Spain dreams big on US gas


Jul 29, 2018-

When the US and EU agreed to boost gas trade to Europe this week, Spain would have been justified in crying victory, having only recently offered its services with its many liquified natural gas (LNG) ports.

There’s a slight problem, though: it may have the capacity to import gas but it’s badly connected to the European network of pipelines, an issue on the table at a trilateral meeting between French, Portuguese and Spanish leaders in Lisbon on Friday.

For years, Spain and Portugal have called for an end to their isolation from European networks of electricity and gas distribution.

And whereas electricity connections are being built, there is little progress on gas.

During a NATO summit at the beginning of July in Brussels, US President Donald Trump criticised EU dependence on Russian gas and asked Europeans to buy US gas instead.

Madrid immediately offered its services, Foreign Minister Josep Borrell revealed this week.

“Us Spaniards are importing more and more American gas, which already represents 25 percent of our supply, and Portugal and Spain have terminals that would allow us to unload American LNG tankers and transport the gas via pipelines,” he told reporters.

As if answering Madrid’s offer, Trump, joined by European Commission chief Jean-Claude Juncker, said Wednesday that the two key economies reached an agreement to boost EU imports of US gas, which is liquified and transported by tanker before being gasified again.

Spain has six regasification terminals, more than any other European country. But so far there is just one pipeline linking it to France and the rest of Europe.

Not enough, says Spain.

“If American gas arrives on the (Iberian) peninsula and can’t go any further, we have a problem,” said Borrell.

As such, Madrid has long been promoting the construction of a second pipeline through the northeastern region of Catalonia.

The project, called Midcat, was broached at a first trilateral summit on energy connections in March 2015 in Madrid.

But Gonzalo Escribano, an energy expert at Spain’s Elcano Institute think tank, said Friday’s meeting was unlikely to yield any progress.

“We don’t know who would pay, and the French are putting the brakes on,” he said.

A European Commission viability study published in April sheds some light on France’s reluctance.

It concluded that the Midcat pipeline, which would cost more than 440 million euros ($510 million), would not benefit any EU country ... apart from Spain and Portugal.

The main reason is that other countries further north—like France—also have LNG ports, so why pay for another pipeline?

The LNG terminal at “Montoir in France is 8,966km (5,570 miles) far from Corpus Christi, in Texas, and Bilbao in Spain is 8,969km far,” the report noted.

European gas imports are on the rise as production drops due to “the decline of indigenous supply sources on the continent,” including in the United Kingdom and Netherlands, “two key pillars of European supply,” said consultants IHS Markit in a May report.

But for now, Europe’s “32 regasification terminals have large amounts of spare capacity,” they noted.

Thierry Bros, a researcher at the Oxford Institute for Energy Studies, estimates current LNG import facilities are only running at about 26 percent of full capacity.

So there is a way to go before LNG terminals further north reach saturation point. That’s why the issue is unlikely to be resolved on Friday at a meeting that will focus more on electricity connections.

A deal on financing construction of a 370-kilometre long power line linking France to Spain via the Bay of Biscay is to be signed, the European Commission said in a statement Friday.

The commission will finance 30 percent of the project by bringing 578 million euros to the table, an unprecedented amount for an energy project.

Published: 29-07-2018 08:32

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