Translated material
Gas for elections
The Belgian regulator is against the construction of underground gas storage facilities with Gazprom money
Another Gazprom project to strengthen its position in retail gas markets in Europe met with resistance from local officials. Following the British authorities, who this spring blocked the construction of an underground gas storage facility (UGS) at the depleted Saltfleetby field, Belgium did the same. The Electricity and Gas Regulatory Commission (GREG) has published a negative opinion on the Puderli gas storage project near Zeebrugge. It is going to be built by a joint venture between the British “granddaughter” of Gazprom - Gazprom Marketing & Trading (75% in the project) and the Fluxys company, in which the Belgian government has a “golden” share.The position of the authorities was announced yesterday in the Belgian media, which, with reference to the regulatory body, reported: GREG opposes the storage facility being 100% financed by Gazprom, as well as the exclusion of the project from the rule on third party access. That is, Gazprom and Fluxys, according to the regulator, should not receive exclusive rights to store gas in newly created facilities. “We are not against investments,” Interfax quotes CREG senior adviser Ivo Van Easterdel as saying. “We want them to follow the rules.” We want them to play football without using their hands."
Gazprom declined to comment officially. A source in the company told Vremya Novostei that the regulator’s conclusion is purely advisory. “The Cabinet of Ministers may not take it into account when making a decision on granting an exception to the rule of third party access to a particular project in Belgium,” says our interlocutor. In addition, according to him, Gazprom Marketing & Trading and Fluxys have already approached the country's leadership with a new proposal, in which the Belgian company agrees to provide third parties with access to its 25 percent share in gas storage capacity. Given that Gazprom will retain the right to independently dispose of the 75% of Puderly capacity due to it throughout the entire service life (25 years). This represents about 20% of the Belgian underground storage market.
Political negotiations on the implementation of this project began during the official visit to Brussels of Vladimir Putin in October 2005. “Our goal is to ensure additional supplies of gas, including Russian, to the Belgian market. The ultimate goal is to increase competition and thus reduce the price. Our plans also include the creation of a gas storage facility in Belgium in Zeebrugge,” Belgian Prime Minister Guy Verhofstadt said at a joint press conference. And fundamental agreements were reached on March 2 of this year, when Verhofstadt came on a working visit to Moscow to meet with the President of Russia and the head of Gazprom, Alexei Miller.
However, since then elections have been held in Belgium, and the country is now effectively without political leadership as leading parties engage in heated debate over the formation of a new governing coalition. For now, Mr. Verhofstadt remains the Prime Minister, with whom Mr. Putin agreed on Gazprom’s investments in infrastructure in Belgium. However, the socialists and liberals, whose coalition he led four years ago, lost the last elections. And the new government is being created under the leadership of the Christian Democrats, and the post of head of the cabinet will most likely go to the 46-year-old former Prime Minister of Flanders Yves Leterme, who is unlikely to have reverence for the guarantees of his predecessor.
Further evidence of this is the timing of the publication of the negative conclusion by CREG. The department issued its negative conclusion on granting the project an exception to the rule on third party access on April 19. But it published materials on the official website only a few days ago. According to these documents, just ten days after Vladimir Putin’s visit to Brussels, the Belgian Minister of Economy, Energy and Foreign Trade, Marc Verwilgen, asked CREG to evaluate the project and the possibility of exclusive use of facilities by investors. The text of the note sent to the government at the request of the minister is dated April 19. It expresses doubts about the advisability of exempting Gazprom and Fluxys from allowing other companies to store gas. At the same time, on April 16, the Kremlin press service reported that, at the initiative of the Belgian side, a telephone conversation between Mr. Verhofstadt and Vladimir Putin took place. “The parties discussed the progress in implementing the agreements reached during Guy Verhofstadt’s working visit to Russia on March 2, 2007,” the official statement says. It is now clear that, apparently, the difficulties that arose during the discussion in Brussels of the “Russian” underground gas storage project were discussed.
According to a source at Gazprom, an updated proposal with a willingness to store gas within the Fluxys quota was submitted to the Belgian government quite a long time ago, but has not yet been considered due to political uncertainty. Negotiations are planned to continue after the formation of a new government. Although no one can predict when this will happen. Discussions between political forces have been going on for more than two months (elections took place on June 10), but little progress has been seen. Moreover, the recent history of Belgian parliamentarism is replete with examples of months-long coalition formation. So, in 1988, the process took almost five months (148 days).
The Puderli underground storage facility is planned to be launched to smooth out peaks in gas supplies via the Nord Stream pipeline from Russia to Germany along the bottom of the Baltic Sea. The first line with a capacity of 27.5 billion cubic meters should be launched in 2011, the second (with the same throughput) in 2013. The new underground gas storage facility should start operating in 2010, and reach its full capacity of 300 million cubic meters of gas per year by 2012. Currently, all storage facilities in Belgium hold 700 million cubic meters of working gas (which can be extracted for consumer needs) of gas.
Meanwhile, as a source at Gazprom Export told Vremya Novostey, seismic work has now been completed at Puderly, their results are planned to be discussed in September and then a decision will be made on drilling new wells and restoring old ones. If all goes well, this stage of work could begin in March 2008.
In the spring, municipal authorities in the UK did not accept an application from the joint venture of Gazprom and WINGAS to build an underground gas storage facility at the depleted Saltfleetby field, citing formal reasons for the refusal. In fact, this meant freezing the project for at least 1.5-2 years, since the participants must begin the approval process from the very beginning. Now the underground gas storage facility may not start operating until 2009, if the project takes place at all.