Posted by: S&P Global Platts

Natural gas flows from Algeria into the Spanish PVB area look set to come close to hitting a multi-year high for a summer season during the Summer 2018 delivery period with the country reclaiming its place as Algeria’s largest pipeline market back from Italy, analysis by S&P Global Platts shows.

Flows of gas from Algeria into Spain so far during this summer have totaled 7.335 Bcm, data from S&P Global Platts Analytics showed, up 43% from the April 1-September 12, 2017, period and are expected to be close to the 2011-17 summer high of 8.113 Bcm from 2016.

The high take of Algerian gas from Spain, on the back of weaker LNG regasification this summer compared with last, has come at the same time as a large wind-down of nominations from Sonatrach customers in Italy, with Algerian pipeline exports to Italy down 10% on an annual basis so far this summer.

As a result, Spain has taken back the position of Algeria’s largest pipeline export country with 12.112 Bcm imported so far this year compared to 11.006 Bcm by Italy.

In 2017, Italy imported nearly 18 Bcm from Algeria via pipelines compared to Spain’s 14.5 Bcm, according to Platts Analytics.

Italy’s take of Algerian gas looks set to pick up during the final quarter of this year with high nominations expected due to the competitiveness of oil-indexed pricing compared to European hubs for the first half of the Winter 2018-19 delivery period, but there remains room for Spain to ramp up nominations as well.

Late Wednesday, Algeria’s Sonatrach announced plans to boost the capacity of the Medgaz pipeline — which delivers gas into Almeria in southern Spain — from 8 Bcm/year to 10 Bcm/year, and potentially to as much as 16 Bcm/year by 2020.

In 2017, a total of 6.727 Bcm (18.4 million cu m/d average) was exported to Spain via the Medgaz pipeline, with year-to-date imports at 4.848 Bcm (19.0 million cu m/d average), Platts Analytics data showed.

Clearly, Sonatrach is targeting Spain for future gas export growth rather than Italy, as the latter has strong gas ties with Russia, solid interconnectivity with Northwest Europe, allied to an additional supply route in the form of the TAP pipeline — due to be operational in 2020.

Spain, however, has no such luxuries. The country is heavily dependent on LNG to balance its gas demand, especially during the winter months, and can often see price spikes in order for the country to compete against the likes of Asia and South America for global spot LNG supply when the system tightens.

Spanish LNG regasification so far this year stood 16% lower on an annual basis and April 1-September 12 regas down a more substantial 20% year on year, given strong price signals for LNG from Asian markets.