Inadequate storage delaying secondary gas market in Spain
The creation of a secondary gas market in Spain is being delayed by inadequate storage facilities, the Spanish energy regulator Comision Nacional de la Energia warned this month.
Speaking at a conference in Barcelona, director Raul Yunta said there will be no liquidity in the gas market until more storage capacity has been added. The issue of regulated access to the storage is making investors reluctant to build new storage. Spanish utility Gas Natural is developing some sites, but these are not expected to be completed before 2009.
“Investors think that it is too risky to develop new projects… They are waiting for a change in the regulatory system,” Yunta said. “There are some explorations for new storage sites in progress, but the timeline will be a later question.”
This lack of storage is a serious impediment to liquidity in the market, he argued. Enagas, Spain´s gas transporter, has developed a system to facilitate exchanges, but this is not working yet. Although swaps are common at all Spanish entry points, these only serve to balance players´ positions and seldom involve cash settlements.
“We do a lot of swaps based on volume but none based on price,” a source from Spanish gas supplier Cepsa told EGM. At present, gas suppliers have to keep reserves for 35 days of supply, leaving only small volumes free for trading. With decreased flows through the Algerian interconnector, Spain has taken to storing gas offshore the Strait of Gibraltar to safeguard against any shortages.
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