Gazprom Buys Europe’s Biggest Underground Gas Storage Facility
Oct 8, 2014
Companies and Markets
Gazprom, the largest extractor of natural gas in the world, has announced that it aims to finalise its plans to purchase Europe’s biggest underground gas storage facility from Wintershall, a subsidiary of the German chemical company BASF, this autumn. In return, BASF is to get access to significant gas reserves in Western Siberia.
The asset swap was announced in December 2013 and has received EU regulatory approval. The storage facility, located in the Lower Saxony town of Rehden, covers 8 square kilometres and can hold 4.2 billion cubic meters of natural gas. This is equivalent to approximately 7% of Germany’s annual consumption.
The storage centre is a key element of the energy security strategy for both Germany and the Netherlands. In 2012, the facility accounted for a fifth of Germany’s total storage capacity.
The move will benefit Gazprom and be a logical step in its strategy to supply Western and Northern Europe after opening its Nord Stream double pipeline. Both Russia and the EU say the deal will not be disrupted by sanctions.
The recent sanctions, however, have had a significant impact on levels of co-operation between western and Russian energy companies. Last week it was announced that Royal Dutch Shell has suspended work on its joint venture with Gazprom to develop Russian shale resources. The announcement came after France’s Total ceased its joint venture with Lukoil. In addition, ExxonMobil announced it was freezing al 10 of its joint projects with state-owned Rosneft.
Elsewhere in Europe, Latvia has announced plans to increase capacity at its Inculkalns underground gas storage site to 2.8 billion cubic metres. The move to expand the storage facility, at the only one in the Baltic states, is expected to be finalised by 2025. Inculkalns is 34 per cent owned by Gazprom and currently holds 2.3 billions of cubic metres of gas, enough to meet two years of Latvia’s annual consumption. However, the facility is also used by Estonia and Lithuania. The facility is also used by Russia for its northwestern region.
According to the latest data, published last week, by Cedigaz in its Worlwide Underground Gas Storage (UGS) database, global working gas capacity reached 399 billion cubic metres on January 1, 2014. This represents a 5% increase compared to the previous year. Salt caverns were the fastest growing segment of the market, expanding 10% in 2013 and representing 33% of the planned projects backlog in terms of capacity.