Algeria promises gas supply stability to Spain – minister

LONDON (ICIS)–Spain has received a guarantee of natural gas supply from Algeria, Spanish minister of foreign affairs Jose Manuel Albares said on 30 September.

“I have received the guarantee of gas supply from Algeria to Spain, as well as the Algerian commitment to satisfy the Spanish demand,” the foreign minister said during his visit to Algeria.

But traders say the announcement is unlikely to have a bearish impact on the Spanish PVB gas hub.

“I am not sure how this is possible without (an) agreement with Morocco,” said a trader based in Spain, referring to the recent uncertainty concerning gas supply through the 12 billion cubic metres (bcm) Maghreb-Europe Pipeline (MEG).

In August , Algeria’s minister of energy and mines Mohamed Arkab indicated the country will no longer deliver natural gas to Spain via Morocco through MEG, saying all volumes will now be delivered to the Spanish market directly through the 8bcm/year Medgaz link, which runs directly from Algeria to Spain.

The agreement for supply through MEG is due to expire at the end of October, when the ownership of the pipeline is passed to Morocco.

MEDGAZ PIPELINE EXPANSION

In July, Spanish energy company Naturgy and Algerian supplier Sonatrach announced an agreement to expand Medgaz by 2bcm/year from the fourth quarter of this year.

The Medgaz pipeline expansion is expected to be completed by the end of November, according to Sonatrach.

If no new agreement is reached on the MEG pipeline, Algerian exports to Spain could be capped at 8bcm/year during the month of November.

Piped exports to Spain via Medgaz averaged 23.4 million cubic metres (mcm)/day during September this year, 9.8mcm/day higher than the average for the same month in 2020, data from grid operator Enagas showed.

Spain meanwhile imported an average of 20.9mcm/day via the MEG pipeline last month, 4.7mcm/day higher than the average during September 2020.

Algerian gas exports through the Morocco route averaged 21mcm/day during October and November last year.

LNG SUPPLY TO SPAIN

While the expansion of Medgaz is unlikely to offset the loss of pipeline flows via the Moroccan transit, LNG imports to Spain could be a way to ease the tightness in supply.

LNG sendout to Spain averaged 39.1mcm/day last month, 13.9mcm/day lower year on year, according to Enagas data.

“I don’t think LNG production can be upgraded further at this moment,” the trader added.

Spain is expected to import 30 laden LNG vessels in October this year, according to Enagas’ monthly schedule plan – double the number that arrived in the same month in 2020.