In a bold move that has stirred legal and environmental debates, a British company has maneuvered through a legal loophole to commence natural gas exploration activities in Spain. This controversial decision has drawn significant attention for its implications on Spain’s energy landscape and the broader discourse on international corporate practices and environmental stewardship. The company aims to tap into Spain’s untapped natural gas reserves by capitalizing on regulatory gaps, sparking a debate over the balance between economic benefits and ecological responsibility. As the exploration progresses, stakeholders closely monitor the potential impacts on local communities and the environment, raising critical questions about regulatory oversight and the future of energy resource management in Spain.
Since 2020, Spain has suspended issuing permits for hydrocarbon exploration, research, and exploitation. Despite this, some investors continue to capitalize on pre-existing licenses. The British firm Prospex Energy has recently seized an opportunity by purchasing a stake in the Viura natural gas field, located approximately 12 kilometers from Logroño.
Prospect Energy has announced that it has secured nearly £4 million (around €4.6 million) to acquire a 7% interest in the Viura field from its majority stakeholder, the American company Heyco Energy Group, which previously held a 58.7% share.
According to Mark Routh, CEO of Prospect Energy, drilling operations for Viura 1B are underway and are expected to reach the target zone within a few weeks. Viura is a significant player in Spain’s natural gas sector, accounting for 85% of the country’s natural gas production.
Estimates from 2022 suggest that the Viura field contains reserves of about 3 billion cubic meters (BCM) of natural gas. This volume could supply La Rioja’s five-year consumption or meet 10% of Spain’s annual gas needs.
Viura is one of only three active natural gas fields in Spain, with another notable site being the El Romeral field in Seville. Tarba, a joint venture between the Australian company Warrego and Prospect Energy, operates the El Romeral fields. The company acquired three exploitation wells in Seville from Natorugy in 2020 for just under €1 million.
Prospect Energy’s entry into the Viura field significantly expands its natural gas exploration and production activities. “We believe that natural gas will remain a crucial component of the global energy mix, especially as we strive to prevent another energy crisis,” adds Mark Routh.
A ‘legal loophole’ for gas extraction
While the natural gas industry in Spain is primarily deemed dormant by local operators, notable exceptions exploit regulatory loopholes. In November 2023, as reported by El Economista, the Spanish Government extended the authorization for the Viura field owners. The American company Heyco Energy Group (58.7%), Sociedad de Hidrocarburos de Euskadi (37.6%), and Oil & Gas Skills (3.5%) have had their drilling rights extended until November 2024.
These rights were initially granted in 2019, permitting Viura-1B drilling for three years. Despite enacting the Climate Change Law—which prohibits new fracking concessions and hydrocarbon exploration— the drilling authorization was extended in 2022. This extension was granted, in part, due to the disruptions caused by the coronavirus pandemic and the subsequent delay in exploring the deposit.
Now that the extension is in place, new investors are seizing the opportunity to capitalize on the Viura field.
A dead business in Spain
Despite Spain’s significant fossil fuel reserves, the country has effectively closed the door on exploiting these resources. According to a Higher Council of Colleges of Mining Engineers study, Spain has had enough gas to meet its current consumption rate for nearly 40 years.
The study highlights that exploiting these reserves could significantly reduce Spain’s energy dependence, secure supply during turbulent times, create thousands of jobs, and potentially lower energy costs. Despite this, Spain is not leveraging its domestic gas resources. Major international players like Naturgy and Repsol operate in the sector, but national regulations constrain their efforts.
The previous PSOE and Unidas Podemos governments enacted a ban on hydrocarbon exploitation across Spain. The Climate Change Act further prohibited fracking, a technique crucial for accessing gas stored in rock pores rather than large deposits. Fracking, widely used in the United States—one of Spain’s primary gas suppliers—requires drilling into rocks to extract gas.
As a result of these restrictions, Spain is condemned to import 99% of the hydrocarbons it needs, driven by environmental concerns and regulatory barriers.
Frequently Asked Questions
What is the British company involved in exploring natural gas in Spain?
The British company in question is Prospex Energy. It has recently acquired a stake in the Viura natural gas field.
Why can Prospex Energy explore natural gas despite Spain’s regulatory restrictions?
Spain has suspended the issuance of new permits for hydrocarbon exploration since 2020. However, Prospex Energy has capitalized on existing drilling rights and legal loopholes. The authorization for the Viura field, originally granted before the ban, was extended until November 2024.
What is the Viura natural gas field?
The Viura field is a significant natural gas deposit located approximately 12 kilometers from Logroño, Spain. It is one of only three active natural gas fields in Spain and is reported to account for 85% of the country’s natural gas production.
What did Prospex Energy do recently regarding the Viura field?
Prospect Energy raised nearly £4 million (approximately €4.6 million) to acquire a 7% stake in the Viura field from its majority shareholder, Heyco Energy Group. The company is also involved in ongoing drilling operations at the Viura-1B well.
How long has the drilling authorization for the Viura field been in place?
The original three-year drilling authorization for the Viura field was granted in 2019. Despite new regulations under the Climate Change Law, the authorization was extended until November 2024 due to delays caused by the COVID-19 pandemic.
Why has Spain banned new hydrocarbon exploration and fracking?
Spain’s ban on new hydrocarbon exploration and fracking is part of its Climate Change Act, which aims to reduce environmental impacts and transition away from fossil fuels. The law also prohibits hydraulic fracturing, which extracts gas from rock formations.
How does this situation impact Spain’s energy sector?
While Spain has substantial fossil fuel reserves, regulatory restrictions mean the country imports 99% of its hydrocarbons. The current legal framework limits the exploitation of domestic resources, impacting energy independence and potentially increasing energy costs.
What are the broader implications of this legal loophole?
The legal loophole exploited by Prospex Energy highlights the complexities of regulatory frameworks and their impact on energy exploration. It raises questions about the balance between environmental regulations and the economic benefits of domestic resource exploitation.
Conclusion
The decision by Prospex Energy to exploit a legal loophole for natural gas exploration in Spain underscores the complex interplay between regulatory frameworks and market opportunities. Despite Spain’s regulatory ban on new hydrocarbon exploration and fracking, extending existing drilling rights for the Viura natural gas field has enabled Prospex Energy to acquire a stake and advance its operations. This move highlights the ongoing tension between environmental regulations and the pursuit of economic benefits from domestic energy resources.
While Spain possesses substantial untapped fossil fuel reserves, its commitment to environmental sustainability and climate goals has led to stringent restrictions on new exploration activities. Consequently, the country relies heavily on imported hydrocarbons, which could impact energy security and costs.
