Harnessing the Golden Age of Gas

Sustaining growth —
Following a lengthy process, Gas Storage Bergermeer will turn the Netherlands into a strategic gas hub for Northwest Europe, boosting security of supply and energy market flexibility

After a long process, TAQA passed a milestone in its European strategy in May. The Netherlands’ Council of State, the highest administrative court, gave the green light to the $1.2bn TAQA-led project to develop the Gas Storage Bergermeer facility near Alkmaar, about 40km north of Amsterdam.

When it is in full commercial operation, expected to be in 2015, Gas Storage Bergermeer will be Europe’s largest open access gas storage facility and will nearly double the Netherlands’ gas storage capacity. That, in turn, will play a significant role in helping the country realise its objective to be Northwest Europe’s most important natural gas hub. The so-called “gas hub” strategy has received strong support from the Dutch government.

The Bergermeer project is a cornerstone of TAQA’s own European strategy, as Jan Willem van Hoogstraten, managing director of TAQA’s Netherlands operations, explains. "It’s a business we know well, having taken over BP’s Dutch oil and gas assets in 2007," he says. This includes the Peak Gas Installation (PGI) at Alkmaar, which – as is intended with Bergermeer – is a depleted gas reservoir converted to storage. Developing nearby Bergermeer makes perfect sense. “We asked, ‘How can we expand our business to make optimum use of our asset base?’” Mr. Van Hoogstraten says. “We already had the expertise and knowledge to design and operate gas storage. We also looked at our strengths in Northwest Europe and decided it would be best for us to invest in projects that fit our expertise and build our existing portfolio. Gas Storage Bergermeer is important to the Dutch government. As an Abu Dhabi government related entity, we have good government-to-government relationships. A complex and large project such as Gas Storage Bergermeer needs good coordination at the highest levels.”

The broader European context for the Dutch gas hub strategy – and, indeed, TAQA’s gas storage strategy – is twofold: both to take advantage of the trend towards a liberalised European gas market, with more players competing across borders for business, and to allay concerns about energy security by providing many more delivery options.

“Energy security, gas supply – it has always been a very hot topic in Europe, especially regarding overdependence on Russia,” says Lazslo Varro, head of the gas, coal and power markets division at the International Energy Agency. “One proper answer to that is to establish a more efficient, more integrated gas market. The priority is to build up the interconnectors in Europe and you need more gas storage. That was the lesson of 2006 and 2009 [when there were disruptions to Russian gas supplies]. Storage played a crucial role in crisis management.”

Gas Storage Bergermeer is a depleted gas field, discovered in 1969 and in production until recent years. The project has undergone a thorough examination, especially over safety concerns related to potential earth tremors. Safety questions were examined by three independent organisations: the Royal Netherlands Meteorological Institute (KNMI), TNO, a research company, and the Massachusetts Institute of Technology (MIT), which reviewed TNO’s report.

One of the main issues was that of potential man-made earth tremors, which had occurred four times during Bergermeer’s gas producing years. However, all of the reports concluded that the increase in reservoir pressure will have a positive effect on the reservoir’s geological stability and that any earth tremors would not exceed the maximum limit that has been consistently viewed as acceptable for gas production and storage activity in the Netherlands. The court ruled there were sufficient safeguards in place.

All politics are local

The seismic hurdle was not the only one that needed to be navigated. There was also a lengthy process at the local level. The gas industry has enjoyed a presence in the Alkmaar region for more than 40 years, thanks to its legacy companies BP and Amoco, and TAQA is keen to build on the relationship. Developing good community relations is a central aim, which mirrors Mayor Piet Bruinooge’s ambitions for the city. “It’s been a really positive relationship from the start. We have always wanted to work together for the benefit of the city of Alkmaar and the local community,” the mayor says. “Alkmaar is transforming itself into the energy centre of the Netherlands, not just for the gas hub,” he explains. This includes a new nuclear reactor nearby, contributing to the creation of a related medical isotopes business, as well as a planned biomass gasification demonstration plant.

TAQA agreed to move its Netherlands corporate headquarters from The Hague to Alkmaar. This switch will have an impact on employment and education opportunities in the region. “The move is not only important for enabling people to work for TAQA but for us to collaborate to develop new skills,” Mayor Bruinooge explains. For example, by equipping the emerging workforce with relevant sector skills, he sees local education providers helping to transform Alkmaar into a knowledge centre for innovation within the energy industry. He says he is pleased with the agreement, which will create 50 jobs directly and 100 jobs indirectly. These numbers will rise further during the construction phase, when up to 1,500 people will be employed, providing the equivalent of 3,600 man-years of work.

