Spain is marking progress in a campaign to boost development of its natural gas grid and gas utilization.
The biggest recent development was Madrid's approval late last month,of prices for Algerian natural gas. That will pave the way for natural gas fueling for as much as 12% of Spain's electrical power generation by 2000. And it will expedite the merger of two Spanish companies that will result in Europe's third biggest natural gas distribution company.
Meantime, efforts to expand the country's natural gas grid and utilization continue.
Spain expects to spend as much as $7 billion on its natural gas infrastructure with about $2 billion ear-marked for the trans-Maghreb to Spain gas pipeline. Spain is expected at first to take 50 bcf/year of Algerian gas for 5 years, building possibly to as much as 350 bcf/year for 25 years. Tentative plans call for later extending the Maghreb-Spain system to Portugal, France, and Germany.
ALGERIAN GAS PRICE
Spain's government late last month set a price of 416.43 pesetas/MMBTU for Algerian gas delivered beginning in 1996. At current exchange rates, that works out to about $2.92/MMBTU.
Spain's Industry and Energy Ministry intervened in negotiations between national gas company Enagas and Unesa, the Spanish electric utilities group, that had been deadlocked for weeks. The governments of Spain and algeria signed an initial accord for gas imports in 1992.
The price the government set is 28 cents/MMBTU less than Enagas sought and 55 cents/MMBTU more than Unesa sought. On that basis, the 5 year contract is worth $1.58 billion to Enagas for a total volume of 546.4 billion MMBTU of gas.
The government's fixed price will rise in steps to 425.25 pesetas/MMBTU by 2000. By that time, under strictures imposed by the government's national energy plan, electric utilities will have doubled the gas fired share of electrical power generation from the current 6%.
An indexing formula used to determine the imported gas price is based on tariffs for electricity, refined products prices, domestic coal prices, and prevailing interest rates but excluding gasoline and imported coal prices. This, the ministry assures Unesa, will prevent a supplier dominated relationship and a jump in electricity rates.
Power producers remain concerned they may have to bear added costs or delays caused by civil strife in Algeria.
In a recent visit to Madrid, Algerian Minister for Industry and Energy Ammar Makhloufi assured Spain the supply contract will be met. However, Spanish business daily Cinco Dias reported that Maghreb pipeline general contractor Bechtel is renegotiating pipeline construction contracts to reflect increasingly higher risks run by its employees in Algeria. Foreigners, especially those in the petroleum sector, have been targeted for assassination in Algeria's worsening civil unrest (OGJ, July 18, Newsletter).
At the same time, finalization of negotiations on the gas pipeline contract in Morocco is 5 months behind schedule for some pipe spreads, forcing layup of some equipment and supplies.
ENAGAS/GAS NATURAL MERGER
The government's price move also opens the way for Gas Natural's $358.6 million acquisition of 91% of Enagas. Until the price for Algerian gas was set, Gas Natural could not properly place a value on Enagas without determining future revenues.
The resulting Gas Natural/Enagas group will be the third biggest domestic gas distribution company in Europe, controlling about 90% of Spain's gas market and garnering revenues pegged at $1.75 billion/year. This figure could double by yearend 2000, says Gas Natural.
The government's holdings in Spain's natural gas sector is a consideration as well. State energy agency National Institute of Hydrocarbons (INH) holds a 3.8% interest in Gas Natural. Repsol SA, owned 40.5% by the government, holds a 45.6% interest in Gas Natural, although the government stake in Repsol is slated to fall to 25% by yearend 1994 (OGJ, Apr. 11, Newsletter). In addition, the remaining 9% of Enagas will remain in INH hands.
Most significant is INH's 91% interest in Sagane, the company responsible for managing Spain's portion of the Maghreb pipeline project. Sagane previously was part of Enagas but was mostly spun off and kept under state control to make the Enagas acquisition more attractive. Enagas retains 9% of Sagane.
Once Gas Natural has completed the Enagas acquisition, it will exercise its rights to buy back part of Sagane during 1996-2000 for $350 million.
The Spanish government's heavy involvement in gas utilization/transportation has electrical power utilities claiming the state always will act in the interests of gas concerns because it has a vested interest in seeing a quick return on the Algerian gas project.
The Enagas/Unesa protocol includes take or pay provisions that call for payment of as much as 20% of the value of gas not delivered, deducted from the cost of deliveries taken in the first quarter of the following year.
MAGHREB PIPELINE
The Maghreb-Europe pipeline system will extend from Sonatrach's Hassi R'Mel gas field in the Algerian Sahara Desert across Morocco to Cordoba, Andalusia.
Construction involves a 504 km line Sonatrach will lay in Algeria and a 600 km segment Spanish and Moroccan companies will lay in Morocco and the Strait of Gibraltar. Enagas will lay the section from Gibraltar to Seville.
The project got a further boost this year when Algeria's Sonatrach and Portugal's Transgaz group signed a contract covering delivery of 87.5 bcf/year of Algerian gas to Portugal through a 460 km pipeline from Cordoba to Setubal, Portugal (OGJ, May 2, p. 52).
Spain's natural gas transportation/infrastructure spending breaks out in three phases during 1994-2004:
- The first, $2.17 billion stage, will focus on the trans-Maghreb pipeline.
- The second, $3.045 billion stage, will emphasize expanding Spain's gas pipeline transmission and distribution network to 44,000 km from the current 5,722 km.
- The third, $1.89 billion stage, will involve spurs and interconnects with French and Portuguese gas grids.
Gas spending will be split among INH, Sagane, and Gas Natural/Enagas, plus about $700 million coming from the European Union's regional development fund.
BASQUE PROJECT
Ente Vasco de la Energia (EVE), the energy authority of Spain's autonomous Basque government, has proposed consolidating the region's natural gas transportation and distribution networks and jointly investing in two major infrastructure projects.
The Basque primary and secondary pipeline network is owned by Gas de Euskadi (GDE), in turn owned 66% by EVE ,and 34% by Enagas. The region's entire natural gas transmission and distribution network is owned by GDE 75% and Enagas 25%.
EVE also asked INH to participate in a $119 million project to lay a pipeline spur to the French gas grid at Bidert and build a liquefied natural gas regasification terminal at Bilbao. That could provide as much as 60% of Basque gas requirements, with the rest coming via the existing link from Zambrana to the regional capital of Vitoria. Surplus could be sold to Enagas for distribution elsewhere in Spain.
Analysts see the proposal as a contingency plan sparked by concerns over the reliability of Algerian gas imports.
TOLEDO PROJECT
Enagas plans a second pipeline in Toledo province by yearend after starting up a new line in the province earlier this year.
Enagas in April began supplying gas to eight ceramics factories in Toledo through a new 45.22 km pipeline extending from the Madrid-Sevilla trunk line at Yepes. From there the gas moves west to Yuncos, where it splits into spurs north to Yuncler and southeast to Alameda de la Sagra.
Obramin, a 50-50 joint venture of Obrascon and Amingapesa, handled construction.
There are no specifics on the location of a second line in Toledo.
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