Asociación Española de Marina Civil - Spanish Regulator: Delaying New LNG Plant Could Ease Deficit

Spanish Regulator: Delaying New LNG Plant Could Ease Deficit

Details: Category: El Musel; Published on Sunday, 01 March 2015 12:57; Written by Administrator2; Hits: 1444

by Rob Songer European Spot Gas Markets

Wednesday, March 14, 2012

Spain's energy regulator has recommended the country's seventh LNG regasification terminal, El Musel, be delayed to cut costs. The advice came in a report published on Friday by the CNE in which it calculated the Spanish natural gas sector could face a tariff deficit of E2.48bn by 2016, if measures were not taken to tackle it.

The deficit is the debt owed to gas shippers that grows when the regulated income they receive is insufficient to match their regulated costs. The deficit is set to increase through the addition of a large amount of new infrastructure expected on line soon. That spending kicks in this year with the addition of three new underground storage facilities - Castor, Yela and Marismas - that will become operational in Spain this summer (see ESGM 5 December 2011).

The projects, which in total will cost almost E2.01bn, will add an estimated E230m of regulated costs in 2012 and E378m in 2013, according to CNE calculations.

'Delay LNG plant'

In 2013 another tranche of debt will be added to the total with the addition of the El Musel LNG regasification terminal on Spain's northern seaboard. That project is costing E380m, of which E67m will be added to the tariff deficit.

This extra regulated cost - added to the fact that Spain's LNG import infrastructure is already underused - is behind the CNE's recommendation that commercial operation of El Musel be delayed.

"Given that, operationally speaking, the plant is not necessary for gas supply the El Musel plant will exacerbate the problems of underuse at the other existing regasification terminals. It is proposed that commissioning of the plant be delayed until it is justified by the demand fundamentals; this could lead to savings as far as the fixed costs for upkeep of the plant are concerned," the CNE said.

It calculated that deferring the entry of the plant would save about E12.7m a year, but added the decision could not be taken without new legislation.

The CNE did not recommend the three storage facilities be postponed, because it was perceived such a decision would impinge on security of supply and reduce regulated incomes. Third-party access charges would have to increase by 9.4% annually to eliminate the deficit by 2015, CNE said.

Failure to implement any above-inflationary tariff rises would lead to a E2.96bn tariff deficit in the gas sector by 2020, it said. That would represent an increase of 74% compared with 2012's level of deficit, which CNE anticipates will be E818m. RS

(Originally published March 12, 2012, in European Spot Gas Markets.)