April 8, 2013 / 5:17 PM / 4 years ago

UPDATE 2-Gazprom, Gasunie to explore Nord Stream expansion to Britain

4 Min Read

By Alexei Anishchuk

AMSTERDAM, April 8 (Reuters) - Russia's Gazprom and Dutch Gasunie signed a letter of intent on Monday to explore the potential expansion of the Nord Stream pipeline to Britain, one of several deals signed during President Vladimir Putin's visit to the Netherlands.

If the project comes through, the extended arm of Nord Stream would give Gazprom greater access to Britain, which has an annual demand of 100 billion cubic metres (bcm).

For the Netherlands, long-term cooperation with Gazprom would secure gas flows as its gas reserves dwindle and the country is expected to become a net importer of gas in 2025.

Alexei Miller, head of Gazprom, said the two companies discussed the possibility of increasing the Nord Stream pipeline with a line that will go to the United Kingdom. He said the capacity of the new pipeline would be about 27.5 bcm, the same as the capacity of each of the two existing pipelines.

"The key issue is to sign a long-term contract with our British partners to supply gas to the British market," Miller told reporters in Amsterdam.

Nord Stream has annual capacity of 55 bcm, enough to supply around 10 percent of the EU's annual gas needs. The pipeline makes landfall in Lubmin, northeast Germany.

Because of rules limiting the market share of individual distributors within the European Union, Gazprom has been unable to use the pipeline at maximum levels.

"The infrastructure in northwestern Europe can be improved a little bit further so they (the Netherlands) need support (from Russia) for investment," said Hans Van Cleef, an ABN Amro energy economist.

"Russia would of course like to benefit from this hub in the future."

Greater Cooperation

Gazprom and its oil arm Gazprom Neft signed two deals with Royal Dutch Shell - one for joint shale oil exploration and drilling, the other for joint exploration and drilling of hydrocarbons on Russia's continental shelf.

The deals underscore the Kremlin's drive to open up access to Russia's trove of hard-to-recover energy reserves to international energy firms with the expertise needed to secure its position as a leading global oil and gas producer.

"Strong Russian-Dutch energy relations are of great importance to both our economies," said Henk Kamp, Dutch minister of economic affairs, during Putin's visit.

"We value them even more today, as they stimulate economic growth and enhance energy security."

In recent years, the two countries have stepped up cooperation in the energy sector to include projects such as pipelines and gas and oil storage.

Gazprom will secure cushion gas for Europe's biggest natural gas open access storage to be built in the Netherlands in exchange for nearly 2 bcm of capacity.

Once it is completed in 2015, Gazprom will gain nearly half or 1.9 bcm of gas in Bergermeer storage, which is 20 kilometres away from the BBL pipeline that takes gas from the Netherlands to the Britain.

A consortium of Vitol Tank Terminals International (VTTI) and Russian investment group Summa will invest $1 billion in a new terminal in Rotterdam port.

Once it is fully operational in 2016, the terminal will have the capacity to handle 2 million tonnes of crude oil and 1 million tonnes of refined oil products, taking significant share in global oil trade.

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