UPDATE 2-Germany seeks Algeria gas partnership: Merkel

(Recasts, adds background)

By Hamid Ould Ahmed

ALGIERS, July 16 (Reuters) - Germany wants to begin a reliable gas partnership with OPEC exporter Algeria to diversify energy supplies for Europe's largest economy, Chancellor Angela Merkel said on Wednesday.

Germany is heavily dependent on energy from Russia, which provides a quarter of Europe's gas needs.

"We want to diversify our energy sources. Algeria is a good gas supplier to Europe," Merkel said on a visit to the north African country, adding: "We are ready to make good proposals for Algeria and we ready to be a reliable partner."

Germany also wanted to help develop solar energy in Algeria, Africa's second largest country with a big swath of the Sahara desert, she said in a speech to Algerian business executives.

Germany relies on imports for 80 percent of its gas requirements, mainly from Russia and Norway, via subsea and land pipelines crossing eastern Europe.

Algerian newspapers have said supplies of liquefied natural gas (LNG) shipped by tanker from Algeria could help Germany reduce its dependence on piped gas from Russia, an aim of Merkel's government.

Liquefied natural gas is natural gas that has been cooled to liquid form in order to make overseas transport of the fuel practical. It is later warmed, or regasified, so the natural gas can be moved in pipelines.

Algeria, which already supplies 20 percent of Europe's gas imports, is the sixth largest foreign oil supplier to Germany but at present sells it no gas.

German utility E.ON Ruhrgas EONG.DE has said Algeria as well as other northern African countries could become a source of LNG for Germany.

For decades an important gas and oil exporter to Europe, Algeria is planning to develop hybrid solar-gas energy plants in the Sahara and longer-term to establish solar-only installations in the desert to export power to Europe.

One Algerian state-owned company, New Energy Algeria (NEAL), is planning to build a 3,000 km-long (1,875 mile) power cable to Germany to export solar-generated electricity from the Sahara.

Merkel said the Algerian-German economic relationship had big potential, adding she would discuss this with President Abdelaziz Bouteflika on the final day of her visit on Thursday.

"German industry shows a big interest in Algeria. We should make more effort to boost partnership in this sector," she said, according to a simultaneous translation of her remarks.

"We will reinforce our partnership with Algeria and carry out concrete things. That's what I will discuss tomorrow with President Bouteflika."

Diplomats say German's economic presence is growing rapidly, drawn in part by Algeria's $126 billion in foreign exchange reserves and a multibillion-dollar programme of public works and reconstruction after years of political violence in the 1990s.

Germany is the 5th largest exporter to Algeria after France, China, Italy and the United States, according to 2007 official data, and is in the top 15 purchasers of goods from Algeria.

About 160 German companies do business in Algeria, more than three times as many as in 2003, Algerian newspapers have said.

Major Germany companies involved in Algeria include industrial gas producer Linde (LING.DE), engineering company Siemens (SIEGn.DE), consumer goods giant Henkel (HNKG_p.DE) (HNKG.DE), and Deutsche Bank (DBKGn.DE). (Reporting by Hamid OuldAhmed; Writing by William Maclean; Editing by Christian Wiessner)