New Gas Storage Key in Wingas-Gazprom Siberian Gas Distribution in Europe

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Researched by Industrial Info Resources (Sugar Land, Texas). The German gas utility Wingas, owned by Wintershall a BASF (OTC:DE:BAS) (Ludwigshafen) company, in a joint venture with Russia’s major energy utility Gazprom (OTC:DE:SCF) (Moscow), plans to expand the company’s underground gas storage capacity to 8 billion cubic meters. Alexei Miller, Gazprom chairman, said in Moscow that the company was implementing two underground storage facility projects and could launch two more similar projects in the UK and Germany in the near future.

Consumption of natural gas in Europe is predicted to grow from around 530 billion cubic meters in 2005 to between 600 and 700 billion cubic meters in 2015 which would mean that imports will rise from the current 50% of requirements to 75%. Currently Wingas has the largest single gas storage facility in Europe with a capacity of 4 billion cubic meters at a depth of 2,000 meters. Wingas supplies natural gas to public utilities, regional gas suppliers, industrial and power plants in Germany and other European countries via a 2,000 kilometer network of pipelines. In 2007 Wingas will supply Belgium with over 12.3 billion kilowatt hours (kWh) of natural gas and 16 billion kWh in 2008. In 2007 the company supplied the UK with over 20 billion kWh of gas.

In mid December 2007, BASF and Gazprom launched production at the Siberian natural gas field of Yuzhno Russkoye. The field in West Siberia has recoverable reserves of more than 600 billion cubic meters. Currently Gazprom supplies Germany with about 40 billion cubic meters of natural gas per annum which demonstrates the reserve value of the new field in containing the equivalent of 15 years of Gazprom’s current supply to Germany.

Alexei Miller emphasized that the commissioning of the Yuzno Russkoye field would make a key contribution to enhancing the security of supply in Germany and Europe. Gas from the field will be delivered to Europe via the planned Nord Steam Baltic Sea pipeline that will provide a direct link between the Siberian gas resources and Germany. The targeted plateau of gas production of 25 billion cubic meters per annum is expected to be reached as soon as 2009.

The supply chain from Russia linked with the enlargement of storage capacity in Europe will give Wingas and Gazprom flexibility in meeting changing demand and market conditions.

In terms of sets swaps between the participating companies Gazprom has increased its holding in Wingas from 35% to 50% minus one share and Wingas and BASF/Wintershall have received 25% minus one share in the new Siberian field and 35% in the economic rewards from the operating company respectively. As one of the largest German importers of Russian natural gas, Wingas has already secured supply contracts with Gazprom through 2036 which will deliver 700 billion cubic meters of gas to German and West European customers through to 2036.

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