European gas market set for new infrastructure boost in 2011
London (Platts)--31Dec2010/710 am EST/1210 GMT
Physical gas flows into Europe are set to be reshaped in 2011 as new
supply routes open up and transform the dynamics of the market.
In northern Europe all eyes will be on Nord Stream, which is due in 2011
to start up its initial 27.5 Bcm/year pipeline, offering the first direct gas
link from Russia to western Europe. The pipe runs from St Petersburg through
the Baltic Sea to Germany's northern coast, bypassing Ukraine.
Nord Stream may not actually offer new gas to western Europe, with some
saying it is just an alternative route for Russia's existing gas. But as it is
a direct link, that could reassure western European customers that they will
not face their supplies being disrupted in the future by any further disputes
between Russia and Ukraine.
The European gas industry, meanwhile, is expected in 2011 to continue
with studies that were started after the last Russia/Ukraine crisis looking at
ways to boost flow capacity from western to eastern Europe, aimed at making
the continent's system more resilient to any disruptions that could occur.
In southern Europe, the Spanish situation could be transformed by a new,
albeit somewhat delayed, pipeline. The 8 billion cubic meter/year Medgaz line
from Algeria to Spain is expected to come into full operation during 2011,
after teething troubles in 2010.
It could substantially alter Spain's supply picture, replacing a chunk of
its current demand for LNG imports, and even perhaps offering long-term
prospects for a better-supplied Spanish market to export to France.
Turning to an existing route, Italy got an early Christmas present on
December 24 when the Transitgas pipeline restarted gas flows, after a
Transitgas carries supplies from northern European producers such as the
Netherlands and Norway through Switzerland into Italy. It was shut down in
late July after storms exposed the pipeline to possible damage at a Swiss
river crossing. During 2011, work will be carried out on an improved permanent
solution. Transitgas' return will help to alleviate security fears in Italy.
The coming year will also see debate continue between rival developers
over the best project to supply gas from the Caspian and Middle East to Europe
through the "southern corridor" route into Austria or Italy, with contenders
including the Nabucco pipeline, the Trans Adriatic Pipeline and IGI Poseidon.
LNG TERMINAL FOR THE NETHERLANDS
Europe's LNG import capacity will be boosted in 2011. The Netherlands,
home of continental Europe's current most liquid trading hub, is due to open
its first LNG terminal in Rotterdam. The 12 Bcm/year Gate LNG facility, owned
by Gasunie and Vopak, is expected to be operational by September, offering
capacity-holders DONG of Denmark, Essent of the Netherlands, OMV of Austria
and E.ON of Germany new abilities to land cargoes into Europe.
Belgium already has an LNG terminal at Zeebrugge, and the UK, France and
Spain have several terminals each, but until Gate opens there are no LNG
terminals east of Belgium on the Dutch, Danish or German coasts.
The economic downturn of recent years has, however, put a stop to plans
for further terminals in the region, with another Rotterdam project, LionGas
LNG, having been dropped, as well as plans for full-scale LNG terminals at
Eemshaven in the Netherlands and Wilhelmshaven in Germany.
US Excelerate and German RWE are still considering a facility for ships
with their own onboard regasification at Wilhelmshaven, but Germany's E.ON and
VNG have put their plans for a full terminal there on hold.
The UK could benefit from Gate LNG, since the Netherlands can flow gas
into eastern England through the BBL pipeline, currently undergoing a small
upgrade that will boost its flow rates from around February 2011, a little
behind schedule. The work had been due by December 2010.
The UK could also see a little extra storage capacity coming on stream in
2011, with additional salt caverns entering operation at Aldbrough in
Yorkshire, and possible startup of some storage caverns at Holford in Cheshire
during the year. And developers will continue to push projects for major new
offshore storage sites for future years.
--Alex Froley, email@example.com
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