Boosting the Algeria-Italy axis to the SoutH2 corridor

The energy sector has recently emerged as a geopolitical weapon among major global economic blocs. Veiled certainties exist whereby the goals of zero emissions by 2050 will advance at a slower pace, thereby increasing the effects and risks of the climate crisis.

The latest decisions taken by the newly appointed Trump administration, such as the US withdrawal from the Paris Agreement, further raise the uncertainty within the energy sector and confirm the importance of this sector in the global economy.

There is a call for a strong and immediate response from the European Union regarding this change of rules and world policy. Brussels acknowledges Europe’s dependence on cheap Russian gas, although it has been reduced over the last few years, and the high degree of externalisation in security supply. However, the European institutions are committed to pragmatism and to maintaining the Union’s founding principles and values. Protecting and defending European interests must be the roadmap to follow.

This week’s #BlogSynerHy article looks at the current status of the SoutH2 project, a cross-border collaboration project between Africa and Europe that aims to secure the region’s energy security and reduce its energy independence for the next decades.

Current status of the SoutH2 Project

The ‘SoutH2 Corridor’ project promotes a 3,300-kilometre gas pipeline from Algeria to Germany via Tunisia, the Mediterranean, Italy and Austria. By 2030, this innovative project aims to produce more than 4 million tonnes of hydrogen annually, with the potential to be a paradigm shifter in global energy dynamics. This capacity would allow Europe to make significant progress towards its goal of reaching 10 MT of imported hydrogen and another 10 MT of domestic production by the end of the decade, aligning with the European Union’s climate commitments.

Italy, Germany, Austria, Algeria and Tunisia signed on Tuesday 21 January 2025 a joint declaration of intent regarding the further development of the hydrogen transport project from North Africa to these three European countries. They signed it in the framework of the high-level ministerial meeting among the countries involved which was held in Rome at the beginning of this week. This meeting was followed by a business forum that gathered companies from the five countries involved in the SoutH2 project, which is recognised as a Project of Common Interest (PCI) by the EU.

The Italian government’s commitment to the project is clear, identifying the Southern Hydrogen Corridor project as key to Italy’s future role as a European energy hub. Italy works towards achieving the objectives of decarbonisation and energy independence, seeking an energy mix in which renewable energy sources, hydrogen and nuclear energy are properly developed.

The signatory countries thus confirm their intention to strengthen cooperation to develop this strategic project linking the North African axis with the European Union, through reinforced cooperation within a joint workgroup over the next five years.

According to the signed joint declaration, the signatories recognise the great potential of Algeria and Tunisia for renewable energy and green hydrogen production, the need to enhance energy security between the region and the EU to support a sustainable growth, the importance of developing hydrogen plants and associated infrastructure, accelerating the energy transition to achieve global climate goals, with a focus on attracting investments in Algeria and Tunisia to support their local market, create jobs and promote innovation. This agreement also highlights the importance of SoutH2 as an infrastructure to transport hydrogen between Algeria and Europe via Tunisia, including the need to strengthen capacities and develop the necessary skills, identify financing requirements and risk mitigation mechanisms, and commit to coordinating policies and sharing knowledge to ensure the effective implementation of the project, regularly monitored through a joint working group which will meet every six months.

Governmental boost to SoutH2 from Algeria

Meanwhile, Algeria signed the official declaration of accession to the project in Italy on Tuesday. Mohamed Arkab, Algerian energy minister, highlighted Algeria’s commitment to the development of the green hydrogen industry, based on its privileged geographical location, its rich solar and wind resources and its advanced infrastructure within the energy sector. He emphasised that Algeria seeks to become a regional hub for the production of green hydrogen and its export to Europe, thereby contributing to the diversification of energy supplies and reducing carbon emissions. ‘Hydrogen coming to Italy, Austria and Germany from Tunisia and Algeria through the Southern Corridor pipeline will be ready by 2030,’ said Gilberto Becchetto Frattin, minister of Environment and Energy Security in Italian Prime Minister Giorgia Meloni’s government, after the signing ceremony, noting that this hydrogen from Algeria and Tunisia will be green if produced only with electricity, but could be blue if produced from gas with carbon dioxide capture.

The Italian minister underlined that the SoutH2 Corridor project will be completed by 2030 as the infrastructure is almost ready, due to the reuse of the natural gas infrastructure.  Furthermore, he stated that Italy can also play a role in the construction of solar power and carbon storage plants in Algeria and Tunisia. Hydrogen can be transported by pipeline, even mixed with methane, and he recalled that, besides pipelines, hydrogen can also arrive to Italy by ship from Algeria and Tunisia processed as a derivative, such as ammonia.

