New Energy research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 04/15/2013 --The pace of economic recovery and renewed growth is critical to Spain's energy market, as it will drive the country's demand for oil and natural gas - virtually all of which is imported. Spain is a key conduit for gas pipelines from Algeria and is a major receiver of LNG, an area where further capacity expansion is possible once the economic outlook improves. Shale gas could potentially offer improved selfsufficiency, but is unlikely to revolutionise the energy outlook. Meanwhile, Repsol looks set to undergo a strategic shake-up following the Argentine government's privatisation of its YPF unit.

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The main trends and developments we highlight in Spain's oil and gas sector are:

Spain is aiming to impose a green tax on natural gas use to help plug a EUR24bn hole in its finances resulting from years of forcing utilities to sell power at below cost, the Europa Press agency reported. The tax would only apply to natural gas, while gasoline and other vehicle fuels would be exempt, as reported in August 2012, citing Spanish industry ministry sources. The deficit is expected to increase at a rate of about EUR6-7bn per annum without prompt action.

Earlier industry estimates had been assuming annual gas consumption growth of 10% for the next few years. This estimate now looks highly optimistic, given Spain's fiscal predicament, the economic outlook and pricing trends. Our assumption for 2013 gas consumption is 32.9bn cubic metres (bcm), rising to a potential 36.2bcm by 2017 and increasing to 40.5bcm by 2022.

Spain's liquefied natural gas (LNG) imports decreased 18% year-on-year to 17.9 terawatt-hours (TWh) in November 2012, according to data released by Spanish energy company Enagas. Total gas consumption in the country reached 32TWh in November 2012, down from 34.5TWh a year earlier. This decline has been primarily attributed to lower demand from gas-fired generators. However, there was an increase in pipeline imports from Algeria to 11.25TWh in November, compared with 9.25TWh in November 2011.

Our estimate for gross liquefied natural gas (LNG) imports for 2012 came in at 24.0bcm, a figure which we forecast to rise and remain to 30.0bcm in 2017 and 2022. Steady progress is therefore expected in terms of the LNG trade during our 10-year forecast period.

Studies carried out by the government of Spain's Basque region have uncovered about 185bcm of shale gas. Officials said that the estimate was based on gas recovered at 13 wells in the Gran Enara field in Alava. Assuming a recovery rate of 15% (slightly lower than in the US), and given successful exploration and appraisal work, the commercialisation of Basque shale gas could see Spain increase its proven gas reserves to 28.0bcm.

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