Spain begins gas re-exports to Morocco via GME pipeline: Enagas

Spain has begun re-exporting gas to Morocco in reverse flow via the GME pipeline, data from Spanish gas grid operator Enagas showed June 29, marking the first direct flow of piped gas from Europe to Africa.

The flow of gas southwards through the GME pipeline -- which previously was used to send Algerian gas via Morocco to Spain -- started at 10:00 am local time (0800 GMT) on June 28, with a total of 1.1 million cu m of gas exported.

A further 83,000 cu m is expected to flow across the link on June 29, the data showed.

Spain and Morocco agreed earlier this year to consider using the GME pipeline for reverse flow to the North African country with the gas to be sourced from the global LNG market.

The grid operator did not detail where the gas for the first exports was supplied from, though two LNG tankers were unloaded over the weekend of June 25-26 at the nearest ports of Huelva and Cartagena, according to Enagas data.

Sources have told S&P Global Commodity Insights that the Huelva terminal would be the most logical option as it is located close to the entry point of the GME line.

Morocco supply

The start of Spanish re-exports to Morocco is a key development for the region's gas sector and will come as a relief for Rabat, which was cut off from Algerian gas supply -- previously its only external source of gas -- in November last year.

Algeria previously supplied gas directly to Morocco via the GME link, partly in lieu of payment for transit, with deliveries seen at some 1 Bcm/year.

Most of the gas was consumed by two gas-fired power stations at Tahaddart and Ain Beni Mathar that were supplied from Algeria, but the plants were idled after the GME flow was halted.

The country also has limited domestic production that is supplied to local industrial customers including automakers and paper mills.

It has also launched a tender to install a floating LNG import terminal in the country as it looks to increase its gas supply.

Related story: Spanish gas-for-power price cap led to 50% drop in CHP generation: Acogen

Regional relations

The decision to halt flows in the GME pipeline -- which supplied almost 6 Bcm of gas to Spain in 2021 before supplies were suspended -- came amid worsening relations between Algeria and Morocco and the ongoing dispute over the autonomy of Western Sahara.

Algeria now only supplies pipeline gas to Spain via the direct Medgaz pipeline, whose capacity has been expanded to around 10.7 Bcm/year.

Relations between Algeria and Spain have also worsened in recent months after Madrid in March altered its position regarding the autonomy of the Western Sahara region, reversing a decades-old policy of neutrality.

Algeria in April threatened to terminate gas supply contracts between state-owned Sonatrach and Spanish buyers if Algerian gas was re-exported to Morocco.

The threat has seen Spain look to develop a new system of gas origination certification so that any molecules delivered to Morocco via the GME pipeline operating in reverse flow could be proven to be non-Algerian.

The tensions come as European gas prices remain at sustained highs, mostly because of Russian supply uncertainty.

Spanish gas remains among the cheapest of Europe's traded gas hubs thanks in large part to its access to global LNG via its six operational LNG terminals.

The PVB day-ahead contract was assessed on June 28 at Eur113.53/MWh, with only the UK NBP day-ahead price lower among Europe's traded hubs, according to Platts price assessments by S&P Global Commodity Insights.

The PVB day-ahead was also at a discount of almost Eur16.50/MWh to the Dutch TTF equivalent.