Midcat 'Won't Open Before 2022'
Midcat, a 7.4bn m3/yr gas pipeline project that would link France and northeast Spain along the Mediterranean coast, is unlikely to be built before 2021-22, industry sources have told NGE.
EU energy commissioner Miguel Arias Canete said last October: “The EU expects that the Midcat will be built by 2020.” However, although the project is being assessed at a High Level Group of EC, French, Spanish and Portuguese officials set up 13 months ago under the Madrid Declaration, it does not appear to be a priority for development.
The rationale behind Midcat is that surplus piped gas from Algeria and LNG regasified in Spain could flow northwards to the rest of Europe, while surplus Norwegian or Russian gas could flow in the opposite direction into the Iberian peninsula when needed.
A similar pipeline, Euskadour, opened in 2005 which connects the Atlantic coastal regions of France and Spain. Then, Midcat was widely expected to follow within a few years; now, some traders question if it is needed at all.
Spanish and EU-wide gas demand has contracted for several years except 2015, and gas import capacity on both sides of the Franco-Spanish border – including for LNG – is currently under-utilised.
On April 6 this year the EU signed grant agreements for €5.6mn – agreed in January 2016 – to cover up to half the cost of preparatory studies for Midcat, with €1.5mn of the grant to be spent in Spain and €4.1mn on the longer French section. Arias Canete said the studies represented “an important first step for further integrating the gas markets of the Iberian Peninsula with the rest of Europe.” But when reminded this week of his October 2015 remark about completing Midcat by 2020, his spokesperson said: “It is for project operators to determine construction and operation phases.”
Midcat envisages two phases. Phase 1 would be a 104-km pipe connecting Le Perthus in France to Hostalric near Girona on the Spanish side, with a 36-MW compressor further south at Martorell near Barcelona. Phase 2 would be a 120-km section wholly within France from Le Perthus to Barbaira, near the city of Carcassonne. Both phases would be 36-in diameter pipelines.
Spanish gas system operator Enagas and its southwest French counterpart TIGF would be partners in phase 1. Investment in Spain is expected to be €151.5mn, with double that – €320mn – to be spent on the French side. Sources close to the project indicate that it could be built by late 2021 and ready for operation in 2022.
For phase 2 GRTgaz, the system operator across most of France, would also be involved while Enagas would also need to install additional infrastructure. For this reason, the scope of phase 2 – and any required infrastructure in France not strictly part of Midcat – is also being reassessed by the High Level Group.
Across the EU, the extent to which infrastructure costs can inflate customer bills is a live public issue. This is especially true in Spain where consumers in 2014 were obliged to assume the €1.35bn cost of permanently mothballing the earthquake-damaged Castor offshore gas storage unit, after the government accepted its developer was not at fault. The nominal cost, paid through customer bills over 30 years, works out at €4.73bn.
Transport system operators are also warier than before about investing, even if they can expect up to half of the cost to be covered by the EU’s €5.35bn Connecting Europe Facility.This is particularly true of Enagas, which built an LNG terminal at Gijon, the seventh to be built in Spain, that was subsequently mothballed because of the gas demand slump. It’s true also for the owners of TIGF which include Italy’s Snam and France’s EDF – both looking to pare back their capital expenditure.
Mark Smedley