Tag Archives: MedGaz

Spanish Economy and Transport Limitations Keep Medgaz Low

After a year of delivering Algerian natural gas to Spain, the Medgaz pipeline continues to face significant challenges to full capacity, with traffic running lower than expected due to a number of factors in Spain and beyond.

The pipeline connecting Algeria with Almeria has the capacity to transport “8 billion cubic meters annually, or 22 percent of Spain’s gas needs,” according to a Reuters report. Sonatrach currently owns 36 percent of Medgaz, with Iberdrola, Abu Dhabi’s Cepsa, Enel’s Endesa and Gaz de France on as project partners.

Algeria’s role as one of the largest natural gas importers in the world has been hurt recently thanks to the country’s sustained economic downturn, which shows little sign of improving in the near future. Even after announcing an EU-level bailout for Spain’s ailing banking system this past weekend, Prime Minister Mariano Rajoy warned that the country’s economy faced a difficult year ahead, suggesting further economic contraction and a longer path to recovery.

Such sentiment gives little confidence to the country’s natural gas actors who are dealing with a decrease in demand so significant that Spain’s newest LNG plant will be hibernated as soon as it is completed in December. Complicating the matter further, Spain’s limited connection to other European natural gas customers has hindered the country’s ability to off-load excess supply. Spain’s minimal pipeline network to France is likely to remain limited due to long-standing political opposition to new transport lines from France.

Still, Medgaz appears confident that Spain’s increased dependence on natural gas will continue beyond the country’s current economic woes, with company reports pointing to steady growth despite recent financial troubles.

For their part, Algeria and their state-backed firm Sonatrach have been working to increase their natural gas efforts, announcing an $80 billion euro plan to expand their resource base over the next five years.

Image: Arabian Oil and Gas

Originally Published in Newsbase’s Afr Downstream Monitor – All Rights Reserved

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New Med Landscape Spurs Pipeline Reevaluation

A new political and economic landscape across the Mediterranean region has led to a revaluation of existing and upcoming pipeline projects with some receiving a fresh look from political leaders and investors.

Economic shifts across Southern Europe and long-awaited political transitions across North Africa over the last year have forced many in the Mediterranean region to rethink their dependence on transport lines and where oil and gas deliveries will come from in the coming years. Political strife turned violent in Libya, Tunisia and Egypt resulted in complete pipeline shutdowns at several points during 2011 leaving customers to the north uncertain about the future of their energy needs. Heavily dependent on Libyan products and exports from Algeria, shipped through a Tunisian hosted pipeline, Italy in particular faced potential reserve deficits over the last year. Further east, attacks on pipelines in the Sinai Peninsula left heavily dependent Israel and Jordon to explore alternative options for their natural gas needs. This new environment has allowed for consideration of other projects in the region as energy customers seek stability for the years ahead.

“Widespread instability across the Middle East and Africa region has raised important questions about the long-term impact on upstream investments, oil and gas production and hydrocarbon exports in the region,” wrote Abdalla Salem El-Badri, Secretary General of the Organization of Petroleum Exporting Countries (OPEC) in an October opinion piece for The New York Times. A recent report in The Wall Street Journal suggested that the instability in the region, as well as the uncertainty about the viability of Iranian oil, had sent large consumers like China in search of new sources of oil and natural gas.

“China is making good progress toward diversifying its oil supply,” Gordon Kwan, a Hong Kong-based energy analyst at Mirae Asset Securities told the WSJ. “If they were to concentrate on just one or two countries that just accidentally went out of production, [global] oil prices could easily double.”

A Fresh Look

A long delayed direct connection between Algeria and Italy has received new attention since political instability in Tunisia and Libya led Italian leaders to rethink the reliability of their existing transport lines. The result of an MOU signed in 2007, bringing to together the interests of Algeria’s state-backed Sonatrach, Euro energy firms Edison, Enel and Hera, the 900km Galsi pipeline would mark the second such project linking the North African nation with Italy, via a landing in Sardinia. However, unlike the Trans Mediterranean pipeline, the Galsi would carry an estimated 8 billion cubic meters of gas northwards upon completion directly from country to country, skipping a passage through Tunisia. Held up due to issues of funding and government support, the Galsi has earned the support of Italian industry and political leaders eager to reduce their dependence on transport lines through the potentially volatile Tunisian territory.

The new pipeline would become the country’s fourth connection to the European marketplace, joining the Transmed, Maghreb-Europe Gas and MedGaz pipelines, the last of which came on line in mid-2011 though Spanish dips in demand have kept it from running at full capacity. Following delays and outright production stoppages resulting from political strife in Libya, the end of 2011 saw a return to service for the country’s Greenstream pipeline. According to the UPI, Italy imported 1.5 billion cubic feet of natural gas in November despite a reduction in the country’s demand.

Both the Galsi and MedGaz pipelines will play a large part in Algeria’s efforts to greatly increase production and exports over the coming year. Having spent the last year addressing corruption at the country’s state-backed energy firm Sonatrach, a shift in sector leadership and finding ways to quell the sort of public protests that led to political changes in neighboring Libya and Tunisia, Algeria are now focused on expanding their energy industry through infrastructure investment and greater use of new transport lines.

Eastern Promise

Driven by the potential of new natural gas efforts in the eastern Mediterranean, Greek natural-gas supplier Depa have conducted a preliminary study into the feasibility of a pipeline linking Cyprus and Greece. While the report found that the pipeline was possible, it may run into opposition from regional leaders as claims to Eastern Mediterranean natural gas reserves have become the focal point of political infighting between Cyprus, Turkey, Israel and Lebanon. Depa have also begun exploring the possibility of a liquefied natural-gas terminal as an alternative, according to a report in Business Week.

The focus on the Eastern Mediterranean centers on the Leviathan Basin, inviting both conflicting claims to the area’s natural gas potential and a host of new transport and production project proposals from all sides. With the potential to allow for greater energy independence for countries like Israel, the Basin could serve to further reduce demand for products transported through volatile North African pipelines, including the Egyptian lines that have suffered from continued attacks since the ousting of President Hosni Mubarak.

Image: Iraq Business News

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