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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Spain's Controversial Natural Gas Undersea Storage Site Nears Completion

Spain's Controversial Natural Gas Undersea Storage Site Nears Completion

In May Spain’s Castor undersea storage site in the Ebro river delta will come online.
 
The massive facility, Spain’s largest, is capable of storing 50 days’ worth of Spain’s natural gas needs.
 
Castor is located off the coast near the towns of Vinaros in northern Valencia and Alcanar in southern Catalonia. More than 1,000 workers have been involved in constructing the project. When Castor becomes operational, it will have 100 employees.
 
But not all in the area of the facility are happy, particularly fishermen and local mayors of municipalities in the Ebro River delta, who look with disfavor on such a large infrastructure site immediately off their coastline.
 
The $1.66 billion Castor natural gas storage site is based on the geological structure of the old depleted Vinaroz Castellon oil field off the coast of Amposta in Montsia county. A 19-bank international consortium, five of which are Spanish, provided the financing. In December 2011 the construction work entered its final stage, with Castor’s leading contractor, Escal UGS, reporting that 90 percent of the work was complete.
 
Castor’s 12 well drilling program commenced August 2010 with the installation of the wellhead platform, the first of two offshore platforms. Another well drilled in 2005 was connected back to the wellhead platform. The site will be connected to the coast via a 13.6 mile-long offshore pipeline. The second offshore platform, housing the processing facilities, arrived on location in November 2011. Following the expected completion of the facilities in May 2012, the injection of cushion gas will commence, with the injection process taking approximately six months before the full commissioning of the facility during the first half of 2013.
 
Spain's gas consumption is rising at the fastest pace in Western Europe and the strategic importance of the Castor project in providing a reliable storage backup of natural gas imports for the Spanish Gas System has been emphasized by recent political events in the “Arab spring” roiling North Africa, which raise the possibility of interruptions.
 
In 2010 Spain imported 36.71 billion cubic meters of natural gas. As the country has no indigenous natural gas production to speak of, Spain imports more than 99 percent of its gas needs. Spain is Europe's largest importer of liquefied natural gas (LNG), accounting for almost one-half of European imports and natural gas imports more than doubled in the last decade.
 
Algeria supplies the majority of Spain's natural gas, accounting for roughly 32 percent of Spain’s total natural gas imports. Seeking to diversify the country’s natural gas imports and so insulate the country from possible disruptions, in 1998 the government passed legislation restricting any single country from supplying more than 60 percent of Spain's natural gas imports. After Algeria, other countries supplying gas to the Spanish market include Nigeria (20 percent of total natural gas imports), Qatar (13 percent), and Trinidad and Tobago (12 percent).
 
Further tying Spain to Algeria, in March 2011 the Medgaz underwater pipeline became operational. The 125 mile-long pipeline, with capacity of 8 billion cubic meters, runs under the Mediterranean from Algeria to Spain, which in addition gets some Algerian gas via a pipeline through Morocco.
 
Escal UGS chairman Recaredo del Potro commented, "the Organization for Economic Cooperation and Development member countries have decided to store an amount of gas equivalent to 92 days of supplies. Spain has few storage sites and has made up for this up to now by storing liquefied natural gas tanks in harbors and big storage tanks in Bermeo and Jaca."
 
As for the concerns of coastal fishermen and mayors, Del Potro defended the choice of location, saying there was no alternative to the area off the coast of Vinaros, as the company needed to utilize an old, depleted oil field in order to build the facility, adding that "One cannot choose nature, nor can it move."
 
Alcanar fishermen's guild chairman Pau Escada asserts that Escal UGS builders "they have dropped rocks in the wrong place, and some boats have suffered damage to their nets when they got stuck in them," adding that fishing boats cannot operate within a half-a-mile radius of the facilities. Seeking to ameliorate the opposition, Escal UGS has paid some financial compensation to local fishermen, but they are still complain about diminishing catches and are demanding a further $153,000 in compensation for damages.
 
But the issue may not remain confined to Spain for long, as Paul Romeva, a member of the European Parliament for ICV-EUiA (Rally for Catalonia, the Greens - United and Alternative Left), has asked the European Commission to fine Escal UGS as punishment for the incidents.

By. John C.K. Daly of Oilprice.com




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