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Spain Facing Severe Gas Shortage After MEG Pipeline Closure

Morocco-Algeria tensions contributed to the closure of MEG. After 4 months of closure, Spain is relying more on Algeria for natural gas supply.

11 Jan 2022

Rabat - Following the closure of the Maghreb-Europe Gas Pipeline (MEG), Spain’s natural gas supply dropped by 21.2% in 2021. To compensate, Algeria increased its supply of liquefied natural gas (LNG) by 16.4% in 2021.

Two 25-year-old supply contracts between the Spanish company Naturgy and the Algerian Sonatrach and Moroccan Metragaz expired in October 2021. As a result, the Maghreb-Europe gas pipeline stopped operating.

The situation resulted from the failure of Naturgy to reach agreements with Sonatrach and Metragaz to renew the contracts in the past two years.

With rising tensions between Morocco and Algeria, Algerian President Abdelmadjid Tebboune ordered Sonatrach to cease trade with the Moroccan National Office for Electricity and Drinking Water (ONEE) on October 31, 2021.

Since its launch in November 1996, MEG had long aimed to meet European demand for natural gas and diversify the Spanish gas supply. The 400-kilometer high-pressure gas pipeline transported annually more than 10 billion cubic meters from Hassi R’Mel, Algeria, to Spain and Portugal, passing through Morocco.

Algerian and Spanish response to MGE closure

Placed under the supervision of Metragaz, the Moroccan section of MEG provides an average of 30% of annual natural gas consumed in the Iberian Peninsula. It also generates 17% of Moroccan electricity output, according to the Europe Maghreb Pipeline Limited website.

With the closure of the Moroccan section, the share of liquified natural gas reached 68.8% in December 2021 compared to a 52.4% share of natural gas in the same month. According to Enagás data, the gas inflow from Tarifa was at zero in December 2021 compared to 6,236 GWh in December 2020.

To cover the supply gap, Algeria rushed to increase its supply of liquified natural gas through the Medgaz gas pipeline, which directly connects Algeria to Almeria, Spain. In December 2021, Medgaz supplied 23% of Spanish gas demand, an additional quantity of 1,565 GWh.

Additionally, Algeria supplied the Spanish market with gas via shipping. This raised questions about the cost since ship supply requires the liquefaction of gas in Algerian coasts and its regasification in Spanish coasts.

In July 2021, Naturgy and Sonatrach agreed to expand the Medgaz pipeline. With an investment of $90 million, Medgaz will transport 25% of Spanish demand for natural gas, Naturgy announced in a press release. The Medgaz pipeline is jointly owned by Spanish multinational Naturgy (49% share) and Algerian state-owned Sonatrach (51%).

Four months later, Spanish Ecological Transition Minister Teresa Riberia visited Algeria to address the impact of MGE closure. During her visit, the Spanish minister stated that “[the adopted measures] continue to assure, in the best way, deliveries of gas through Medgaz according to a well-determined schedule.'

Echoing Riberia’s optimism, Enagas reported in a statement that 'there are no objective signs of a situation of lack of gas supplies in the coming months.'

Spanish Gas Demand and Dependency:

In 2021, the Spanish demand for natural gas grew by 5% and attained 378.5TWh compared to a 2% growth in 2020. Meanwhile, conventional demand increased by 6% and represented 76% of total demand.

As conventional demand is related to household, industrial, and commercial consumption, its increase was related to the drop in temperatures and the recovery of economic activity following the lockdown, Enagás reported in a press release.

Spain continues to depend primarily on foreign sources for its energy production, with at least 73% of the energy consumed in the country originating from third countries.

Between 2009 and 2019, the renewable energy share in the Spanish national electricity mix moved from 24% to 38%, according to an International Energy Agency report on Spain. The country is set to reach 76% of renewable energy contribution to the electricity mix. In 2019, nuclear power contributed to 22% of Spanish energy generation.

Natural gas combined-cycle plants that produce a third of the country’s electricity, stated the same report. With a high dependency on foreign sources of energy such as natural gas, Algeria remains Spain’s main gas supplier.

Specifically, the North African country’s natural gas and liquified natural gas cover 42% of Spanish demand. The United States ranks second with 14.4% of demand coverage followed by Nigeria (11.4%) and Russia (8.7%), according to Spanish newspaper El Pais.

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