French regulator questions benefit of MIDCAT pipeline

23 June 2016, Week 24, Issue 355

France’s energy regulator issued an unusually strong statement last week in which it questioned the merits of the proposed Spain-France MIDCAT gas interconnector.

The 173-km pipeline, which will link Figueiras in Catalonia with Barran in southwest France, would transmit gas from the Spanish grid, which originates from LNG terminals, into the French grid. Backers to the pipeline, which has "project of common interest" status granted by the European Union, are Spanish energy giant ENAGAS and French regional gas transmission company TIGF.

However, France’s Commission de Regulation d’Energie (CRE) said that questions about the need to establish new interconnectors were "now being raised’. The CRE warned that gas interconnectors were "complex and costly" projects, and that France would have to cover 2 billion euros (US$2.3 billion) of the pipeline’s 3 billion euro (US$3.4 billion) cost. The regulator added: "The decision to launch it should not be taken lightly [or] without robust cost-benefit analyses."

CRE’s concern is that the French taxpayer will have to foot most of the bill for a project that it says has as yet unproven benefits. The agency said it would "seek to avoid [consumers] being exposed to considerable costs to build infrastructure facilities, whose advantages for developing the European market and security of supply have not been demonstrated."

The CRE’s statement is a surprise to EU gas market participants. Most EU member states have been looking to diversify their natural gas imports in order to rely less on Russia. MIDCAT looks like a positive step forward in that direction, especially as Moscow makes moves to develop the Nord Stream 2 pipeline to send more Russian gas into Europe.

But such concerns have an international and geopolitical tint, with the CRE stating that its mission is only to protect consumers on price. In those terms it apparently believes that the MIDCAT project in its current configuration is not a good deal for French gas users.

Edited by

Ryan Stevenson

Managing Editor

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