The Medgaz pipeline, which will carry Algerian gas to Spain, is on track for a 2009 start, Medgaz consortium boss Pedro Miro said today.
"Right now what we can say is we are meeting both the timescale and the budget agreed," Miro said in an interview.
"During the first few months of 2009 we will start tests and the system will start up progressively ... so that in the second half of 2009 the whole thing will be operational."
The €900 million ($1.2 billion) project, a joint venture between Algerian state energy player Sonatrach and Spanish and French energy companies, won the final go-ahead in December, a Reuters report said.
It will be able to supply France as well and should therefore help the European Union diversify its gas supplies and reduce reliance on Russia.
Contractors, announced in February, are now working on the equipment and the 210 kilometre pipeline itself, which is being made in Japan, coated in Malaysia and will start arriving in the Spanish port of Almeria in the fourth quarter of this year.
The pipeline, which in parts will run at water depths of 2160 metres, the pipeline will be one of the deepest in the world, alongside Bluestream, which runs from Russia to Turkey under the Black Sea, or BP's Mardi Gras transportation system in the Gulf of Mexico.
Spain's existing gas pipeline from Algeria comes via Morocco and across the Strait of Gibraltar, which is much shallower.
Medgaz will deliver 8 billion cubic metres of gas per year initially and its shareholders have split that capacity in proportion with their stakes.
Sonatrach has 36%, Spain's Cepsa 20%, power companies Iberdrola and Endesa 20% and 12%, respectively, and Gaz de France the remaining 12%.
Spain's Gas Natural may soon buy into the project, taking part of Sonatrach's share, the Algerian government said.
"Two expansions are possible. We could maximise the volume that we transport via one pipeline and we could lay a second pipeline," Miro said.
The initial project allows for a second pipeline of the same 24-inch diameter to be added with minimal extra construction.
Medgaz, which can supply Portugal and France via the Spanish grid, already has a concession from the Algerian government to transport 16 Bcm a year for at least 30 years.
Building the second pipeline will need permission from Spain to increase imports and will depend on demand.