Abu Dhabi's TAQA and GAZPROM Consortium to Build Natural Gas Reservoir in the Netherlands

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Researched by Industrial Info Resources (Sugar Land, Texas)--GAZPROM Exports (Moscow, Russia), a subsidiary of the world's largest gas company, GAZPROM OAO (OTC:OGZPY) (Moscow) and Abu Dhabi National Energy Company PJSC (ABD:TAQA) (TAQA) (Abu Dhabi, United Arab Emirates) have signed a memorandum of understanding to construct an underground natural gas reservoir in the Netherlands. The reservoir will be located at the Bergemeer gas storage field, which lies north of the country's capital, Amsterdam. The reservoir project, considered to be the largest of its kind in Europe, is estimated to cost $1 billion-$1.5 billion. The reservoir will have a capacity of around 4.1 billion cubic meters and will be operational by the second quarter of 2013.

Two other companies, Energie Beheer Nederland (EBN BV) (Herleen, Netherlands) and Petro-Canada (NYSE:PCZ) (Calgary, Alberta), are also part of this venture. EBN BV is a government-owned company with interests in mining and exploration of oil, natural gas and minerals. Petro-Canada, established in 1975, engages in exploration, pipelines, refining and retailing of energy products in Canada and the U.S. The company is Canada's second-largest downstream oil company, accounting for 16% of the country's total refining capacity. The investments and stakes in this project are under discussion and will be firmed up in the next couple of months. The new gas storage unit is critical in ensuring a safe and steady gas supply to customers in the Netherlands and other parts of Europe.

TAQA, which was established in 2005 and has a presence in nine countries, will operate the reservoir facility. The company is working on the various permits and approvals to begin the project. The design process has also commenced to convert the depleted Bergemeer gas field into a state-of-the-art storage facility. Once completed and operational, the bulk of the capacity in this facility will be made accessible to third parties. GAZPROM has more than 60 years of natural-gas project design and construction experience. The company will supply the buffer gas for this project for the next four years. Buffer gas is required especially during the summer months to maintain the required pressure levels for commercial operations in the reservoir. The consortium is expected to finalize all financial, contractual and technical details by the first quarter of 2009, when the final agreement is also expected to be signed. TAQA will also begin talks with other partners and suppliers for this project.

The Bergemeer reservoir project is crucial for GAZPROM in view of its impending Nord Stream pipeline scheme. GAZPROM has started the construction of this pipeline project that in its first phase will connect Russia's Baltic coast with Germany. In the second phase, the pipeline will extend to Great Britain through Greifswald in Germany and the Netherlands. GAZPROM will benefit tremendously from the Bergemeer reservoir facility that falls in the path of the pipeline route. With no additional investment or transportation costs, GAZPROM will be able to develop new markets, increase sales opportunities and minimize the risk of supply disruptions. GAZPROM has struggled in the recent past because of supply interruptions. Russia is therefore keen to increase investments to expedite the pipeline project. The company announced that it will spend $2.8 billion in building the overland division of the Nord Stream gas pipeline. This investment is likely to be made in 2009.

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