Econostrum | Economic News in the Mediterranean

Medgaz completes its first year of operation

Written by Mathieu Bouchard avec la BEI on Tuesday, October 30th 2012 à 09:32 | Read 1837 times

Since April 2011, the underwater pipeline, half of which is funded by a €500-million loan from the European Investment Bank, has been supplying the Spanish market with Algerian gas.

SPAIN / ALGERIA. If Medgaz is technically able to operate at 100% capacity, as welcomed by its Board of Directors at the meeting held on 30th May 2012 at its headquarters in Almeria, the deepest pipeline in the Mediterranean, commissioned in April 2011, has, however, just celebrated its first year of commercial operation in a deteriorating economic environment.

Medgaz is a juggernaut, capable of carrying, across 210 km and more than 2,000 metres deep, eight billion cubic metres annually of natural gas from Beni Saf on the Algerian coast, to the Port of Almeria, in the south-east Spain, without passing through a third country, unlike the Maghreb-Europe Gas Pipeline that runs through Morocco. Ultimately, Medgaz, currently powered by the huge Hassi R’Mel gas field, could even be used to transport gas from Nigeria by building a huge trans-Saharan pipeline.
The new gas pipeline is owned by a consortium of five international companies, Algeria’s Sonatrach (36%), project leader, Spain’s Iberdrola (20%), Spanish-UAE Cepsa (20%), Italian-Spanish Endesa (12%) and France’s GDF-Suez (12%), who could soon join Spain’s Gas Natural Fenosa, currently in talks to buy some of Sonatrach’s shares.

The effects of the economic crisis have been felt and the competition has increased

Medgaz directly links Algeria to Spain (Medgaz map)
Medgaz directly links Algeria to Spain (Medgaz map)

Medgaz began in 2001 and had to meet increased gas consumption in Spain, one of the biggest importers in the market, which depends on Algerian exports for one third of their supplies.

By granting a €500 million loan to implement this through FEMIP, the European Investment Bank (EIB) hoped to strengthen the long-term security of the EU’s energy supply and contribute to the development of the Algerian economy.

But the economic crisis in Europe and Spain in particular, added to the growth in domestic wind power and competition from American coal, whose stocks on the market have increased since the development of shale gas usage in the United States, has led to, in the country of Prime Minister Mariano Rajoy, a slowing down in the rise in demand for gas, whose price is increasingly indexed to oil prices.

Jacques Percebois, Director of the Centre for Research in Economics and Energy Law at Montpellier, and co-author of Energy 2050, puts things into perspective when he says,

We must not throw the baby out with the bath water”. The French researcher believes that “with these kinds of projects, profitability is calculated long-term and Medgaz is helping to meet a need to diversify supplies”.
He advises that, for the future, we should strengthen the interconnection of European gas systems and introduce a little more flexibility in the indexing of gas and oil prices.

Version française

Read also : 
Medgaz relie enfin l’Algérie à l’Espagne
La BEI prête 500 M€ à Medgaz pour son gazoduc entre l'Algérie et l'Espagne
L’Algérie au cœur de la future politique gazière européenne

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