Tag Archives: Mediterranean energy

Spanish Oil and Gas Adjusting to New Reality

Facing a sustained economic crisis and unfavorable legislative responses, many in Spain’s energy sector are working furiously to adjust expectations and strategies for what could be a very different domestic marketplace.

The country’s new energy reality became a bit clearer at the end of last month as a collapse in local demand and stronger than expected needs from across Europe helped make Spain a net diesel exporter for the first time on record, according to a Reuters report. The shift was also the result of 5 billion euros in refinery upgrades over the last few years, increasing Spanish capacity and helping avoid one facility closure. While this development stems from Spain’s diminished domestic diesel market, reflecting slower growth and demand, it has provided a way for needed revenue from stronger diesel demand elsewhere in Europe.

Meanwhile, larger firms, including Repsol and Gas Natural, have worked to insulate themselves against the diminished Spanish and wider European demand by attempting to expand their footprint in emerging markets in South America and North Africa. Despite these efforts, many have faced further challenges at home thanks in part to exposure to the domestic market and the weight of the country’s sovereign debt challenges. In early October, Standard & Poor’s downgraded energy giant Gas Natural from stable to negative as concerns grew around a possible sovereign bailout appeal by Madrid.  On October 19th, Reuters reported a slight reprieve for the energy sector as the government sidestepped a lowering to junk rating on sovereign debt, though considering the government’s current energy debt and status, this development hardly brings them out of the woods.

For the country’s natural gas actors, further adjustments may soon be necessary thanks to a revised national tax program that will apply a 6 percent flat rate on power generation, as well as an additional “green tax” for gas-fire generation. Alongside the government’s recent cuts in energy subsidies, this new tax is part of an effort to ease Spain’s current energy deficit of around 24 billion euros.

Image: Eurogascorp.com

Originally Posted in Newsbase’s Euroil Monitor

 

 

 

 

 

 

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Cairo’s Sinai Efforts Falling Short

Weeks after the Egyptian government pledged action to halt growing unrest in the Sinai Peninsula, military action appears to have had minimal effect on stopping violence and safeguarding the country’s energy trade route to Jordan.

The promised action followed months of growing instability in the region, beginning shortly after the fall of the government of Hosni Mubarak. In addition to a growing number of kidnappings, the Sinai saw 15 direct attacks on natural gas pipelines bound for Jordan and Israel. In early August, a single attack that led to the deaths of 16 Egyptian soldiers spurred newly elected President Mohammed Morsi to launch a military initiative aimed at bringing the region back under control. However, as recently as this weekend, attacks have continued, including one that resulted in the deaths of three police officers in El-Arish.

This latest event was followed by the dismissal of the North Sinai security chief, General Ahmed Bakr as well as protests among local police groups demanding greater attention from government forces and the passage of emergency laws. In response, Morsi once again pledged direct action, but will likely face resistance from a local Bedouin population with a long history of conflict with Cairo.

In addition to the clear goal of returning order to the country’s eastern region, the government’s efforts are especially important to protecting a natural gas export route to Jordan and beyond. Although exports from Egypt have recently halted as Cairo deals with a surge in local consumption and dwindling supply, the country’s ability to exploit domestic reserves for future growth will rely on a dependable export route to the east. According to a Jordan Times report, talks between the two governments have suggested that exports could resume as soon as next month, with a possible boost in quantity on the table.

While the government is working to address local consumption issues through a reassessment of subsidy programs and energy diversification, they have also begun pushing for greater exploration efforts, including both on and offshore projects. Recently, the Morsi government offered tenders for fifteen on- and offshore blocks for natural gas exploration.

Image: The Guardian

Originally Posted in Newsbase’s MEA Downstream Monitor

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