LONDON: Spain is preparing a reform of its natural gas sector to stop incipient losses borne by the state from growing into the kind of multi-billion-euro debt problem that prompted a controversial reform of the electricity industry earlier this year.
The government unveiled a sweeping power overhaul in July to resolve a ¤26bn ($35bn) electricity tariff deficit created after more than a decade of a mismatch between regulated prices and costs of power, which the state guarantees.
Now it intends to pass measures to align regulated costs and revenues in the gas sector and increase competitiveness, Industry Minister Jose Manuel Soria said in an interview at the Spanish embassy in London.
“There will be a gas reform to avoid what happened in the electricity sector. Right now there is a small, incipient (tariff) deficit in gas. We have to control it,” Soria said after attending an international tourism event in London.
Spain is battling excess gas supply due to a recent surge in renewable energy, which in the first half of the year accounted for over half of total electricity generation, as well as excess capacity after years of over-ambitious infrastructure planning.
The scale of the country’s gas sector is the result of targets formed in the boom years before crisis hit and left plants operating at a fraction of their capacity.
Spain finally emerged from recession in the third quarter of this year after five years of contraction or stagnation that led to one of Europe’s highest unemployment rates at 25 percent and a drop in energy demand.
Spain has power generation capacity of 100 gigawatts, far outstripping current peak demand of 44 gigawatts. As part of the gas reform, Spain will introduce an exchange for gas prices, moving away from bilateral agreements, said Soria, who comes from the Canary Islands and is a longtime leader in the ruling conservative People’s Party.
Reuters
