Cross-border projectsEnergyEuropeFranceSpain

Stalemate Situation for the Future of the MidCat Project

In what is seen as a win for environmentalists, yet a loss for the gas industry, energy regulators of both Spain and France have rejected pushing ahead with the South Transit Eastern Pyrenees (STEP) – a gas pipeline that would link both countries - thereby placing the future of the MidCat project in limbo

In an effort to wean itself off of Russian gas supplies, the European Union has turned to alternative suppliers, in order to meet energy needs and improve energy security. With initiatives such as the Southern Gas Corridor currently in the development phase, Europe has turned to large supplies of natural gas from fields across the Mediterranean as one of its sources.

The Midi-Catalonia pipeline (MidCat) was brought to life in early 2015, as a way of taking advantage of North African gas reserves to increase EU energy security. In addition to providing access to the North African market, Spain has been considered as highly promising by Brussels, due to its immunity to the gas crises of 2006 and 2009 with Russia. Antoni Peris, the chairman of Sedigas, stated in a press conference that “with [the MidCat] pipeline, Spain could replace 10% of what Europe currently receives from Russia.” 75 per cent of Spain’s natural gas is imported in LNG form. But, most importantly, the country is responsible for 40 per cent and 32 per cent, accordingly, of the European Union’s LNG storage and regasification capacities; meaning Spain exceeds any other EU country in terms of regasification capabilities.

According to Miguel Arias Cañete, the EU Climate Action and Energy Commissioner, the establishment of the MidCat pipeline would connect the Iberian Peninsula to central parts of Europe. He added that “when built, MidCat will increase energy security across the EU, especially in EU countries more dependent on a single supplier.” As with many of these energy infrastructure projects, the purpose is to build connections to multiple sources, to minimize the amount of risk involved.

While European officials have been optimistic about the 3-billion-euro project, Spain and France have not always expressed the same enthusiasm. According to the Cost Benefit Analysis of STEP, as First Phase of MidCat, the Commission de regulation de l’énergie (CRE) of France determined that the MidCat pipeline wasn’t in France’s best interest. The report showed that France has enough existing infrastructure to connect the French and Spanish markets, thereby making the venture unnecessary. In the CRE’s assessment, France would end up paying for more than half of the total cost of the project, which would be footed by taxpayers.

An early 2018 study of the pipeline highlighted additional concerns surrounding the project. While the EU Commission has always promoted MidCat as a way of transporting gas supplies from both Algeria and the Mediterranean, Michel Boche of Terega, an Italian-owned French gas grid company, stated that “the expected flow would be mainly from France to Spain”, which is the opposite direction than what the project proposes.

Gas storage tanks in Spain. Exceeding any other EU country in terms of regasification capabilities, Spain is responsible for 40% and 32%, accordingly, of the European Union’s LNG storage and regasification capacities. Copyright: Enagás

Despite the project being listed as an EU ‘Project of Common Interest’, Xabier Benito Ziluaga of Spain, also a member of the European Parliament, offered an alternative perspective, by explaining that the pipeline’s development has been pushed forward, based on the will of private companies, and not with the public’s benefit as a priority.

In addition to the problem associated with the cost, many oppose the project, because of its environmental impacts. Michele Rivasi, a member of the European Parliament, highlighted the fact that the MidCat project promotes the continued use of fossil fuels, rather than investment into cleaner energy sources.

Teresa Ribera, the Spanish Minister for Ecological Transition, has also warned of the environmental consequences. In her interview with Politico, Ribera stressed the importance of remaining cautious with gas infrastructure investments, given European Union targets to reduce greenhouse gas emissions – entailing a penetration of RES in electricity production equivalent to at least 32 per cent, energy efficiency of 32.5 per cent by 2030 and, most recently, for the Union to become the world’s first climate-neutral economy by 2050.

On January 22, the regulating bodies of France and Spain, officially rejected the request to build the central section of the MidCat pipeline, citing high cost and lack of necessity. According to the official statement, the two countries also took the environmental impact into consideration. While the project has been promoted as a way of improving network integration, regulators pointed out, that encouraging the use of fossil fuels fails to contribute to achieving the goals on EU energy policy. The document concluded, that based on the current situation, there isn’t a great enough need to justify such an expensive project and, therefore, it would not move forward.

With France and Spain offering a hard ‘no’ on the completion of the project, the EU Commission continues to express support for the completion of the MidCat, considering the decision of regulators to be a ‘setback’.  Anna-Kaisa Itkonen, the spokesperson of climate action and energy, stated that “it is now for the project promoters to assess the regulators’ decision in detail and decide on the next steps”, signaling that the central authorities may still try to push the project onwards.

Currently, the future of the project will be based on the results of the selection procedure for the Projects of Common Interest list, which will be published later this year. The project has been submitted as a candidate, and if approved, will once again be eligible for EU grants for further development.

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Austin Clayton

Austin is a consultant and writer based in Baku, Azerbaijan, where he currently is advising government organizations on development in the tourism sector. He holds a degree in International Studies from Johns Hopkins University and has researched international finance and economic development through the Georgian Foundation for Strategic and International Studies in Tbilisi, Georgia.

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