MidCat ditched in favour Barcelona-Marseille offshore pipe [Gas in Transition]

France sent its first ever gas exports to Germany on October 13, as the energy crunch helped boost European solidarity in the face of the growing threat to energy security.

The fear of shortages is so strong in Central Europe that Germany was even prepared to adapt regulations in order to accept the delivery. Safety rules demand that the gas in French transmission pipelines is doctored to make it smell. The German insistence on an odour-free fuel had blocked trade across the border until last month.

However, the volume of smelly French fuel heading eastwards this winter will total just 2% or so of the 90.5bn m3 that Germany consumed last year. And Paris has been less enthusiastic about helping Berlin tap other supplies from further to the west by resurrecting plans for new pipelines from the Iberian Peninsula, which has ample LNG capacity.

After months of quarrelling, however, the governments of France, Portugal and Spain finally agreed on October 20 on building a sea-based pipeline linking Barcelona in Spain to Marseille in France. This will serve as a replacement for a long-discussed, but static plan to build an on-land pipeline between Spain and France, known as MidCat. Details are scant, though, including with regards to the pipeline’s capacity and cost.

Cheerleaders

Efforts to resurrect the plan to run a third link between the Spanish and French gas systems have been regular over the past decade or two. The last bid, which also envisaged developing Catalunya’s distribution network at a cost of €3bn ($3bn) or so, was halted in 2019, after tests revealed little demand for new capacity.

However, with Russia having cut supplies, and Central Europe worrying that it may face shortages this winter, proponents have spied a chance to have another go at launching the project.

LNG is an obvious alternative that could help make up some of the shortfalls. LNG supplies into the EU surpassed pipeline flows from Russia in March, according to data from ENTSOG. The eastern giant has cut deliveries by over 80% to around 700GWh/d in the meantime, while LNG imports stand at over 3,300 GWh/d.

However, there’s little LNG infrastructure in EU states to the east, leaving the region struggling to tap this alternative source. Proponents of extra France-Spain pipelines say they could play a key role, therefore, by connecting Central Europe to the Iberian peninsula’s large LNG capacity via France.

Cheerleaders at either end of the chain say that this requires an expansion of links between the Spanish and French transmission systems. That has had Germany, Spain and Portugal all pressing for the construction of a pipeline linking Spain and France.

Spanish prime minister Pedro Sánchez has highlighted the "great advantages" that such a project could offer in terms of European energy security.

Portuguese officials have said the country is ready to expand its regasification capacity if the pipeline was built.

German chancellor Olaf Scholz says the link could make “a massive contribution” to easing the continent’s supply crisis.

France, however, has seen things differently. It had long opposed the project, and until recently had insisted nothing had changed, despite the Russian shutoff.

“There is no obvious need for it, there is no evidence of any need for it today nor in the future,” president Emmanuel Macron said in early September. “I don’t understand why everyone is getting all worked up about it and saying it would resolve the gas crisis: it’s not true.”

MidCat had been on the drawing board for over two decades, and construction work had previously been started. However, the last bid to build it was scuppered by environmental concerns and a lack of market demand in 2019. How long its replacement will take to realise, if it is, is unclear. But what is clear is that Europe’s gas crunch now creates an unprecedented sense of urgency.

Iberian solution

Earlier this year Germany revived plans to build its own LNG infrastructure, but it won’t have any more than 10bn m3/yr in regasification capacity ready this year. That leaves it highly exposed given that Russian pipeline gas has historically supplied around 50bn m3/yr.

Such vulnerability is also a worry in neighbouring states such as the Czech Republic, Slovakia and deeper into Central & Eastern Europe. These states are even more dependent on Russian gas, and they’re frantically searching for alternative supplies.

But again, infrastructure in the vicinity is severely lacking. Operating LNG terminals in Croatia and Poland host a combined LNG import capacity of around 7.5bn m3.yr. Poland also opened the 10bn m3/yr Baltic Pipe linking to Norwegian gas fields in September, the day after explosions knocked out Russia’s Nord Stream pipelines.

“Every increase in interconnectedness is helpful, and can result in easing some of the bottlenecks in Central & Eastern Europe,” says Agata Loskot-Strachota, a senior fellow in energy policy at the Centre for Eastern Studies (OSW), a Polish state research institution based in Warsaw.

