Spain can become Europe’s gas barn. For that you need to bet everything on LNG

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Spain is the largest importer of liquefied natural gas (LNG) in the European Union. With a capacity of 3.31 million cubic meters, our country is in a privileged position to replace Russia as the main gas store in Europe. We explain why LNG is so important and what Spain can do to strengthen its position as a gas supplier.

What is liquefied natural gas (LNG). LNG is natural gas that has been cooled, usually to -162ºC, to be in a liquid state. The advantage of this is that it takes up to 600 times less space, so it can be transported more easily, usually in methane tankers. The entire process is complex and very expensive, from transportation to the liquefaction plant, through the filling of ships, storage and regasification. For this last process, Spain has the largest network of regasification plants in Europe.

35% of European capacity passes through Spain. According data from Gas Infrastructure Europe (GIE), Spain has 35% of the storage capacity of the EU and the United Kingdom, followed by the United Kingdom itself with 22%, France with 14%, Belgium with 6% and Italy with 5%. One third of the gas that Europe needs can be stored in Spain.

In addition to being leaders in storage, we also have the largest regasification capacity thanks to multiple plants, such as those in Barcelona, ​​Huelva, Cartagena, Bilbao, Sagunto, Mugardos and El Musel, which have not been put into operation . By comparison, France has only four regasification plants and they are much smaller than the one in Enagás in Barcelona, ​​the oldest in continental Europe and with a storage capacity of 760,000 m3 of LNG.

Until not long ago, it was considered an excessively expensive infrastructure. The situation with Ukraine and the energy crisis has completely changed the picture. According to a report of the Institute of Energy Economics and Financial Analysis (IEEFA) As of 2021, Enagás was benefiting from excessive infrastructure and that had led to higher gas bills than any other country. A multimillion-dollar investment that was not even used all the time, since sometimes there was not enough demand.

In the background is a regulatory system that guarantees a fixed rate for investments, regardless of whether the country really needed those investments. An excess that until now we were paying consumers. But, as a result of the new situation, we have found ourselves with a competitive advantage that was not contemplated.

In 2022, the arrival of LNG at the ports of Spain has skyrocketed. If some 86 methane tankers arrived between November and March last year, it is expected that they will unload up to 146 methane tankers in 2022. Spain is a country well connected by sea and with an enormous regasification capacity, which makes us a preferred destination for LNG that It is sent from countries such as Algeria, Russia, Nigeria or the United States. The latter is moving to end up becoming the world’s leading exporter of LNG, thus surpassing Qatar and Australia. In Spain, the purchase of LNG from the United States has also been promoted by the closure of the gas pipeline with the Maghreb.

According to data from Enagás, 58% of the gas that arrives in Spain does so via gas pipelines, while 42% does so in the form of liquefied natural gas, transported by methane tankers.

“The amount of LNG imported from the Atlantic by the EU during the last three months of 2021 was 40% higher than during the same period of the previous year,” explains Simon Dekeyrel, analyst at the European Policy Center. In other words, Europe is progressively importing more liquefied gas from the US than from Russia, as part of its objective of reducing its dependence. And much of that gas goes to Spain.

Fernando Rodríguez, a consultant for the EU’s internal market, explains that calculations would have to be made on to what extent the situation in Spain is really more beneficial or if it would be cheaper to directly send the gas to LNG to Germany.

The problem: we are an “island” in energy terms. Spain has a large capacity to store gas, but we cannot export it. In other words, Spain has more gas than it needs, but it does not have the capacity to send it to its European neighbors. The reason is the lack of interconnections. Spain currently has the Larrau and Irún gas pipelines, with an annual capacity of some 8,000 million cubic metres. Insufficient to send the gas that Europe may need if it seeks to avoid the one that comes from Russia. To get an idea, between the Nord Stream 1 and the (cancelled) Nord Stream 2, a capacity of 110,000 million cubic meters was going to be reached.

NordStream 2 was to solve much of Europe's gas problems.  Until Ukraine came

The Midcat gas pipeline project is back. But who pays for it? One of the solutions goes through the Midcat gas pipeline, discarded in 2019 due to its cost but which is now once again a viable option. It is a gas pipeline that would pass through the municipality of Girona de Hostalric and would connect the north of Catalonia with Occitania. A gas pipeline that would expand the annual capacity to 17,000 million cubic meters.

However, France does not seem to be up to the job. Teresa Ribera, Minister for the Ecological Transition, explained that “the question is who pays for an interconnection to guarantee the security of supply in central and northern Europe. Our demand is that it not be the taxpayer or the consumer of Spanish gas”.

The Midcat project is again seen favorably due to the need for gas, but Spain considers that it is a great investment whose benefits will not go directly here. On the contrary, it would be a gas pipeline that would help enhance the value of the Spanish regasification plant network. A project that according to the Employers Promotion of Work, could be completed in less than three years, at a cost of around 450 million euros. Little compared to the almost 700 million euros that Europe paid to Russia every day.

Burn coal, buy from Algeria, methane tankers: how Europe can reduce its dependence on Russia

Spain looks favorably on gas pipelines… thinking of hydrogen. The construction of a new gas pipeline would also allow Spain to obtain benefits derived from transit rights. But the government is still not entirely clear. They want the European Union to provide funds for its construction, but there is another issue that is of particular importance: its compatibility with hydrogen.

Our country has a curious position, being leaders in LNG despite the fact that our market is usually based on other energies. This is where green hydrogen comes in, one of the energies that Spain wants to promote. If these new gas pipelines serve as infrastructure to strengthen the green hydrogen network of tomorrow, Spain would be much more proactive in investing in new gas pipelines in order to alleviate dependence on Russian gas in Northern Europe.

In Xataka | Green hydrogen is one of the EU’s big bets for the energy transition: these are its strengths (and weaknesses)

Spain is the largest importer of liquefied natural gas (LNG) in the European Union. With a capacity of 3.31 million…

Spain is the largest importer of liquefied natural gas (LNG) in the European Union. With a capacity of 3.31 million…

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