Gazprom To Build Two Natural Gas Storage Sites In Germany for Pipeline Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--OAO Gazprom (OTC:OGZPY) (Moscow, Russia) has announced plans to construct two underground storage units in the northeastern region of Germany to store natural gas from the proposed Nord Stream pipeline project. The tanks will have a storage capacity of up to 15 billion cubic meters of natural gas, which will be transported from Siberia. The natural gas will be pumped into the bedrock at a storage depth of 700 meters. On completion, the facility is expected to become the largest gas storage site in Western Europe.

Suitability and feasibility tests are being carried out in Hinrichshagen in the Ostvorpommern district. Similar tests will be carried out at the second site near the town of Sewekow in Brandenburg. The storage facility is expected to be commissioned by 2011-12. The Nord Stream pipeline will also begin operations around this time. It is expected that a major part of the stored natural gas will be under German control. The storage tanks have been planned as backup facilities to collect natural gas in the event of supply disruptions. The project has been expedited after the recent Russia-Ukraine conflict that left more than 20 countries in Europe without fuel supplies for weeks at the peak of winter.

The European Union (EU) imports more than 25% of its fuel requirements from Russia. The energy dependence has made the Nord Stream project that connects Vyborg in Russia and Greifswald in Germany very crucial, since the project will circumvent Ukraine, Belarus and other Balkan states. The 762-mile network will consist of two 48-inch-diameter pipelines with a total combined capacity to carry 55 billion cubic meters of gas. The first line is expected to be completed by 2011, and the second is slated to come into operation in 2012. The two lines will carry natural gas to more than 25 million households in the EU.

Nord Stream (Zug, Switzerland) is a joint venture between Gazprom, E.ON Ruhrgas AG (Essen, Germany), Wintershall Holding AG (Kassel, Germany) and NV Nederlandse Gasunie (Groningen, Netherlands). Wintershall, which is the oil and gas division of BASF SE (OTC:BASFY) (Ludwigshafen, Germany) will have a 20% stake in the project. E.ON Ruhrgas and Gazprom will hold stakes of 20% and 51%, respectively. Dutch gas transportation and infrastructure major, NV Nederlandse Gasunie, has a 9% stake in this venture.

Supply of natural gas to countries in Western Europe and Germany will be facilitated through the 198-kilometer pipeline network managed by WINGAS GmbH (Kassel, Germany), a joint venture between Gazprom and Wintershall. WINGAS is expected to receive more than 9 billion cubic meters of natural gas annually through the Nord Stream project during the next 25 years. While France, Netherlands, Germany, Denmark and Great Britain have consented to be part of the project, the company is facing opposition from Sweden, Poland, Estonia and Finland in regard to environmental issues. This has caused delays and raised project costs. More than $125 million has so far been spent on environmental surveys and studies. The current estimated project investment is around $9.89 billion.

Until the storage operations of Gazprom's facility begin by 2011-2012, the 4 billion-cubic-meter storage facility operated by WINGAS on 3.08 square miles of underground land in Rehden in northern Germany will be the largest in Western Europe. According to CEDIGAZ (Rueil Malmaison, France), an international natural gas association, Germany has more than 20.17 billion cubic meters of natural gas storage capacity, which is the largest in the EU and fourth largest worldwide.

Gazprom and German company Verbundnetz Gas AG (Leipzig, Germany) have proposed building a 510 million-cubic-meter storage unit costing more than $450 million in Bernburg in the state of Saxony-Anhalt. Rhein Energie AG (Cologne, Germany) and Deutsche Essent GmbH (Dusseldorf, Germany) have signed a memorandum of understanding to construct a 200 million-cubic-meter storage facility at Gronau-Epe by 2010. Essent has another storage tank in the same location that is connected to the national grid of the Netherlands.

Germany has the third-largest natural-gas reserves in the EU after the Netherlands and United Kingdom. Most of its 254.8 billion cubic meters of gas reserves are located in the northwestern part of the country between the Elbe and Weser rivers. Substantial deposits have also been found in the North Sea region. However, environmental restrictions on exploration and production have made Germany a net importer of natural gas. The country is ranked third in the list of top natural-gas-consuming nations, after the U.S. and Russia. Germany's natural gas production in 2007 was around 17.96 billion cubic meters, while the country imported around 88.35 billion cubic meters of natural gas in the same year.

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