wrote.

Bersani asked the Commission to seek detailed information from Russia and Algeria. The Commission’s De Rynck declined to comment on Italy’s concerns.

An Algerian energy ministry spokeswoman declined to comment, while a spokesman for Gazprom said prices for its European customers were determined by long-term contracts.

A spokesman for the French Foreign Ministry said it was looking at the potential consequences of the deal. "We have fairly diversified gas supplies, which means that we have contacts with Russia as well as Algeria. It is in that context that we will evaluate the content and consequences of this draft agreement," he said.

The independent Algerian daily Liberte said in an editorial the agreement appeared to anger the EU.

"The accord...has given a fillip to bilateral (Algerian-Russian) relations and sets the seal on a strategic energy alliance. However, the skies may already be darkening. This accord has not pleased everyone, notably the European Union," it said.

Italy is dependent on imports for about 80% of its natural gas needs. It receives about 32% of its gas from Russia and 37% from Algeria.

A gas supply crunch last winter forced Italy to take emergency measures including putting limits on consumption and dipping into strategic gas reserves.

In the 1990s, Gazprom’s management outraged European officials by calling for an Opec-like gas grouping, which would involve Russia, Algeria and Norway, supplying the bulk of pipeline gas to Europe. The idea never materialised. – Reuters