Europe is experiencing a gas crisis and although Spain barely extracts any fossil fuels and no longer makes use of its coal deposits, the country could play a pivotal role in resolving Europe’s energy crisis. And we are not talking about the abundance of sun or wind to solve this crisis, although these energy sources will play a significant role in the energy mix of the future.
A little background
The current conflict between Russia and Ukraine has highlighted Europe’s energy vulnerability. European countries have long aimed to shift into greener energy production, and to that end have closed down their worst polluting fossil fuel generation (such as coal and oil into natural gas) as well as nuclear power plants. Although additional renewable power generation facilities have been built, Europe has not succeeded in achieving anything near energy self-sufficiency. A pandemic that changed where and when we use energy and a war in Europe involving the largest gas supplier to the continent’s economies have made the inadequacy of the energy supplies painfully clear.
Having spent decades developing its dependency on Russian supply through several pipelines while partially moth-balling storage facilities that were meant to lessen the effects of short term energy shocks (in favor of a strong belief in “just-in-time” deliveries) Russian gas supplies to Europe have now more or less been cut off completely. Europe have imported a total of around 155 billion cubic meters per year, amounting to about 40% of the EU’s needs, from Russia alone. The risk analysis that must have accompanied such decisions must have been interesting to read.
This dramatic reduction in supply has led to skyrocketing prices despite lower energy demand during a hot and dry summer time. Fall and winter with colder temperatures are coming and a lack of short term alternative sources, mean expectations are for high prices to continue over the next months and possibly years to come. Whether you believe the sanctions are to blame or the Russian regime using gas as a weapon is not really what we’ll discuss in this article.
Faced with this new reality, national and EU politicians are finally scrambling to find solutions that perhaps won’t ruin people, close down companies and ultimately create social upheaval.
What about Spain?
According to the Pipeline & Gas Journal, Barcelona started lighting its streets with gas derived from coal as early as in 1841 and by the end of that century, most cities and larger towns had their own gas-making plant as well as distribution networks. In 1972, the government founded Enagás to develop a nationwide gas transmission grid, which today serves most every major city and town including the islands of Ibiza and Mallorca in the Mediterranean.
In 2017, the industrial sector accounted for almost two thirds of the total energy consumption (64%), with the remainder split equally by the domestic-commercial and electricity generation sectors. We will get back to electricity generation, grids and prices in a later article.
With no significant own production of oil, gas or coal, a lot of the country’s energy needs are covered through imports, renewable power or low carbon options like nuclear power plants. Renewable energy production in Spain is just below the EU average (21.2% of energy consumption, compared with 22.1% for the EU).
Despite a well-developed domestic network, the Iberian Peninsula has been more or less isolated energy-wise from the rest of Europe.
Oil
While the other large and small countries further north in Europe have been increasingly reliant on oil and gas from the North Sea and Russia, Spain has imported most of its fossil energy from Africa and North America. According to a report in April from the think-tank, the Elcano Royal Institute, only 2% of the oil and 6% of the gas imports come from Russia.
According to the International Energy Agency (IEA), Spain has a negligible oil production but the processing capacity at its eight refineries exceeds domestic needs and makes Spain a net-exporter of oil products. It has 11 oil port terminals, an extensive network of pipelines and storage capacity connected to the above mentioned refineries. Spain’s main crude oil suppliers are Nigeria, Mexico, Saudi Arabia, Kazakhstan and Iraq ahead of Russia, the USA and Brazil. But as Spain also has several other significant supplier countries, they are well diversified and not highly dependent on any single one.
The oil pipeline system is owned and operated by CLH Group (Compañía Logística de Hidrocarburos) which boasts the biggest civil pipeline network in Western Europe, a network more than 4,000 km long. Spain has the highest rate of inland oil transportation via pipelines with 90% of primary transport using the network (compared to 11% in Germany that has a similar pipeline system length).
Natural Gas
Spain’s gas imports are also quite diversified, although not as much as in the case of oil.
The main gas supplier countries are the United States, Algeria and Nigeria with additional contributions from Russia, France, Trinidad & Tobago, Qatar, Egypt, Equatorial Guinea, Portugal and Norway. Much of the gas is imported in gaseous form through pipelines, while the rest is imported in liquid form delivered by ships.
Current pipelines
Spain has two gas pipeline connections with Portugal (via Badajoz and Tuyvia) with a third one in the planning stages.
There are also two connections between France and Spain (via Irun and Larrau with a combined capacity of seven billion cubic meters per year), with a third pipeline, the MidCat, that could double the current capacity planned but moth-balled, at least for the time being.
Additionally, Spain has two gas pipelines with Algeria. The Medgaz pipeline is a 210 km subsea pipeline with a capacity of 8 billion cubic meters annually, between Algeria (Beni Saf) and Spain (Almería). The second pipeline, the Gazoduc Maghreb Europe, goes through Morocco and has a capacity of 12 billion cubic meters. But, following an announcement that Morocco would develop its own LNG terminal capacity and a conflict over the rights to Western Sahara, a former Spanish colony, Algeria cut off gas supplies through this pipeline in 2021. When Spain changed its stance and supported Morocco’s claims over Algeria’s in March of this year, the same conflict led to reduced flows of gas through the MedGaz pipeline as well. However, Spain has been able to compensate this reduction through increased, but more expensive, LNG-imports from the USA.
