Spain could be on the brink of giving formal recognition to the LNG reload business after the Spanish senate approved a law earlier this month tabled by the government to reform the sector.
The law passed contained a government amendment specifically aimed at recognising the effect that LNG reloading has had on the country’s burgeoning gas tariff deficit. The amendment will seek to close certain loopholes that allow Spain to be used as a de facto reload hub without this service actually being recognised for what it is under existing third-party access rules. It will do this by allowing terminal operators to set their own charges, ensuring that they derive maximum financial advantage from the use of their assets, and, in so doing, help the state recoup losses and cut the country’s gas tariff deficit.
A senate spokeswoman said the law, having been approved in full, did not need to return to congress – Spain’s lower house – for further approval, but would instead be published in the Spanish state bulletin, BOE, after which it would enter the statute. The spokeswoman did not give a date for this.
Spain’s gas tariff deficit, which currently stands at €800 million (US$ 1billion), stems from the country’s shrinking gas demand. Since the European economic crisis, which first saw Spain enter recession in 2009, gas flowing through the system has been insufficient to cover the regulated incomes set for infrastructure operators. On top of this, the fall in demand has led to infrastructure mothballing, which accounts for the bulk of the current deficit.
However, although parts of Spain’s gas infrastructure – which includes elements such as LNG regasification and underground storage – have been lying idle, the actual import infrastructure – the jetties and LNG storage tanks – have almost never been busier. This is because a huge amount of the LNG contracted into Spain is being reloaded and sold to more lucrative markets.
Over the period between January and August this year, Spain reloaded and exported a total of 38.2 TWh of LNG (approximately 2.5 million t), up from 19.1 TWh over the same period last year, data from Spanish gas grid operator Enagas shows. This increase in the volume of LNG reloaded reflects the growing interest Spain holds as a hub for international gas companies, whether they are seeking to buy spot LNG volumes, or gain greater flexibility for their portfolios through the use of Spain’s deep pool of storage.
However, until now, only those that have contracted regasification capacity have technically been allowed to make use of the country’s LNG storage and reloading assets.
Yet, according to one source in the LNG terminal sector, that does not mean that those without regasification capacity have been unable to use this capacity. “The Spanish gas system is easy to access: a symbolic one-month regasification contract allows you to operate at a terminal (providing your company is registered with the energy regulator),” he said.
In order to carry out a reload it is necessary to pay fees for unloading, storage (known as ‘parking’) and reloading fees, he explained, but this could be circumvented.
“Parking can be very expensive, but a special allowance of 300 GWh is given with any regasification contract. So basically if a 900 GWh vessel is shared by three companies, there is no parking fee. This optimisation is very well known by terminal users and my understanding is that nobody is paying parking fees,” the source added.
The new rules would aim to close loopholes and allow terminal operators the means to recoup monies owed for reloading, the source said. “As a consequence of this [parking loophole], terminal operators are paid by the gas system a variable fee which is more or less 10% of the fees charged to the terminal user,” he explained further.
The new rules could represent a ‘revolution’ for transmission system operators (including Enagas, operator of the Barcelona, Cartagena, Huelva terminals, and the three independent operators of Bilbao, Reganosa and Sagunto) because it could open the door to terminal operators setting their own tariffs for reload services. This could even make reloads more competitive in comparison with LNG diversions, he added.
Enagas said it would not comment on the impact of legislation until it had been passed officially into law following publication in BOE. The energy ministry did not reply to requests for comment on when the law could become operational.
Adapted from press release by Ted Monroe
Read the article online at: https://www.lngindustry.com/regasification/14102014/spain-to-recognise-lng-reload-business-1591/