Russian gas in Spain, why?

Russian gas in Spain, why?



Imports of Russian gas into Spain are increasing in the midst of the war in Ukraine and many people wonder why. Are we not facing Russia, a country that has been subjected to economic sanctions to force it to back down? What is happening so that Russia is currently (April 2023) the third gas supplier to Spain, behind the United States and Algeria?

Several things are happening that are not easy to summarize. The first and foremost is this: Russian gas is not embargoed and never has been since the war began. European energy companies can freely buy Russian gas without being explicitly prohibited by the European Union or the United States. In August of last year, the ban on buying Russian coal came into effect and since last December the embargo on Russian oil arriving in Europe by sea has been in force, a measure that affects 90% of the oil that Russia exported to EU countries. . A maximum cap of 60 dollars a barrel for oil imported by pipeline also entered into force. At the beginning of February the Russian diesel embargo came into force. Gas has never been sanctioned. The complete stoppage of Russian gas purchases could have caused a collapse of the European economy.

Less Russian gas is reaching Europe via pipeline, and countries that were most dependent on Russia have moved heaven and earth to turn to other fuels and find other gas supply routes. Germany and Italy, whose dependence on Russian gas reached 60%, have been two of the most affected economies. Germany has resorted massively to coal for the production of electricity and Italy, which has a powerful public hydrocarbons company, has negotiated the purchase of more gas from Algeria, Azerbaijan, Qatar, Nigeria and even Mozambique, among other sources. Last year, the European Union as a whole consumed less gas, thanks to the energy saving measures adopted by all the countries, thanks to lower consumption by industry, largely due to the increase in prices, and also as a consequence of relatively moderate temperatures in autumn and winter. In 2021, Europe consumed about 500 bcm of gas, 155 of which came from Russia. Last year it is estimated that only 500 bcm were consumed. (One bcm equals one billion cubic meters of gas.)

The first to reduce supply were the Russians, to increase prices in the futures market and put pressure on the countries most dependent on the European Union. Then came the blowing up of the two Nord Stream gas pipelines in the Baltic Sea, the two giant gas highways between Russia and Germany. (The Nord Stream1 was in operation in La and the Nord Stream2 was about to be inaugurated). Who was responsible for this sabotage, which occurred last September, is one of the great mysteries of the ongoing war in Ukraine. The latest information available suggests that Russia was not the author of the sabotage. Divers who plunged eighty meters deep in the Baltic Sea may have spoken English, and one day we’ll know if it was English with a British or American accent. There is a version (that of the American journalist Seymur Hersh) that points to the possibility that they spoke Norwegian, receiving orders in English from the United States. One day we will know for sure. What seems clear today is that the perpetrators of the sabotage wanted to restrict as much as possible the massive arrival of Russian gas into Germany by an underwater route in which third countries did not intervene. In other words, they wanted to limit the bilateral relationship between Russia and Germany. A very significant fact of this war is that the flow of Russian gas to Europe through the Ukraine (Soyuz gas pipeline) has practically not been interrupted at any time.

We return to shipments of Russian gas to Spain. Since the gas extracted in Russia is not subject to embargo and shipment through land pipelines has been restricted, the arrival in Europe of naval shipments of liquefied natural gas (LNG), a fuel that is also not subject to embargo, has increased. embargo. The gas liquefies at 161 degrees below zero and is transported in ships with large cryogenized tanks that maintain that temperature. Each liter of liquefied gas becomes 600 liters of gas when the regasification process is carried out once they arrive at port. Since Spain has the best regasification infrastructure in Europe, distributed over seven plants (Barcelona, ​​Cartagena, Sagunto, Huelva, Bilbao, Gijón and Ferrol), this explains why it is currently the main recipient of LNG in the European Union. There is a second reason that explains the increase in Spanish purchases of Russian liquefied gas, and it is no less: Russian LNG continues to be cheaper, in long-term contracts, than liquefied gas from the United States and Algeria.

In its general lines this is the picture. A situation that is beginning to generate political warning messages. Let’s try to detail it a little more.

*

In 2021, before the war in Ukraine broke out, the main supplier of methane gas to Spain was Algeria with 42.7% of the total, followed by the United States (14.2%), Nigeria (11.4%) and Russia (8.9%). In the second half of 2021, Algeria decided to interrupt the supply of gas through the Maghreb Europe gas pipeline in retaliation against Morocco, a country with which it had broken diplomatic relations. This measure affected Spain, since the aforementioned gas pipeline runs through Moroccan territory before reaching the Strait of Gibraltar. Despite the technical reinforcement of the second Algeria-Spain gas pipeline, the Medgaz pipeline that crosses the Alboran Sea, the flow of Algerian gas decreased and, as we will see below, it was not compensated by the purchase of additional shipments of Algerian liquefied gas.

*

In 2022, Spanish energy companies preferred to further diversify purchases. Last year, the United States, a large exporter of liquefied gas, led the list of suppliers, with 28.8%, followed by Algeria (23.8%), Nigeria (13%) and Russia (12.1%). Purchases from the United States doubled, imports from Algeria fell by almost half (last year there was a tough negotiation between Naturgy and the Algerian state company Sonatrach to review prices) and arrivals of Russian liquefied gas.

*

During the first three months of 2023, according to the monthly bulletins of the Enagas company, the company responsible for the transmission network, Russian gas imports have continued to rise. These are the data for March: United States, 24%, Algeria, 24%, Russia, 16%, Nigeria, 15%. Since we are talking about the first three months of the year, these are data that do not yet mark a definitive trend, but they are significant.

*

The purchase of Russian liquefied gas is not prohibited, but the increase in imports is causing political unrest. The first to protest was Germany, whose LNG reception capacity is very limited. Until last year, Germany did not have any regasification plant on its seacoast, since it had bet everything on the two gigantic Nord Stream gas pipelines. In recent months, it has managed to start up two floating regasification plants in the North Sea. The European Commissioner for Energy, Kadri Simson (Estonia) has asked all European countries not to renew the Russian LNG purchase contracts as the current contracts expire. And in Spain, the Minister of Ecological Transition, Teresa Ribera, sent a letter two weeks ago to 10 energy companies requesting a greater diversification of purchases until Russian LNG is dispensed with.

*

The companies have avoided entering into public controversy with the Government but have discreetly made their reasons known. The main importer of Russian liquefied gas is Naturgy. This company has a long-term contract for the purchase of liquefied gas from the Yamal region, in the Arctic, from a consortium led by the Russian company Novitek, with European and Chinese partners. This contract expires in 2038 and is subject to the guaranteed purchase formula (take or pay) that obliges to pay fixed amounts even if the product is not withdrawn. In the absence of a formal ban by the European Union, companies buying LNG from Russia do not want to end up in a court of arbitration for breach of contract.

*

There are other Russian matters of a strategic nature that are not subject to embargo either. This is the case of enriched uranium, vital fuel for nuclear power plants. Russia is the world’s leading producer of enriched uranium, controlling more than half of the international market. In 2021, about 30% of the uranium concentrates purchased by Spain came from Russia. More than 70% of the electricity produced in France is generated by atomic power plants. There is no embargo. Last February, Ukrainian President Volodymyr Zelensky called for sanctions on the Russian nuclear industry, and the response from European leaders was rather evasive.



Read Original Source Here…

Scroll to Top