Underground Gas Storage Facilities

Underground gas storage (UGS) facilities are an integral part of the Unified Gas Supply System (UGSS) of Russia and are situated in the main gas consumption regions. UGS facilities help to smooth out seasonal fluctuations of gas demand, reduce peak loads in UGSS and provide for better flexibility and reliability of gas supply. The network of UGS facilities supplies up to 20 per cent of gas during the heating season and up to 30 per cent of gas during cold snaps to Russian consumers. Over the entire operation period (as of June 2009) 1,900 billion cubic meters of natural gas circulated through the domestic UGS facilities.

UGS Facilities in Russia

There are 25 UGS facilities operational in the Russian Federation, of which 8 were built in aquifers and the remaining 17 – in depleted gas fields.

Expansion of UGS capacities is a strategic objective of Gazprom. By the 2008–2009 heating season start-up Gazprom raised the daily average send-out and the peak daily send-out of UGS facilities to 500 and 620 million cubic meters, respectively. The commercial gas volume accounted for 64 billion cubic meters.

Due to the economic crisis and reduced demand for natural gas in Russia and abroad, Gazprom had to suspend commercial gas build-up and the daily send-out increase at the existing UGS facilities. Therefore, in 2009 the natural gas storage sector was facing the major challenge of maintaining the achieved potential and the high level of reliability in the existing UGS facilities through their reconstruction and retrofitting. By now, the Company maintains the rates of the previous autumn-winter period.

At the same time, crisis phenomena in the economy are of temporary nature. The inevitable recovery and projected growth in gas demand determine the need to continue the UGS business development. Therefore the long-term strategy of the UGS business development underwent no changes. By 2020 Gazprom is going to increase the peak daily send-out of Russian UGS facilities to 1 billion cubic meters.

At present, Gazprom is constructing three UGS facilities in Russia: the Udmurtia reserving complex in an aquifer, the Kaliningrad and Volgograd UGS facilities in salt caverns. Several UGS facilities are in the process of engineering, development, feasibility study and exploration. A wide scope of work is scheduled for Eastern Siberia and the Far East in 2010–2011 aimed at searching for the suitable formations to build UGS facilities and underground storages of helium concentrate.

UGS Facilities in Europe

As part of the strategy aimed at securing natural gas supplies to Russian consumers Gazprom is taking part in UGS projects in the countries, which transit the bulk of Russian exported gas:

• Gazprom and WINGAS (a joint venture of Gazprom and Wintershall Holding) operate the Rehden UGS, Europe’s largest facility with the capacity exceeding 4 billion cubic meters.
• Gazprom, WINGAS and RAG operate the first phase of the Haidach UGS facility in Austria with the working gas volume of 1.2 billion cubic meters and the daily send-out of 12 million cubic meters. In total, Gazprom holds two-thirds of the project capacity.
• Gazprom also holds shares in other companies owning and operating UGS facilities: ArmRosGazprom (Armenia), Latvijas Gaze (Latvia) and VNG AG (Germany).
• According to the leasing agreement with Vitol, since 2005 Gazprom has gained a 5-year access to 50 per cent of the Humbly Grove UGS facility (Great Britain).

In addition, Gazprom in cooperation with its European partners is studying the possibilities of implementing new UGS construction and operation projects:

• With VNG the Katharina UGS is being constructed near Bernburg (Germany) with the working gas volume of up to 600 million cubic meters.
• As part of the Agreement of Cooperation with MOL signed in March 2009, the Pusztafoldvar UGS project is being developed in Hungary. The working gas volume of the facility is expected to make up 1.3 billion cubic meters with the possible daily send-out of 15 million cubic meters. Gazprom and MOL established a joint venture on a parity basis to perform engineering, construction, financing and operation of the UGS facility.
• With TAQA an agreement has been reached on the Bergermeer UGS facility in the Netherlands. As was agreed, in exchange for a certain amount of cushion gas provided on a temporary basis for injection into the facility, Gazprom will gain access to its working gas capacity and a share in the company acting as a technical operator of the facility.
• With Srbijagas agreements have been reached on joint implementation of the Banatski Dvor UGS project with the working gas capacity of 450 million cubic meters. To construct and operate the facility, a joint venture is being set up with the following shareholding structure: Gazprom – 51 per cent, Srbijagas – 49 per cent.
• In addition, Gazprom is performing technical and economic assessment of the possible engagement in UGS projects in Austria, Great Britain, Italy, Romania, Slovakia, Turkey, Czech Republic and other countries. In case positive results are obtained, the Russian party and the relevant foreign partners will start the process of bilateral documents coordination targeted at the execution of UGS facilities construction projects.