To satisfy safety concerns, a “risk contour” needed to be established around a new gas treatment and compression facility planned for Alkmaar’s industrial park. “So, rather than buying 10 hectares, we bought 24.5 hectares,” Mr Van Hoogstraten says.

TAQA has ambitious plans for the extra space. The company is working closely with ECN, the Netherlands-based research institute for renewable energy, and other local stakeholders to build an energy innovation park. TAQA’s vision is to build a cluster that includes a mix of innovative high-tech companies operating in the energy-related sector and research & development functions of more established energy players. TAQA is already in talks with two potential occupants and hopes to see the first company move into the park by the end of 2012. It is, however, a long-term project. TAQA estimates it will take up to 10 years for the park to be operating at full capacity.

A new centre of expertise on biomass, built in partnership with ECN, will be a central feature of the development. This is part of TAQA’s wider effort to bolster industry-related education provision in the region so that companies there can recruit from a highly trained workforce.

Alongside this, creating jobs and developing a knowledge hub for the energy industry, TAQA is taking great care to minimise the environmental impact of Gas Storage Bergermeer. The installations used in the gas producing years, which are currently still visible, will be renovated and placed underground. Use of leading-edge technology will ensure that there are no carbon dioxide emissions under normal conditions. Wildlife is also being protected. An 18-hectare field next to the drilling site is being managed as a safe habitat for birds to nest and breed. And TAQA plans to buy 30 hectares of land nearby to establish a nature reserve.

TAQA will develop the facility to store more than 4.1 billion cubic metres of gas, enough to supply 2.5 million homes for a year. Six of Bergermeer’s nine existing production wells will be reused and 14 new ones will be drilled. Gas brought out of storage will be cleaned, dried and compressed within the new gas treatment and compression facility. New pipelines will then deliver the treated gas into the existing Dutch national gas transport system.

An essential cog

Gas Storage Bergermeer will play a key role in Dutch plans to be the natural gas hub, or gas roundabout, for Northwest Europe. Since the discovery in 1959 of the Groningen gas field, the largest in Western Europe, the Netherlands has been a key player in Europe’s gas market. The country has built a large onshore and offshore exploration and production sector, as well as highly developed gas infrastructure for transmission and distribution. It is a significant exporter of gas to other European Union (EU) countries – production in 2011 was 85 billion cubic metres, or about 30% of the EU’s total, of which 60 billion cubic metres was exported.

It has developed expertise in all areas of logistics and trading and in recent years has added facilities to handle liquefied natural gas (LNG). However, gas reserves have been in decline, and the country will become a net importer of gas by about 2025. The Dutch government in November 2009 set out a strategy to turn the Netherlands into a gas hub for Northwest Europe in order to retain its leading position in gas.

“Up to now, the Groningen field has been a buffer to cover every demand situation with its exceptional flexible production capacity,” says Mr Van Hoogstraten. “But as the country becomes more dependent on less flexible imports, it is really important to have local storage to meet demand surges.” Imports from Norwegian North Sea gas fields can take two days to reach the Dutch system; pipeline gas from Russia takes five days; and imports of LNG from the Middle East can take 14 days.

The Dutch Ministry of Economic Affairs, Agriculture and Innovation was therefore supportive of Gas Storage Bergermeer as a key part of its broader gas roundabout strategy. A study commissioned by the Ministry that examined the impact of developing the gas roundabout strategy estimated that 11,600 full-time jobs would be created directly and 31,500 indirectly, as well as 23,300 “induced” jobs – as the gas sector interacts with the rest of the Dutch economy. The report, by The Brattle Group, estimated the value of goods and services produced around the Dutch gas sector at about €41bn, or about 7% of Dutch GDP.

“An integral feature of Gas Storage Bergermeer is flexibility,” says Mr Van Hoogstraten. “We will offer a majority of the available storage capacity to the market, without reserving capacity for our own use. That’s 4.1 billion cubic metres of additional storage capacity – a significant amount of new capacity for the Northwest European market. This additional flexibility will help create a more liquid wholesale market where prices reflect the real value of gas.” Potential users will include power generators, distributors and traders. Third-party access gas storage facilities such as Gas Storage Bergermeer are a key component of the EU Gas Directive, which aims to make energy markets work more efficiently and become more competitive.

Partnerships in the project, especially with governments, are an important factor. EBN, an independent company with the Dutch state as its sole shareholder, holds a 40% stake. TAQA’s other partner, Russia’s state-owned gas company Gazprom – one of the world’s largest gas companies and supplier of 25% of Europe’s gas – has acquired a share of the facility’s capacity and a stake in the facility itself.

With the continued liberalisation of Europe’s markets, TAQA will be looking for other possibilities on the continent to develop strategic energy infrastructure projects such as Gas Storage Bergermeer.