Dutch Gasunie going ahead with BBL project, awaits Fluxys, Ruhrgas to join
Dutch gas incumbent N.V. Nederlandse Gasunie will go ahead with the construction of a pipeline linking the Netherlands with the UK, the company announced on Wednesday.
The decision to launch a EUR 500 million project to create a 235 km long connection from Balgzand in the Netherlands to Bacton on the Norfolk coast – almost parallel to the Zeebrugge-Bacton Interconnector – ends a lengthy study period dogged by delays (see ESGM 10.067). It precedes an investment decision by Belgian Fluxys and German Ruhrgas, who are still mulling over whether or to what extent to exercise their option to acquire a minority stake in the Gasunie-led project. A spokesperson for Fluxys says that the group is likely to make a decision by mid-June, when its board of directors is scheduled to meet. She emphasised that the project was “of strategic importance” for Fluxys. Being the parent of the Zeebrugge hub operator Huberator, Fluxys expects the project to positively impact on its transportation business by boosting liquidity across different trading markets as its opens up additional price arbitrage opportunities. In addition, it views the BBL as having a complementary function in case of future outages in the Interconnector.
The envisaged completion of the BBL pipeline by late 2006 coincides with the start of the long-term contract that Gasunie´s subsidiary Gasunie Trade & Supply signed with with British Centrica. The Dutch supplier will deliver 8 billion cubic metres (Gm3) over a ten year period under this contract. The planned pipeline´s total capacity, which a spokesman for Gasunie estimated at around 16 Gm³, will comply with the total number of capacity requests that shippers brought forward during a lengthy open season period. For the time being, Ruhrgas, German Wingas and Gasunie will be the sole users of export capacity in the 36 inch pipeline, according to the Gasunie spokesman. It is open whether there will be spare capacity that could be sold to other parties after completion. Wingas confirmed that it booked “notable amounts” of capacity to diversify its deliveries to UK customers amid plans to “substantially increase” its activities on the UK market. Unlike its domestic rival Ruhrgas and Fluxys however, the Wintershall/Gazprom joint venture was not invited to join the project as a shareholder. “Fluxys and Ruhrgas were earlier in coming to conclusions,” the Gasunie spokesman explained, emphasising that every party was initially given the opportunity to join. With the other potential investors expressing stronger interest, project leader Gasunie apparently concluded that it is enough to have three parties on board.
The Interconnector pipeline, by contrast, is operated by eleven co-owners. Neither Wingas nor Gasunie´s potential partner Ruhrgas would comment on the extent of their capacity interests. The latter, which is currently in talks with its British sister company Powergen over a ten year delivery contract starting in October, already owns a 10% share in the Interconnector through its affiliate Ruhrgas UK Exploration & Production. Ruhrgas is understood to have bought capacity for the first phase of the Interconnector upgrade – which will bring the total reverse flow capacity from currently 8.50 Gm³ to 16.50 Gm³ by late 2005.
Future majority shareholder Gasunie emphasised that the prospect of enjoying exemption from EU regulations governing the transit business was one decisive factor for its decision to kickstart the BBL project as it enhanced the certainty of return on investment. Its confidence in obtaining exemption from regulated tariffs and regulated third party grid access conditions got a boost after the national energy regulators of the UK (Ofgem) and the Netherlands (Dte) “announced their intention to grant that exemption” and the EU Commission stated its opinion on the regulators´ approach.
The BBL project will involve the building of a compressor station in the province of Noord-Holland, a short section of an onshore pipeline, the crossing of the coastal sand dunes in the Netherlands (about 5 km), 230 km of offshore pipeline across the North Sea as well as the construction of landfall and receiving facilities at Bacton. Additional investments essential to link the Dutch transmission grid with the BBL entry point at the Dutch shoreline will be carried out on Gasunie´s own account.
The Gasunie group is formally the project leader even though the operational management of its transportation business has been spun off to Gastransport Services (GTS) and will be legally separated by as early as July. Ownership of the Dutch grid, however, still rests with the parent group Gasunie. Gasunie´s largest shareholder is Energie Beheer Nederland (40%). Other shareholders are ExxonMobil Holding Company Holland and Shell Nederland (25% each) as well as the Dutch state (10%).
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