October 1, 2013 / 5:36 PM / 6 years ago

UPDATE 1-Small earthquake hits Spain near gas storage project

(Adds Fitch comment, bonds put on negative watch)

By Jose Elías Rodríguez and Tracy Rucinski

MADRID, Oct 1 (Reuters) - A small earthquake struck Spain’s east coast on Tuesday, the strongest ever measured in the area, just days after the government halted work on a big offshore gas storage plant following hundreds of recent minor tremors.

Spain’s National Geographic Institute said the earthquake at 0532 local time measured 4.2 magnitude, the strongest yet in the region around the Gulf of Valencia, a zone not normally known for seismic activity.

The government last week ordered a stop to injections of gas into the European Investment Bank-backed Castor storage plant, while scientists study whether the injections triggered the quakes.

Industry Minister Jose Manuel Soria said on Tuesday there was no confirmed link between the earthquakes and the work on the plant, but seismologists have said they believe there is a connection, because the tremors started at the same time as the injections of gas.

The project involves storing 1.3 billion cubic metres of gas in a depleted oil reservoir under the Mediterranean Sea and sending it via pipeline to Spain’s national grid when needed.

Owner-operator Escal UGS has injected so-called cushion gas into the reservoir and withdrawn seawater to get it ready for storage. A phase of injections ended on Sept. 16, and another round of activity was to resume in October but is now suspended.

Escal said the plant had approval from Spain’s environmental authorities.

“The entire process has been carried out following existing controls and norms for this type of subterranean storage,” Recaredo del Potro, president of Escal UGS, said in a statement on Monday.

Escal UGS, a partnership between Spain’s ACS which has 66.7 percent of the venture and Canada’s Dundee Energy , has raised $1.4 billion on debt markets to finance the project.

ACS declined to comment further on Tuesday. Dundee Energy could not be immediately reached for comment.

GETTING WORRIED

An environmental group that has fought the plant since its conception in 2007 said there was no specific study on potential seismic activity from Castor and that it was built near a fault line.

“We insisted on a seismic report. There was none. If there are small earthquakes now, what will happen when the plant is at full capacity?” said Cristina Reverter, spokeswoman for the Citizens’ Platform in Defence of Senia Lands.

ACS was not immediately able to confirm whether the plant was built near a fault line, and no one was able to comment at Escal or the National Geographic Institute.

The quake, with an epicentre 35 km southeast of the town of Alcanar, did not cause any damage to buildings but scared residents unaccustomed to seismic activity.

“People are starting to get worried,” Alcanar Mayor Alfons Montserrat said by telephone. He has requested an urgent meeting with the Spanish government over the matter.

The Castor offshore submarine gas storage facility aims to begin operating next year and is meant to store 30 percent of Spain’s daily natural gas needs. Spain imports almost all of its oil and gas, and the plant is designed to help it guarantee supplies and keep prices stable.

Castor was the first European project to issue so-called project bonds. Fitch Ratings agency has assigned a BBB+ rating to the 1.4 billion euros in senior secured bonds to finance the plant.

Fitch put the bonds on negative watch on Tuesday, saying it had previously factored in delays up until May 2014 but could downgrade the bonds if the project was delayed beyond then.

“The outcome of the events is open to a variety of scenarios, ranging from short delays to the project’s schedule, protracted delays ... and increased technical requirements, and in the worst case scenario, relinquishment or termination of the concession,” the ratings agency said. (Additional reporting by Andres Gonzalez and Sarah White; writing by Fiona Ortiz; editing by Jane Baird and Pravin Char)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below