Enagás sees its native Spain as a crossroads that can supply LNG as marine fuel to global deepsea shipping. Gas assets general manager Claudio Rodriguez tells Karen Thomas how the energy giant is expanding along the LNG supply chain – at home and abroad
How large is Enagás’ LNG portfolio, and what are your growth targets and expectations to 2020 and beyond?
In October, Spain implements the European Network Code on gas balancing of Transmission Networks, which will transform the Spanish system – which also launched an organised gas market in December – and will provide standard products and services. We will adapt Spanish LNG and natural gas products and services to our customers’ needs and to consolidate the Spanish system.
Enagás is present in eight LNG terminals – six in Spain, one in Mexico and one in Chile – and we are analysing a large-scale regasification terminal in the Canary Islands, and a small-scale terminal in Gothenburg, known as the GO4LNG project. Altogether last year, we handled 5.6 million tonnes of LNG, down 18.8 per cent from 6.9 million tonnes in 2014.
In Spain, we manage LNG vessels from 2,000m³-266,000m³ and our terminals offer the full range of traditional LNG services. However, we are also developing small-scale LNG in the Iberian Peninsula, through innovative projects in the maritime, railroad and airport sector and the LNGas hive project, a five-year initiative co-financed by the European Union to develop an integrated logistics supply chain for LNG.
Internationally, Enagás is using its operations and maintenance (O&M) knowhow in emerging markets. Having operated natural gas infrastructure since the late sixties, starting at Barcelona LNG terminal, we can develop new gas infrastructure worldwide.
Where will you concentrate new investment in the next 12 months?
In Spain, our 2015-2020 efficiency plan aims to improve our role as a midstream player. We have improved our energy intensity to above pre-crisis levels.
Boil-off gas (BOG) compressors eliminate losses during reloading and we use residual energy to generate electricity. We will continue to increase efficiency and flexibility, and expect to multiply by 18 our investments in 2015-2020 to obtain 8.5 times more energy savings – to reduce our carbon footprint and to increase the competiveness of LNG.
During this period we will also invest in improving flexibility in the small-scale LNG logistics chain. Enagás is adapting its terminals to provide small-scale and bunkering services and will test LNG multimodal transport via ISO containers next year. We are also analysing the feasibility of LNG rail tank cars and how we would need to adapt our terminals to load such trains.
Internationally, we will consolidate our position as a midstream player, looking for opportunities in growing markets that offer a good balance between risk and profitability.
What do you expect for LNG demand growth in the short and longer term?
Although we expect a slight increase in LNG traffic looking for long-term purpose in Europe, we do not expect strong demand growth in large-scale LNG. In small-scale, the latest data suggests significant demand will arrive around 2018. Future demand will depend on infrastructure availability, regulation, prices and the final environmental impact of LNG.
We must address doubts about the environmental impact of LNG. Enagás is participating in several studies to clarify how LNG cuts transport-sector emissions and recently compared the emissions of different fuels to conclude that LNG is one of the most environmentally friendly in the well-to-tank cycle, benefiting from being widely available, from spare infrastructure capacity and having experienced LNG operators.
We have two main objectives: energy efficiency – to reinforce natural gas’ short-term competitiveness as transitional energy and LNG as fuel for a decarbonised future – and adapting infrastructure to consolidate Spain as a hub.
What opportunities and challenges do you see in the shift to buy more destination-free or shorter-term cargoes?
The shift to destination-free or shorter-term cargoes is not a possibility, it is a fact. A new natural gas market framework is in place. The number of LNG providers has increased, the US has started to export and many liquefaction projects are under development.
Global LNG prices have converged and decreased, and we expect some oversupply. Shippers need the storage and flexibility to take advantage of business opportunities such as new small-scale LNG demand, new gas demand or unexpected spot operations.
Meanwhile, natural gas suppliers must note these fast moving developments. One of the key words these days is adaptability as medium and short-term operations increase in scale and as the gas sector becomes more and more varied and demanding.
How will Enagás make the most of this shift?
We are transforming our LNG regasification plants into multimodal terminals to offer large and small-scale services with the flexibility and reliability our clients demand. We are also improving the gas value chain by reducing midstream costs. By February, Cartagena LNG terminal will reload at a rate of 7,000m³/h, making it one of the fastest terminals in Europe, which offers our shippers a significant economic benefit.
