The plant, a joint venture with electricity generators Union Fenosa and Iberdrola, will bring more natural gas to the Spanish market. Together with BP's existing investments, this will represent a major step towards breaking GasNatural's stranglehold on natural gas imports to Spain, thus fostering competition in the country's energy supply.
UK-based energy giant BP is currently planning a joint venture with Spain's leading electricity generators Union Fenosa and Iberdrola to build a regasification plant at the port of Sagunto near Valencia, due for completion in 2004. Through its subsidiary BP Energia, which provides integrated energy solution to Spain's industrial and commercial (I&C) clients, BP is increasingly active in the country's liberalizing energy markets.
At present, the development of competition in Spain's I&C sector is being held back by the fact that Enagas, the pipeline subsidiary of incumbent supplier GasNatural, controls both of the import pipelines bringing natural gas into the country. Even though a consortium including BP won a 25% share of Enagas' supply contract with Algeria last month, this import capacity is not sufficient to meet GasNatural's rivals' procurement needs.
Given Spain's relative isolation from the European gas network, the only realistic option of securing the necessary volumes is through shipping natural gas in liquefied (LNG) form. Once in the country, LNG is regasified and injected into the natural gas network.
BP's most significant Spanish LNG investment to date is a 25% stake in the Bilbao plant in the north of the country, due to come onstream in 2003. This integrated regasification and power facility, Europe's first, will receive LNG from BP's gas fields in Trinidad. The new plant will increase this substantially, for a total investment of about E234 million.
It is no accident that BP's partners are electricity companies. Gas-fired power generation is expected to be the main driver behind future growth in Spain's natural gas demand, so electricity generators will be the main consumers of any additional volumes of gas that BP and other challengers to GasNatural's monopoly position import into the country.
In addition, by establishing a close relationship with Spain's electricity wholesalers, BP hopes to strengthen its position in the supply of electricity to the country's major energy users.