Spain Well-Entrenched as Natural Gas Island

By Nicholas Newman, Contributing Editor

Spain is Europe’s fifth-biggest consumer of energy and seventh-largest market for natural gas, burning some 984 Bcf in 2015, when gas accounted for 18% of its  energy consumption.

The industrial sector accounted for the lion’s share at 64%, with the remainder shared equally by the domestic-commercial and electricity generation sector. Economic recovery, combined with conversion of  coal and diesel plants to gas, and growth in power generation of 32% in 2017 to maintain power supplies, has increased demand for gas, reported Kallanish Energy in February 2017.

As for the future, demand for gas is  expected to rise between 3-4%, according to Enagás Executive Chairman Antonio Llardén.

Gas Pioneer

As early as 1841, the city of Barcelona was lighting its streets with gas derived from coal. By the end of the century, every city and major town had its own gas-making plant and distribution network. However, it was not until 1969 that the Spanish tanker El Laietà brought the first shipment of LNG to Spain and Barcelona’s newly built regasification plant.

From then on, increasing shipments of LNG began to replace coal gas and were joined in 1993 by the arrival of pipeline natural gas imports from France. In 1972, the government founded Enagás to develop a nationwide gas transmission grid, which today serves every major city and town including the holiday islands of Ibiza and Majorca in the Mediterranean. The government’s shareholding is now just 5% and the company delivers gas to 7.2 million out of 22 million households in competition with Naturgas.

International Pipelines

Spain has cross-border gas interconnectors linking it with neighboring Portugal and France and via subsea pipelines with Morocco and Algeria. The opening of a interconnector in 1993 with France allowed Spain to receive piped natural gas from North Sea via the Pyrenees Mountains.

The inauguration of the 1,010-mile (1,620-km), 12 Bcm/y Maghreb Europe pipeline three years later brought Algerian gas via Morocco to Spain for nationwide distribution, then on to Portugal. In 2011, the 8 Bcm Medgaz pipeline opened, linking Algeria directly across the Mediterranean with southern Spain at Almera.

This subsea pipeline of 470 miles (757 km) which is 7,086 feet (2,160 meters) at its deepest point, also supplies gas to Portugal via two cross-border interconnectors at Badajoz and Tuy. There are plans for a third cross-border pipeline linking Oporto in Portugal with Zarrora in Spain.

Transmission Operators

There are only two gas transmission system operators: market leader Enagás and Naturgas. Both are subject to European Gas Directives as well as national regulation by the National Commission on Markets and Competition (CNMC) (Figure 1.)

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Figure 1: Spain’s main transmission gas grid.

Enagás is Spain’s ninth-largest company, notwithstanding banks, and is the leading transmission system operator with market capital of $1.7 billion and sales of $1.2 billion. Internationally, Enagás makes it into the Forbes Global 2000 at 1,870 and has operating interests in seven countries outside Spain, as well as a share of the Trans Adriatic Pipeline Project (TAP) routed through Greece, Albania and Italy.

In Spain, Enagás is responsible for more than 6,835 miles (11,000 km) of high-pressure gas pipelines, 19 compressor stations and 416 regulation and metering stations. All if these facilities are interconnected, securing the supply of natural gas even during peak demand. It also operates six international connections, two with Africa via Tarifa and Almeria (linking with the Magreb and Medgaz gas pipelines, respectively), two with Portugal via Badajoz and Tuy, and another two with France via Irun and Larrau.

Enagás manages three underground stores: Serrablo, located in Huesca; Gaviota, located in Bizkaia coast; and Yela, located in Guadalajara, with a combined storage capacity of 2,000 million m3 (newtons), enough for at least 20 days of gas consumption.

Enagás has four regasification plants located in Barcelona, Cartagena, Huelva and Gijon, a 50% stake in the Bahía Bizkaia Gas (BBG) plant in Bilbao and a 72.5% stake in the Saggas terminal in Sagunto. All of these facilities have the technology needed to load and offload methane tankers, supplement the mainland supply structure and offer diversity of supply.

Off the mainland, Enagás  is  developing  two micro-regasification plants  with an initial  storage capacity each  of 150,000 m3 of LNG  on the  islands of  Gran Canary and Tenerife. For both plants, Endesa is the main customer as it converts its diesel-fueled power plants to gas, as well as local industries and providers of bunkering facilities for shipping, reports Energas subsidiary Compañía Transportista de Gas Canarias (Gascan).

Naturgas is a minnow compared to the market leader, with just 4,800 miles (7,715 km) of gas transmission and nearly 840,000 customers, located  mainly in northern Spain, including the Basque Country, the Asturias, Catalonia, Castillo y León, Madrid and the  Region of Murcia, Extremadura and Navarre. As of July 2017, Naturgas was acquired by a special purpose vehicle owned jointly by the Abu Dhabi Investment Council, Swiss Life Asset Managers and Covalis Capital.

Wholesale Market

Beneath the transmission-system operators are the five distribution groups: Gas Natural Fenosa, Naturgas, Energeia, Endesa and Iberdrola. Gas Natural Fenosa is the market leader in retail gas distribution with over 5 million customers spread among 1,000 municipalities in nine autonomous regions.

The wholesale gas market also includes 32 registered trading companies, 17 of which sell gas to final customers. The main gas traders buy and sell gas on the European wholesale market on behalf of major customers such as power utilities Endesa, Natural and Fenosa, as well as leading municipalities including Madrid, Granada and Malaga.

Gas Imports

To ensure diversity of gas supplies, government regulations limit the percentage share of gas that can be sourced from any single country. Therefore, Spain which has about one-third of Europe’s total LNG regasification capacity, imports gas from over 10 countries. In January 2016, natural gas net imports reached 35,315 GWh, the bulk of which came from Algeria (57.9%), Norway (12.3%), Nigeria (10.8%) and Qatar (10.3%).

Pipeline Prospects

Under discussion is the 7.5 billion m³ capacity, $3.4 billion (3 billion euro) MIDCAT cross-border gas pipeline project proposed by Spain’s Enagás and French regional gas transmission company TIGF. This 107-mile (173-km) pipeline, linking the Spanish grid at Figueiras in Catalonia with Barran in southwest France, would double existing cross-border exchange capacity and allow gas from Spanish and Algerian LNG terminals to reach the French grid. (Figure 2).

Figure 2: MIDCAT Pipeline. Source:

Figure 2: MIDCAT Pipeline.

MIDCAT offers strategic benefits as it would end the isolation of Iberia from Europe and thereby increase integration with Europe’s gas market. It would also provide an outlet for Spain’s LNG regasification plants which are operating at just 25% of capacity.

France needs more gas supplies to enable it to reduce its reliance on nuclear power generation from 75% to about 50% by 2025. Last year, 20 of France’s 58 reactors had to go offline, leading to rising demand for gas and price increases in both Spain and France. Had MIDCAT existed then, customers would not have been inconvenienced.

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