When do you expect balance to return to LNG supply and demand, and for shipowners to place new orders again?
The evolution of LNG is accelerating – it depends on infrastructure availability, regulation, prices and final environmental impact. It is difficult to predict when supply and demand will return to balance or when new orders will come. Whenever it happens, Enagás will be ready.
What is Enagás’ LNG growth strategy in Spain?
We aim to strengthen our position in large-scale LNG. We are present in six of Spain’s seven LNG terminals and recently increased our stake in Sagunto from 30 per cent to 72.5 per cent. In small-scale, Enagás is developing solutions in Spain and beyond, through the LNGas hive project.
Directive 2014/94/EU on deployment of alternative fuels infrastructure (Clean Power for Transport) aims to decarbonise the Mediterranean and Atlantic corridors. Enagás’ infrastructure will comply with the directive in 2017; Spain will be ready by 2020. That is an enormous achievement, given Europe’s 2025 deadline.
We are also working to develop efficient, competitive infrastructure in Tenerife to complete an LNG value chain to support energy sustainability in the Canary Islands. Here, small-scale LNG could bring excellent opportunities in gas-to-power and marine fuel.
We always have in mind the ambitious challenge of transforming Spain into an NG/LNG hub. The Iberian gas hub MIBGAS is already in place, although it remains to be seen how it will evolve and how competitive the new LNG products, services and tariffs will be.
What is Enagás’ LNG growth strategy in Europe?
As the market is less local and more and more global, leveraging our positioning in Spain means leveraging our position in Europe. Our capacity and flexibility will play a significant role in European LNG strategy, particularly in gas security and resilience.
In March last year, Enagás and Fluxys acquired Swedegas, which owns and operates Sweden’s high-pressure gas pipeline network. Fluxys and Enagás are also working together to develop the GO4LNG terminal.
What is Enagás’ LNG growth strategy in Latin America and other emerging markets?
In Chile and Mexico, our strategy is to extend our expertise and business model to our terminals’ zone of influence. We feel very comfortable with our partners and with the management of TLA Altamira in Mexico and Quintero LNG in Chile.
In Chile, we recently increased our stake from 20.4 per cent to 60.4 per cent. These two terminals are benchmarks for both countries and we plan new improvements and expansion here.
We continue to look for new opportunities in emerging markets within our core business, based on our extensive operations and maintenance (O&M) knowhow.
What are your plans to promote small-scale LNG?
Our presence in six of the eight Iberian Peninsula LNG terminals makes us best-positioned in LNG in Europe. The main LNG infrastructure is already built in Spain, so developing the LNG logistics chain only requires marginal investments. Barcelona and Cartagena enjoy dedicated LNG jetties for small-scale services.
We are adapting our LNG terminals to offer the safest, most efficient small-scale services, revamping Barcelona LNG terminal’s small-scale jetty and planning to do so in Cartagena, Huelva, Sagunto and Bilbao.
Our LNG terminals are to be logistics terminals, where we complement traditional unloading, storage and regasification services with new ones, big and small scale. This new concept requires the infrastructure and the regulatory framework to support demand.
Enagás co-ordinates the LNGas hive that is developing the software and the hardware to supply LNG for use as a marine fuel and for small-scale services, identifying standards to develop LNG as a fuel, defining the training and accreditation processes and proposing a National Policy Framework.
Other studies will test LNG bunker-supply logistics. This includes adapting LNG terminals to offer bunkering and small-scale services, developing bunker barges or multimodal transport, and studying how LNG is used within the port environment.
As for associations, Enagás holds the maritime vice-presidency of the Iberian Association for the promotion of natural gas and liquefied natural gas as fuels for road, railway and maritime transport, or GASNAM. We are also in contact with NGVA, which promotes the use of natural gas for sustainable mobility.
Finally, what are your plans to make LNG available as marine fuel?
We are focusing on small-scale and view bunkering of LNG as one of the main markets. The CORE LNGas hive project will contribute by developing the supply chain for LNG-bunker demand. The Iberian Peninsula is very well positioned, as a crossroads in global shipping and the Strait of Gibraltar is one of the world’s main bunkering areas.
Enagás LNG Terminals are the hubs that will support this demand, so we are very aware of our role in developing LNG as a marine fuel. Apart from developing infrastructure, we are participating in studies to clarify how LNG can cut transport-sector emissions.