Exclusive: Study for EU questions jumbo France-Spain gas pipe plan - sources

By Geert De Clercq
FILE PHOTO: European Commissioner Miguel Arias Canete holds a news conference on mobility and climate change package at the EC headquarters in Brussels, Belgium November 8, 2017. Reuters/Eric Vidal/File Photo

By Geert De Clercq

PARIS (Reuters) - A report prepared for the European Commission has questioned the economic viability of plans to build a gas pipeline connecting Spain and France, designed in part to help reduce Europe's reliance on Russian piped gas, five sources told Reuters.

The Commission has long backed the 3 billion euro ($3.7 billion) Midi-Catalonia (Midcat) pipeline that would more than double the amount of gas that can be piped across the Pyrenees mountains that border the two nations.

French pipeline operator Terega, owned by Italy's Snam, and Spain's Enagas want to invest in the project, which they say would give Europe greater access to Spain's numerous liquefied natural gas (LNG) terminals.

Midcat is also supported by European Union Climate Commissioner Miguel Arias Canete, a Spanish national.

But the project has faced opposition from French energy regulator CRE, who says Midcat would push up consumer prices without improving security. French gas network firm Engie-owned GRTgaz has also questioned the need for the pipeline.

Now a study by Poyry, a consultancy appointed to assess the first phase of Midcat for the Commission, indicates the project is unlikely to be economically viable.

It said it would only achieve "financially viability ... in scenarios with a tight LNG market".

It said such tightness in the gas market could be caused by a sharp fall in Algerian gas supplies to Europe, a scenario that sources said was unlikely.

Experts said existing gas infrastructure across the Pyrenees is already underutilized, even during periods of high demand.

"If there were a real demand for Midcat, the market would already have built those interconnectors," said one of the sources familiar with the Poyry report.

The report, which has not been published by the Commission but which was seen by Reuters, will be the basis for a Commission discussion on Wednesday of priority EU infrastructure plans termed Projects of Common Interest (PCI).

The Commission did not immediately respond to a request for comment. Poyry declined to comment.

A spokeswoman for Terega said: "The project is in line with European objectives to reinforce flexibility and security."

The project has attracted criticism from politicians and environmental activists.

"By pouring billions of public money into new fossil gas infrastructure, Europe would wave goodbye to the Paris agreement," Friends of the Earth Europe's Antoine Simon said.

Spanish European Parliament member Xabier Benito Ziluaga said Madrid backed the plan to support its gas industry.

His French colleague Michele Rivasi, who also opposes the plans, told Reuters: "The Midcat project is not coherent with the European Union's climate commitments and its promises to reduce reliance on fossil energies."

(Additional reporting by Alissa de Carbonel; Writing by Geert De Clercq; Editing by Edmund Blair)