Gazprom dashes Latvia's hopes to store more natural gas in Dobele

  • 2007-06-20
  • By Gary Peach

RIGA - Gazprom threw cold water over Latvia's hopes to boost its role as a major natural gas storage center after a top executive said the Russian energy monopoly would not invest in any more underground facilities.
Alexander Medvedev, CEO of Gazpromexport, told reporters in Moscow on June 13 that Gazprom had analyzed Latvia's proposal but could not give the green light.

"But this does not mean the absence of cooperation between Russia and Latvia. We are cooperating in another underground gas storage facility in Incukalns," Medvedev said.
Gazprom has instead decided to build underground storage facilities in Britain and Germany. "It is not accidental that Wingas has a separate department in charge of the issue," he said, adding that Wingas recently launched the Haidach gas storage facility in Austria.
Wingas is a joint venture between Gazprom, now the third largest corporation in the world in terms of market capitalization, and Germany's Wintershall.
It is unclear how Gazprom's ambitious gas storage plans would be perceived in Brussels, which is keen to regulate the energy market by forcing companies to split production and distribution units. (See story on Page 12.)

For Latvia, Gazprom's intention to choose West Germany over Eastern Europe for gas storage will be a major disappointment after Latvijas Gaze, which is partly owned by Gazprom, drafted an ambitious plan to increase storage capability by 10 - 25 percent.
Currently the Incukalns Underground Gas Storage has a capacity of 2.32 billion cubic meters of active gas, making it one of the largest in Europe. (According to Latvijas Gaze, there are 130 gas storage facilities in the European Union.) About one-fourth of the 1.7 billion cubic meters of active gas at Incukalns is designated for northwestern Russia, according to Economy Ministry officials.
Latvijas Gaze would like to increase that to 3.2 billion, particularly by investing in a fault beneath Dobele in western Latvia.

For its part, the European Union is increasingly concerned about energy stability and wants to develop infrastructure so that extra resources can be stored and utilized in times of crises.
The Dobele facilities, Latvijas Gaze claims, could offer additional benefit to European gas consumers since it is not far from the planned 5 billion euro Nord Stream gas pipeline that Germany and Russia plan to build.
But it would appear that, for now at least, Latvia's ambitions will remain on paper. Rainer Steele, chairman of Wingas' management board, said that new gas storage facilities would be established in Britain and near the German-Dutch border.
"Together with partners Wingas will create in Europe capacities to store 8 billion cubic meters of gas," Steele was quoted by Russian agencies as saying.
Regardless of where Gazprom decided to build its storage capacities, serious doubts will remain about whether the company will be able to extract enough blue flame to meet demand at home and abroad in the foreseeable future.

For the past 15 years Gazprom's output has been flat 's around 560 billion cubic meters 's as the company has failed to invest in new fields. To compensate for the difference, the Kremlin worked hard to cut a deal with Central Asian producers, particularly Turkmenistan, that would keep gas pipelines full. 
On June 14 a Gazprom executive said the company, the largest gas producer in the world, could raise output to 670 billion cubic meters by 2020 rather than the 590 billion cubic meters penciled into future production forecasts.
"This increase is not only linked to the boom of the Russian economy but to the gas consumption boom in the Asia-Pacific region and our plans to access LNG [liquefied natural gas] markets," deputy CEO Alexander Ananenkov was quoted as saying.

In the Baltics, natural gas plays a secondary role in total energy supply. In Estonia, where oil shale is king, gas accounts for about 10 percent of consumption needs.
Latvia consumed 1.7 billion cubic meters of gas in 2006, down from 3 billion in 1991. Still, natural gas accounts for about one-third of Latvia's energy needs, about 10 percent higher than the EU average, according to the Economy Ministry.
In Lithuania, gas imports are on the rise and will reach 3.5 billion cubic meters, up from 3 billion in 2006. After the Ignalina nuclear plant shuts down at the end of 2009, gas consumption is set to soar in Lithuania.