Liquefied Natural Gas (LNG)
Spain got its first delivery of LNG in 1969 when Spanish tanker El Laietà delivered its shipment to a newly built re-gasification plant in Barcelona. From then on, LNG started to replace gas extracted from coal. Almost all of Spain’s remaining coal mines, concentrated in the four provinces of Asturias, Palencia, Teruel and León, closed in December 2018.
The gas imports from shale oil in North America come in the form of Liquefied Natural Gas, or LNG, delivered to its six facilities located throughout coastal Spain, namely in Barcelona, Cartagena, Huelva, Gijon, Bilbao and Sagunto. At these specialized terminals, the LNG is re-gasified and distributed further. While there are a total of 29 LNG facilities (six are small scale) in Europe, the six in Spain (with more planned in the Canary Islands) and the one in Portugal, make the Iberian Peninsula an important hub for international gas deliveries. Spain has about a third of Europe’s LNG import capacity, meaning around 60 billion cubic meters, compared to a national annual consumption of about 33 billion cubic meters according to Natural Gas Intel. Were it not for the union’s inability to agree on pipeline extensions across the Pyrenees, Spain could have been a significant supplier to the rest of Europe.
According to an article in the Anadolu Agency based on information from the International Gas Association and Gas Infrastructure Europe, it is estimated that Europe uses just over half of its import capacity with Spain using 37% of its capacity, the UK 38%, Italy 82%, the Netherlands 77%, Belgium 90%, France 66%, Portugal 70% and Greece 49%.
The transmission system operators
There are two gas transmission system operators in Spain: the market leader Enagás (founded by the Spanish government and tasked with building the country’s domestic pipeline grid, it is also one of Spain’s largest companies) and Naturgas.
The wholesale market
There are also five distribution groups in Spain: Gas Natural Fenosa, Naturgas, Energeia, Endesa and Iberdrola.
The wholesale gas market has over 30 registered trading companies, of which more than half sell gas to final customers.
The main gas traders buy and sell European wholesale gas on behalf of major customers including power utilities such as Endesa, Natural, Fenosa and leading municipalities like Madrid, Granada and Málaga.
Across the Pyrenees and into Europe
However, to the north, the French have complicated further integration of the Iberian Peninsula with the rest of the European Union. While there has been an exchange of gas through the two existing pipelines (with a combined capacity of 7 billion cubic meters per year) between the two countries when needed, an additional pipeline named MidCat or Midi-Catalonia (from Hostalric, north of Barcelona to Barbaira in southern France) with a planned capacity of about 7.5 billion cubic meters per year, launched in 2013, could help alleviate the supply problems. But, it was suspended in 2019 due to cost and environmental reasons. The French government says it was suspended because of costs and a lack of necessity and was originally planned to feed natural gas to Spain and not the other way around anyway. Macron said in a press conference on 5 September (2022) that he still thinks the pipeline is not needed and that building new LNG terminals is a better option. But, he would be willing to reconsider if the German and Spanish prime ministers were able to convince him.
Construction is only complete to Hostalric, and there’s another 60 miles of pipeline left to be completed to be able to connect the Spanish with the French transmission grid. Estimates of how long it would take to finish the project also vary widely. While the Spanish government believes it could take eight to nine months to build the pipeline on the Spanish side of the Pyrenees, the French government operates with a time-frame of three to four years to finish the whole project. According to Reuters, the CEO of Enagás suggests the full project could take about 2.5 years.
What about the future?
Spain has adopted an energy strategy that involves expanding its LNG operations, a further build out of renewable power and a transition into green hydrogen. Officials use this strategy to promote the need for additional pipelines connecting Spain to the rest of Europe believing that hydrogen exports can use the current (and planned) pipelines or possibly a refitted version it. Alternatively, that hydrogen exports can piggy back on that same infrastructure. There are quite a few questions regarding if and how this is possible, at least with the current level of technology.
There are different types of hydrogen supply, namely green, blue, grey, pink and yellow. Below is a wonderful graphic from Petrofac that describes the differences between them. It all comes down to what kind of energy is used to separate the hydrogen and whether or not any released remaining gas is captured and stored or not.
Green hydrogen is extracted from water through electrolysis powered by one or a mix of renewable energy sources, it only releases oxygen into the air.
Pink and yellow hydrogen use the same process as for extracting green hydrogen but use a nuclear power source (pink) or solar power only (yellow).
Blue hydrogen on the other hand is extracted from natural gas which mainly consists of methane (CH4), among some other gaseous hydrocarbons, and releases but captures and stores the CO2.
Grey hydrogen uses the same process as the extraction of blue hydrogen, but does not capture nor store the remaining CO2 and instead releases it into the air.
Developing additional pipeline capacity from Africa seems a likely and sensible project as well as extending pipelines further into other parts of the EU. Right now, there is also a lack of pipeline capacity going from France into Germany and other EU countries so that exports from Spain would not flow freely to where they are needed. If these problems are solved, Spain could effectively become an energy hub for the future that would enable the European Union to wean itself off of Russian hydrocarbons and still be sufficiently supplied.
Other renewable types of energy that could be developed alongside wind, solar and hydrogen, here in Spain include wave/tidal and geothermal energy. Time will show if efforts will be made here.
We assume that fusion is still too far off from being a realistic contributor to our energy use although progress is being made. Fusion has the potential to dramatically change the energy landscape. Perhaps one day…
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