Belgium: Fluxys, Statoil to Explore Cooperation in Natural Gas Storage

Fluxys and Statoil will examine the options for Statoil to book long-term storage capacity at Fluxys’ underground storage site in Loenhout.

The two companies have signed a Memorandum of Understanding to that effect during the current Belgian trade mission in Norway. The Belgian and Norwegian governments both support the project. Over 1/3 of the natural gas consumed in Belgium is sourced from the Norwegian continental shelf.

Walter Peeraer, chairman of the Executive Board and CEO of Fluxys: “A long-term storage agreement with a natural gas producer would significantly enhance security of supply. As system operator, Fluxys could count on certain and immediate access – for a period of 20 years – to a large strategic gas reserve in case of emergency, for instance if a natural gas source becomes temporarily unavailable to the Belgian market.”

Fluxys and Statoil to investigate project feasibility

In 2007 Fluxys started works to increase capacity at the underground storage facility in Loenhout. Over a period of four years (2008-2011), workable storage capacity is gradually being increased by 15% from 600 to 700 million cubic metres.

In Belgium, Statoil is a system user for border-to-border and domestic transmission of natural gas brought into Zeebrugge through the subsea Zeepipe from the Troll and Sleipner fields. The company is also active on the Zeebrugge spot market. Over 1/3 of the natural gas consumed in Belgium is sourced from the Norwegian continental shelf. Under the current legal framework, Fluxys must give priority allocation of storage capacity to system users who supply distribution system operators. As Statoil is active in border-to-border transmission and does only supply industrial clients, the company cannot make use of storage in Belgium. In the Memorandum of Understanding Fluxys and Statoil agree to investigate the economic and legal feasibility of Statoil booking long-term storage capacity. Talks will be conducted with Belgian federal regulator CREG to see how such a capacity reservation can be implemented in the framework of an open and transparent procedure. Fluxys recently signed a similar Memorandum of Understanding with Gazprom Export.

Under a long-term contract, in case of emergency Statoil will be providing its natural gas that it has in storage directly to Fluxys. In that way, the agreement would work in favour of both parties: Fluxys would have immediate access to Statoil’s natural gas in storage and Statoil would have a buffer capacity for its downstream deliveries to customers throughout North-Western Europe.

Long-term contracts: building blocks for a low-carbon future

Fluxys currently has long-term agreements for the liquefied natural gas terminal in Zeebrugge and for border-to-border transmission of natural gas in Belgium. The latter contracts are important because every cross-border flow also opens up a new source for the Belgian market. Long-term contracts for natural gas storage would be an additional building block in developing a solid future for natural gas as a key element in the energy mix with a view to reducing greenhouse gas emissions at an acceptable price.

As it goes, natural gas is not only the fossil fuel with the lowest greenhouse gas emissions, but also an energy source complementary to renewable sources such as wind and solar, which are not always available. Natural gas technology also offers major advantages in terms of energy efficiency. Consequently, natural gas is an excellent choice for domestic heating, vehicle fuel and power generation (including power generation capacity as a back-up for power generated from renewable energy sources which are not continuously available).

Coordinated approach

The agreement between Fluxys and Statoil is a practical result of Fluxys ‘vision memo’ submitted to the Council of Ministers in September, focusing on favourable pre-conditions to further develop Belgium as a natural gas crossroads for North-Western Europe. One of the key points was to develop a coordinated approach between policymakers, government, regulators and system operators, based on a joint long-term vision of Belgium’s role as a crossroads.

Belgium fully supports the endeavours of the Fluxys Group to strengthen the country’s role as a natural gas crossroads and move ahead with developing an integrated natural gas market in North-Western Europe. Fluxys employs a double strategy to that effect:

* Develop new infrastructure in Belgium, with currently an indicative 10-year investment programme worth €2 billion.

* Cooperate with other gas infrastructure companies outside Belgium and co-invest in new projects or take stakes in existing infrastructure to arrive at a genuine cross-border approach.

About Statoil

Statoil is an international energy company with operations in 34 countries. Building on more than 35 years of experience from oil and gas production on the Norwegian continental shelf, the company is committed to accommodating the world’s energy needs in a responsible manner, applying technology and creating innovative business solutions. Statoil is headquartered in Norway with 20,000 employees worldwide, and is listed on the New York and Oslo stock exchanges.

About Fluxys

Fluxys is the independent operator of the natural gas transmission and storage infrastructure in Belgium. Through its subsidiary Fluxys LNG the company also operates the Zeebrugge liquefied natural gas terminal. Driven by its first mover approach Fluxys has developed its infrastructure into a central crossroads for international gas flows in North-Western Europe.

The Zeebrugge area plays a key role in Fluxys’ crossroads function for international gas flows in North-Western Europe: the infrastructure in the area has a throughput capacity of some 48 billion cubic metres of natural gas per year, approximately 10% of the border capacity needed for Europe’s natural gas supply.

With 18 interconnection points to neighbouring grids and systems the Fluxys network is tied in to all natural gas sources available to the European market:

* pipeline supply from Norway, the United Kingdom, the Netherlands, Germany and Russia,

* worldwide LNG supply through the Zeebrugge LNG terminal offering 110 berthing slots per year for unloading or loading, and a throughput capacity of 9 billion cubic metres of natural gas per year.

Any LNG or pipe gas brought into the Fluxys network can either be shipped into the Belgian market or redelivered at the border for onward transmission into the United Kingdom, the Netherlands, Germany, the Grand Duchy of Luxembourg, France and further to Southern Europe. Transport for delivery into the Belgian market amounts to 17 billion cubic metres per year. As for border-to-border transit, shippers have booked long-term capacity at roughly 80 billion cubic metres per year for existing infrastructure and over 15 billion cubic metres per year for infrastructure to be built or under construction.

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Source:LNGWorldNews, January  18, 2011;