The Elusive Connection Between Spain and France

The Iberian peninsula, which has been part of the EU for more than 30 years, is urgently calling for the MidCat gas connection with France, and the rest of Europe. Its citizens and industries would like to be part of Europe from the energy stand-point, so that they can live and compete on equal terms with their European peers. Unfortunately, France's reticence on the subject augurs a long wait.

The Pyrenees, which are  the natural border between France and Spain were not a barrier to the railway system, even if Spain had decided to use a different gauge than the rest of Europe, for the unjustified fear that France would steal their hardware. Cars and trucks also go freely accross the many highways that today crisscross the range between the Atlantic Ocean and the Mediterranean Sea. The boundary literally disappears.

But when it comes to energy, things are altogether different. In France, La Commission de Regulation de l'Energie (CRE) has recently declared that the projected gas connection between France and Spain called MidCat, approved in 2015 by the presidents of France, Portugal, Spain and the EU, is actually not necessary. The CRE says that the costs are too high, and adds that Spain already has a number of regasification plants that are functioning at less than 25% of their nominal capacity and can feed all the required LNG to Spain and Portugal.

The CRE justifies its decision as a saving for the French taxpayer. Something is really amiss here. It states that the cost of the pipeline would be around €3bn; but Enagas, the Spanish system operator, has reported that the capex for the 222 km to the French border, and on to Carcassone, would be a total of €471mn. The CRE defends their huge estimate by adding all sorts of pipelines north to south to debottleneck their system and to establish one market in France. These line improvements should have obviously been carried out much earlier, and their omission has unfortunately cost the French consumers in the south very dearly for years in the form of higher prices.

Juan Vila, Gasindustrial

The Iberian peninsula is consequently struggling to convince the French authorities that new MidCat capacity of 7.5bn m³, together with the existing 7.3bn m³ from the Basque country and Navarre connections, would facilitate the integration of the Iberian gas market to the rest of Europe in "low to normal" demand scenarios. At the same time, it would make the Iberian LNG terminals available to France and EU during possible disruptions from Russia or Norway when the existing European LNG terminals would have insufficient capacity. In fact, France would benefit both ways by charging (near) exorbitant fees to the southbound gas, and by being able to continue feeding gas from the Spanish LNG terminals to its citizens and industries if a major disruption does occur.

The shortsighted report also proclaimed that there were more compelling reasons to invest in improving cross-border Germany to France pipeline capacity over the next six years when, at present, this capacity already amounts to 20bn m³/yr. The main gas transmission system operator in France, GRTgaz, is now engaged in a major program to upgrade north-to-south flow capacity into France and has recently substantially increased capacity from Belgium to 29bn m³. The integration of the Iberian market would contribute to European market liquidity that would be achieved by an effective interconnection. Today, even Switzerland enjoys better connections with France than Spain does.

All of this forces the peninsula to have a gas supply mix with 50% LNG. This is a situation that makes Spain and Portugal uncompetitive, especially during periods of low gas prices, as LNG, with its liquefaction, transport and regasification elements, has an obvious added cost that under normal circumstances, the other central European countries generally do not have.

None of this appears to matter to the CRE, nor the rights of almost 60mn people and its industries living and working in Portugal and Spain. They need to be connected to Europe if their industries are to compete on a level playing field. France and its CRE should look beyond its strict and somewhat misguided needs, take responsibility and facilitate the connection of its gas transmission system to the southern neighbours. As the EU Climate Action and Energy Commissioner Miguel Arias Canete has asserted, Iberia cannot continue to exist as an energy island.

Juan Vila

President, GasIndustrial