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Gas System in Spain

The general basis, principles and model of organisation of the gas sector in Spain were established through the Hydrocarbons Act no. 34/1998, of October 7 (the “Hydrocarbons Act”), the Royal Decree-Law 949/2001 of August 3 and Royal Decree no. 1434/2002 of December 27 (“Royal Decree 1434/2002”).

The approval of the Act no. 12/2007 of July 2 (“Act 12/2007”), which modifies the Hydrocarbons Act in order to adapt it to EU Directive 2003/55/EC, has completed the process of deregulation that was started in the sector in 1998.  The regulated supply system ended on January 1, 2008 and was substituted by a last resort supply system.

According to Law 12/2007, the scope of consumers that can be supplied under the last resort tariff systems has been reduced to only domestic and low consumption ones.  However, these clients will have the option to choose between being supplied under the last resort system (by last resort suppliers appointed by the Spanish government) or in the liberalised market (at the prices freely agreed with suppliers).

Spanish law distinguishes between (1) regulated activities, which include transportation (regasification of LNG, underground storage and transportation of natural gas) and distribution; and (2) non-regulated activities, which include production and supply.

Any company engaging in a regulated activity must engage in only one regulated activity. However, a group of companies may conduct unrelated activities, provided that different companies within the group engage in each regulated activity (both corporate and financial unbundling are required).

Natural Gas Transportation

Natural gas transport operators are those who operate premises that are part of the basic or secondary transport network. These premises may be:

Basic transport network:

> Liquefaction plants
> Regasification plants
> Gas pipeline networks with a pressure of more than 60 bar
> Subterranean storage premises
> International interconnections

Secondary transport network:

> Gas pipelines with a pressure of between 16 and 60 bar.

Naturgas, through its subsidiaries Naturgas Energía Transporte and Septentrional de Gas S.A., is involved in the transportation of natural gas in several regions (Basque Country, Catalunia, Asturias, Castilla-Leon and Navarra) through the operation of high-pressure pipelines (pressure greater than 60 bar).

Natural Gas Distribution

The distribution business consists of the transfer of gas from the transport installations to the end consumer through each local operator's distribution network. The distribution network comprises gas pipelines with pressure equal to or less than 16 bar, as well as the support installations.

The distribution operators purchase natural gas from the transport operators, upon payment of a regulated transfer fee, to supply gas to their distribution network's binding (regulated) clients. Besides this, the distribution operators also have to allow access to their installations, by third parties, upon payment of an access tariff.

Naturgas, through its subsidiaries Naturgas Energia Distribucion and Tolosa Gasa, is involved in the distribution of natural gas in several regions (Asturias, Basque Country, Madrid, Castilla – León, Murcia, Extremadura and Catalunia) through medium and low-pressure pipelines (pressure less than 16 bar).

Natural Gas Supply

Suppliers acquire natural gas from producers or other suppliers and sell it to other suppliers or to consumers in the liberalised market on terms and conditions freely agreed among the parties.  In order to enable suppliers to conduct their business, transporters and distributors are under an obligation to grant access to their network in exchange for regulated tolls and fees.

Naturgas participates in the supply activity (both, in the ordinary supply market and in the last resort market) through its subsidiary Naturgas Energia Comercializadora, S.A.U., which sells natural gas to end consumers all over Spain.