Little wonder then that the LNG capacity on the Iberian peninsula looks so tempting, if only they could get their hands on it. Spain currently has six LNG terminals that give it the EU’s biggest regasification capacity and accounting for 33% of the bloc’s total. Portugal has one plant.

Both countries are keen to use those facilities to serve European partners now wondering where their supplies will come from this winter. Between them they could land around 65 bcm/y from suppliers including the US and Nigeria.

However, the volumes the two countries can re-export are limited, they say, by the options for sending that gas into France and beyond. The two pipelines currently linking the Iberian gas market to the French network have a capacity of 8.5bn m3/yr – a fraction of Spain and Portugal‘s potential exports.

Expanding Spanish-French gas transport capacity “would make a lot of sense for Spanish and Portuguese players,” Graham Freedman, principal analyst in WoodMac’s European Gas and Power team, tells NGW. “It effectively would open up the European market. They’ve got more LNG capacity than they know what to do with and a lot of it is not being used on a regular basis. If they could open up the route to go through France then they’d be able to trade more freely.”

These limits on exporting gas north to other European countries were identified by analysts as a contributing factor as a backlog built at Spanish LNG terminals in mid-October. With dozens of ships sitting around the Iberian peninsula, Enagas warned that it may be forced to suspend unloading.

Indeed, Spain’s LNG import capacity of around 60bn m3/yr tends to be vastly underutilised. Last year the sextet of terminals unloaded less than 19bn m3. Portugal’s Sines terminal, which has a total potential capacity of 5.25bn m3/yr, imported around 4bn m3.

Devil in the details

However, Iberian ambitions to become a European gas hub are little motivation for Paris to put its hand in its pocket to make the pipeline project happen. And the French have not been shy in pushing back against the bids for the plan.

“MidCat was halted primarily because the French government doesn’t see the value in building this pipeline. And I think that remains the case today,” Freedman says.

One of the prime French arguments is that the two existing pipelines across the Pyrenees are anything but saturated. Macron has noted that the routes were used at just 53% capacity between February and September this year.

Freedman agrees that the pipelines are not as busy as they could be. But he notes Spanish arguments that the pipeline would offer flexibility to Iberian exporters.

The current links run up the western side of the Pyrenees. The new pipelines would deliver gas from the three terminals on Spain’s Mediterranean coast. But expanding Spanish-French capacity is not the only potential bottleneck for gas travelling from the Atlantic Ocean to the Baltic Sea. Routes that can send gas from France to Germany – whether direct or via Belgium, Switzerland or Italy - are saturated.

For the project to have a real impact on Central Europe’s energy security, France would need to expand these pipelines. And once again, there would be little benefit to the French taxpayer, say analysts.

But it might be worth Paris’ while to expand these routes to carry its own exports eastwards, Freedman suggests. France’s LNG import capacity of 36bn m3/yr is the EU’s second largest, and the country could be eyeing its own potential to serve up gas – and power once it gets its large nuclear fleet back on line – to its German neighbour.

Two plus two

When it comes down to it, despite the enthusiasm in Berlin, Lisbon or Madrid, France’s evidenced refusal to foot the bill is likely to be a significant obstacle. That suggests that pushing the pipeline project back into Brussels’ funding plans will be key to its prospects. Its predecessor MidCat was once on the EU’s Project of Common Interest (PCI) list. However, like other fossil fuel projects, it has now been removed.

“Any additional infrastructure projects on the Iberian peninsula need to be further assessed by the member states concerned at either end of the chain or in-between. We can’t comment on any specific project at this stage,” a European Commission spokesperson tells NGW.

There are hints, however, that Berlin hopes to push the project back into contention for EU financial help, and that Brussels could be tempted to add two and two.

“The European Commission sees a crucial energy security issue, and it also sees the potential of the huge capacity in Iberia,” Freedman points out. “But there are probably easier ways to get more gas into Germany than via Spain – Italy, France or even using UK infrastructure for instance.”

One option of funding for the project could be the REPowerEU plan, the EU strategy to reduce dependence on Russia. Another, would be to leverage the project’s promised green credentials to put it on the PCI list. But the next list will not be proposed until the end of 2023, and the European Green Deal no longer allows fossil fuel projects on it. Pitching the pipeline as hydrogen-ready, and only temporarily flowing gas, as France, Spain and Portugal have done, may be the answer.