Gas Natural SDG S.A.

International Directory of Company Histories, Volume 69 (1998) by M. Cohen

Gas Natural SDG S.A.

Avda Portal de l'Angel 22 Barcelona E-08002 Spain Telephone: 34 902 199 199 Fax: 34 93 402 58 70 Web site: http://www.gasnatural.com

Public Company Incorporated: 1992 Employees: 6,150 Sales: EUR 5.63 billion ($7.35 billion) (2003) Stock Exchanges: Bolsa de Madrid Ticker Symbol: GAS NAIC: 221210 Natural Gas Distribution; 221122 Electric Power Distribution; 238210 Electrical Contractors; 532310 General Rental Centers

Spain's Gas Natural SDG S.A. is one of the three largest natural gas companies in Europe, and the largest in South America. The former state-owned natural gas monopoly remains a leader at home—with more than 72 percent of Spain's natural gas market—although legislation has forced the company to begin reducing its market share to 60 percent before the end of the 2000s. Yet that same legislation, which liberalized Spain's utility market, has provided Gas Natural with the opportunity to expand into new areas of business, including electrical generation. The company expects to have more than 6,000 MW of power generation capacity online by 2008. Gas Natural is the leading supplier of natural gas to the Latin American market, with operations focused on Argentina, Colombia, and Brazil, as well as to Mexico and Puerto Rico. Since the beginning of the 2000s, Gas Natural has begun an expansion into the European market as well, with Italy as its first target market. In December 2004, the company reached an agreement to purchase 35 percent of Greece's state-owned gas company, Depa. The company also joined with its major shareholder Repsol-YPF in acquiring the construction and operation contract for Algeria's Gassi Touil integrated gas production and pipeline project, strengthening Gas Natural's supply base. Gas Natural also has invested in alternative energy sources, including buying some 50 percent of five wind farms in Spain at the beginning of 2005. In addition to its gas production and distribution operations, Gas Natural operates a fleet of ten methane tankers, making it one of the world's leading transporters of natural gas. Gas Natural is listed on the Bolsa de Madrid and produces revenues of more than EUR 5.6 billion ($7.3 billion) per year.

Gas Beginnings in the 19th Century

Spain's interest in natural gas as an energy source began in the first half of the 19th century, when in 1826 professor Josep Roura became the first in Europe to succeed in producing a gas light using gas from coal. Roura was commissioned by then King Ferdinand VII to provide lighting for the Queen's procession during a celebration in Madrid in 1832. Roura built the country's first gas plant in Madrid and built a temporary grid of 100 gas-powered streetlights. Following that display, Roura was asked by the royal family to build a gas-powered lighting facility for the royal palace in Oriente.

The first wide-scale use of gas in Spain came in the 1840s when a group of investors, including Frenchman Charles Lebon, established Sociedad Catalana para ele Alubrado por Gas (SCAG) in order to build a public lighting grid in the city of Barcelona. SCAG quickly attracted investors and by 1845 had become one of Spain's largest companies. SCAG listed its shares on the Bolsa de Madrid as early as 1853.

In Madrid, meanwhile, another group of investors, backed by British capital, launched Madrilena por Gas (Gas Madrid) in order to install a gas lighting network in that city as well. That business started up in 1846 and remained one of Spain's major gas producers and distributors. In 1864, it was joined by another company, Gas Lebon, founded by Charles Lebon.

The bombing of the company's Barcelona gasworks reduced CGE's production capacity during and after the war. Shortages of raw materials, exacerbated by the outbreak of World War II, made it difficult for CGE to rebuild. The lack of coke also hampered CGE's ability to produce gas into the late 1950s.

Gassing Up in the 1960s

CGE began investigating new sources of gas in the early 1960s, and in 1963 the company began producing gas based on naphtha, rather than coal, for the first time. More important for the company, however, was the discovery of vast natural gas fields, including off the coast in nearby Algeria. The promise of producing gas more easily and less expensively encouraged CGE to abandon its electricity wing in the early 1960s and refocus itself entirely as a gas business. The company then began an extensive modernization effort in order to adapt its distribution network for the reception of natural gas.

The first shipments of natural gas arrived in Spain via methane tankers in 1969 for treatment in a purpose-built re-gasification plant in Barcelona. Meanwhile CGE had begun to expand beyond the Catalan region, buying Compania Espanola de Gas, a distributor of gas to the Valencia region.

Over the next decades, CGE continued to construct a national network. The company also began building a fleet of methane tankers, and later became one of the world's leading transporters of natural gas. Limited supply (as Spain had no natural gas fields of its own) meant that the use of natural gas was slow to spread in Spain, however. In Madrid, for example, Gas Madrid continued to rely on its production of naphtha gas until the late 1980s.