Spain's Enagas denies stoppage of Algerian supplies to Spain via Medgaz pipeline

Spanish gas grid operator Enagas has denied that Algerian supplies to Spain via the Medgaz pipeline have been cut after state-owned Sonatrach said an incident occurred on July 24 temporarily halting flows as repair works are carried out.

"According to information received from Medgaz, during routine maintenance work at the Beni Saaf Compression Station, there was a two-hour temporary stoppage of flows from the Algerian plant to the Almeria International Connection," Enagas said in a July 24 statement.

"This has led to a decrease - but not a cessation - in the flows entering Spain via this International Connection. The problem has been solved and flows are recovering normally. The minimum flow rate was 704,000 Nm/h."

The incident comes amid the heatwave sweeping Europe, with record low hydropower stock levels in Spain.

"In the Spanish Gas System, there has been no effect on the security of supply, there has been no technical reason for this situation, nor has any action been required to resolve it," Enagas added.

Spanish gas prices remain among the cheapest in Europe given Spain's significant access to LNG -- with its six operational import terminals -- and pipeline gas from Algeria.

Spanish PVB day-ahead gas was assessed on July 22 at Eur96/MWh, according to Platts price assessments by S&P Global Commodity Insights.

Russian gas supply

The July 24 incident comes amid reduced Russian gas supplies to Europe, a situation that has prompted the European Commission to propose July 20 an EU-wide voluntary 15% cut in gas demand from August until March 2023. It is yet to be approved by EU energy ministers.

However, Spain said July 20 it would stand against the EC proposal to reduce gas consumption.

Spanish-Algerian relations have suffered of late over Spain's changed stance toward the disputed Western Sahara region, ringing new alarm bells in the European gas market.

Algeria on June 8 suspended its 20-year friendship treaty with Spain due to Madrid's stance.

Naturgy partnership

Algerian gas supplies to Spain were affected late last year due to a row between Algeria and Morocco that saw supplies via the GME pipeline halted completely.

In 2021, Algerian gas exports via the Medgaz pipeline -- now the only pipeline route for Algerian gas to reach Spain after the GME line was suspended -- averaged 22 million cu m/d, according to data from S&P Global Commodity Insights.

Spain's Naturgy has long-term import arrangements with Sonatrach -- the two are long-standing partners in the energy sector -- with the price paid by Spain recently at a discount to market prices.

Sonatrach and Naturgy jointly own the Medgaz pipeline, which previously had a capacity of 8 Bcm/year but has been expanded to have a capacity of up to 10.7 Bcm/year.