Framework Agreement between companies to promote SoutH2

The German VNG, the Algerian Sonatrach and Sonelgaz, the Italian Snam and SeaCorridor and the Austrian Verbund signed a memorandum of understanding (MoU) in October 2024 to jointly examine the feasibility of a large-scale hydrogen production project in Algeria and its export through the planned SoutH2 corridor to Italy, Austria and Germany.

This agreement sets the framework for further cooperation between these companies, including the development of joint studies. More specifically, the partners agreed to explore the technical and economic feasibility of a large-scale project throughout the entire hydrogen value chain.

VNG signed a contract for the supply of Algerian gas at the beginning of 2024. By this MoU, the foundation for a broad-based hydrogen cooperation has been set. VNG identifies Algeria as a potential and strategic partner in the production of this future energy source and is therefore a very important partner for Germany. By supplying green hydrogen from Algeria, different supply options are diversified, sealing an important contribution to the future security of supply of decarbonised gases in Europe.

International cooperation has a key role to play for the deployment of the hydrogen economy in Germany and Europe, since the demand for hydrogen cannot be met only by domestic production.

The SoutH2 Corridor will be run by power transmission system operators (TSOs) Snam, TAG, GCA and Bayernets, which submitted individual applications for Projects of Common Interest (PCIs) under the European Commission’s TEN-E regulation in December 2022.

A high proportion of reused pipelines (>70%) is expected to allow cost-effective transport, while access to suitable renewable hydrogen production sites (wind and solar) in North Africa will lead to a competitive production.

The commitment aims for SoutH2 to be fully operational by early 2030. It comprises the following candidate PCI projects:

• • “Italian H2 Backbone” by Snam Rete Gas

• • “H2 Readiness of the TAG pipeline system” by TAG

• • “H2 Backbone WAG + Penta-West” by GCA

• • “HyPipe Bavaria – The Hydrogen Hub” by Bayernets.

Africa and H2

Africa will become a key player in the global green hydrogen market, as 41 projects are expected to start developing within the next five years, according to a new report published by the Energy Industries Council (EIC). Despite its promise, the EIC warns that Africa’s hydrogen sector faces serious challenges, such as securing offtake agreements, establishing regulatory frameworks and building a solid infrastructure.

The Africa 2025 OPEX Report reveals that North African countries, including Egypt, Algeria and Morocco, are pioneering efforts, whose abundance of annual sunshine provides broad opportunities for investment in green hydrogen production and export infrastructure.

Egypt’s National Green Hydrogen Strategy, for example, aims to control 8% of the global hydrogen market and produce 10 million tonnes of green hydrogen per year by 2050, with a significant proportion intended for export.

Neil Golding, director of Market Intelligence at EIC, cautioned that optimism should be taken with care. ‘While the longer-term outlook looks positive for the hydrogen sector, no commercial-scale project has yet reached a final investment decision. Offtake agreements need to be signed and demand created for the projects to become commercially viable. At the same time, we see the need for regulatory frameworks to be established and the development of robust infrastructure’.

Africa offers fertile ground for scaling up the production of green hydrogen, generated from renewable energy sources such as solar and wind, while taking advantage of its abundant resources and low production costs. The African Green Hydrogen Alliance, launched in 2022 and led by Egypt, Kenya, Mauritania, Morocco, Namibia and South Africa, aims to position Africa as a world leader within this sector.

According to the report, 41 hydrogen projects are expected to be started within 2030. Sub-Saharan Africa is also developing green hydrogen capacity, where countries such as Namibia are at the forefront with large-scale projects. Namibia’s potential $10 billion hydrogen project will create 15,000 construction jobs and 3,000 permanent jobs. Further north, Mauritania’s Aman and Nour projects will produce 40 GW of power to produce hydrogen.

Notwithstanding the huge potential, the report identifies several challenges that need to be addressed to fully realise Africa’s green hydrogen ambitions, including the need for major investments in infrastructure (such as pipelines, ports and export facilities) and the development of clear policy frameworks and regulatory support to attract investment.

The upfront costs of green hydrogen projects require international cooperation and funding initiatives, according to the report. Europe’s REPowerEU Plan, designed to reduce the continent’s dependence on Russian gas and which aims to import 10 million tonnes of green hydrogen annually from Africa, is a clear sign that efforts are already in progress. However, the report highlights that more specific funding and collaboration will be key to scaling up hydrogen production in Africa.

The future of the Iberian Corridor (H2Med)

Included in 2023 in the PCIs and promoted by the governments of Portugal, Spain and France, this project is a trans-European initiative that will connect the hydrogen transport network of the Iberian Peninsula with northwest Europe through a hydrogen corridor that crosses its national geography. In January 2023, the German government joined the project due to the urgent need to cover its current and future gas demand from countries belonging to the European Union, thus involving the large German industrial sector in the project. The leading companies behind the project will be Enagás (Spain), GRTgaz & Terèga (France) and REN (Portugal), as well as the German company OGE.

