LNG will continue to play an outsized role in balancing the Spanish gas system until gas pipeline booking is streamlined and, in the longer term, more interconnection is built with the rest of Europe.
That is the view of Claudio Rodriguez, Gas Assets General Manager at Spanish infrastructure owner and operator Enagas in a recent interview with ICIS.
Spain’s level of pipeline interconnection with the rest of continental Europe is among the lowest in Europe, and supply from France can cover under 10% of the country’s demand. LNG plays a huge role in balancing the country’s gas system.
This was shown in January and February when Spain, just months after rolling out its new balancing regime, was hit by a major demand spike.
Spanish gas prices rose to Asian netback levels in order to pull in LNG spot cargoes.
Spain’s six LNG terminals, which together have a combined ability to put 1.9TWh/day of gas into the grid - around 177 million cubic metres/day, were critical in helping shippers who were newly responsible for balancing their own portfolios and needed gas at short notice, said Rodriguez.
Streamlining existing EU capacity
Despite a 20% capacity enlargement at the French border, to 225GWh/day that took effect in January 2017, Spain remains susceptible to future supply crunches until capacity allocation at the cross-border link with France, VIP Pirineos, is refined, Rodriguez said.
“The increase of capacity at the interconnection has been very favourable and is providing security to the gas flows, but the impact is lower than it should be due to the different nature of the capacity offered on either sides of the Pirineos Virtual Interconnection Point,” Rodriguez said.
“Enagas offers this capacity as firm capacity, while the French operator will continue supplying the capacity as interruptible. Firm capacity from the French side would imply a ... more positive result,” Rodriguez said.
The outlook for LNG reloads
Spain’s desire to be a global LNG hub was a pipedream without the ability to carry out LNG reloads cheaply, but this will never happen unless the expensive regulated tariffs that control the market are reduced significantly, according to Rodriguez. Enagas had been outflanked by newer European entrants to the LNG reload market, he admitted.
In 2014, Spain carried out 72 reloads totaling around 63TWh of gas, but has only carried out one genuine commercial reload since late 2015.
“Enagas boasts the best LNG reloading platform in Europe … [but] the current global LNG market scenario is very different to previous years,” he said.
As inter-market arbitrage possibilities are now so low because of the current LNG oversupply, shippers’ attention is increasingly focused on cutting costs, he said.
The high regulated cost of executing an LNG reload in Spain was “one of the decisive factors” in choosing to reload a cargo at a northwest European terminal such as Gate, Zeebrugge or the Isle of Grain rather than one of Spain’s terminals.
“Other European terminals … have responded to new market opportunities by publishing new reloading tariffs cheaper than the ones at the Spanish terminals.
“Spain, leader in Europe by number of regasification terminals, needs not only competitive tariffs and tolls offered by the Spanish gas system, but also products and services which fit perfectly to shipper’s needs, consolidating our country as a reference LNG hub at a global level.” firstname.lastname@example.org.