In January 2024, the engineering company Wood was selected by Enagás to carry out the engineering tasks – the design phase – for the interconnection with France, known as the BarMar section. Enagás forecasts a total investment of around 2.135 billion euros for this new underwater pipeline, to which will be later increased by 350 million euros for the Portugal section. Spain will assume around 1,000 million euros of this amount. The first studies conducted reveal that the BarMar – the underwater part of the Iberian Corridor – will be 455 kilometres long, with a diameter of 28 inches, and will reach a depth of up to 2,600 metres. The system will have a 140 MW compressor station in Barcelona in order to operate at a pressure of 210 bar.

In December 2024, several European companies established an alliance to accelerate the implementation of H2Med. Companies such as Moeve, DH2, Thyssenkrupp nucera, Elyse energy, HDF, Hynamics, QAIR, SEFE, SHS-Stahl-Holding-Saar, and Copenhagen Infrastructure Partners – energy and technology companies – alongside the above-mentioned energy companies, established a framework for cooperation in this cross-sectoral and multi-sectoral European initiative. This is an open alliance that aims to include more companies and regions, and also seeks government support. The main objective of this alliance is to accelerate the decarbonisation of industrial territories through the implementation of the H2Med Southwest Hydrogen Corridor in the early 2030s, aiming to foster a strong European hydrogen value chain. This initiative follows the Green Pact and Europe’s Fitfor55 as well as the new targets set by the European Commission in the forthcoming Clean Industrial Deal.

However, it should be highlighted the many doubts about a hypothetical large-scale investment by the private sector in an exclusive renewable hydrogen infrastructure such as the Iberian Corridor, while the SoutH2 Corridor will use natural gas transport to the centre of Europe, without a clear commitment to reconvert the current system for its future use to transport hydrogen.

Furthermore, there is a lack of commitment and involvement of a key actor for the future development of this project, the Kingdom of Morocco.

Conclusions

The European Union’s interest, and Germany’s in particular, regarding a series of energy corridors to reduce its future energy independence, especially from Russian gas, is a priority and a strategic one.  Therefore, the European Union is bound to promote and support projects aimed at lessening dependence and increasing security of supply in Europe.

The agreements between Italy, Germany, Austria and Algeria within the framework of the SoutH2 project could be a serious setback for the renewable hydrogen projects planned in Spain, since they imply the addition of greater competitiveness in the supply of hydrogen to Northern Europe, especially to Germany. Moreover, the SoutH2 Corridor will have the support of Algeria, a country with a high potential for hydrogen production over the next few years, which is currently one of the largest importers of gas to Europe, but seems to be in an ‘enmity’ phase with Spain due to the Spanish government’s policies of approaching the country to its neighbour on the other side of the Strait of Gibraltar, Morocco, a country without a strong international relationship with the Algerian country. This ‘enmity’ with Algeria means a reduction in natural gas imports to Spain, which is also not allowed to use surplus supplies for export to countries further north owing to the French refusal to accept the Spanish proposal.

Unlike the SoutH2, the Iberian Corridor will not transport natural gas, despite Spain’s insistence throughout negotiations with France. France, whose influence in Africa is considerable but exponentially declining, did not accept a condition which would have granted Spain a tremendous economic and political weight, both in Europe and North Africa.

The Iberian Corridor is at a competitive disadvantage with respect to the SoutH2 Corridor, as it is considered to be an exclusive H2 infrastructure. SynerHy has always identified the Iberian Corridor project as a unique opportunity to develop an exclusive infrastructure for the transport of hydrogen by pipeline that would provide the backbone of a southern distribution network from the Iberian Peninsula to the rest of Europe. If the funding is feasible and other geopolitical interests (France) allow it, the project can be a great opportunity for Spain to finally become a major energy leader and perhaps be able to reindustrialise its productive system and to increase the industrial sector’s weight in the GDP.

The European Commission also considers the Iberian Corridor as the one to transport European-produced hydrogen, since the Iberian Peninsula is considered the most promising region in Europe for the production of green hydrogen. Moreover, the SoutH2 corridor is aimed at importing hydrogen. This means that the EU plans expect the Iberian Corridor to cover part of the domestic hydrogen demand according to the European roadmap (10 Mt) while the SoutH2 will cover part of the imported hydrogen demand (10 Mt) and imports of 10 Mt, so in theory these corridors would not be considered to be mutually competitive. Furthermore, the Iberian Corridor is seen as a potential connection for the supply of green hydrogen from Morocco and therefore could meet part of the demand for imported hydrogen. 

Therefore, we believe it is a priority to encourage an institutional response from the countries involved in the H2Med project, and especially from Spain, to avoid being left behind in projects of such vital importance from an energy, geopolitical and economic point of view for our country. Engaging Morocco more actively, as Algeria is doing in the SoutH2 project, could give a boost to the viability of the H2Med project.