The Latvian UGS Potential for Improvement of the EU's Security of the Natural Gas Supply: a Midterm Perspective

Transcription

1 The Latvian UGS Potential for Improvement of the EU's Security of the Natural Gas Supply: a Midterm Perspective 1. Leo Jansons, MA 2. Dr. habil.sc.ing. Namejs Zeltiņš, 3. Dr. sc.ing. Adrians Dāvis, 4.Juris Savickis 1. Leo Jansons, MA Senior Officer The Ministry of Economics of the Republic of Latvia Department of Energy Market and Infrastructure E mail: leo.jansons@em.gov.lv (corresponding author) 2. Dr.habil.sc.ing. Namejs Zeltins The Latvian MC/WEC Chairman of the Board E mail: zeltinsh@edi.lv (presenting author) 3. Dr.sc.ing. Adrians Dāvis Chairman of the Board, JSC Latvijas Gāze E mail: adrians.davis@lg.lv 4. Juris Savickis President LLC ITERA Latvija itera@itera.lv Abstract The exploration of the Latvian natural gas storage potential begun in 1950s, when first geological evidence of large scale underground water horizon structures suitable for this purpose were discovered in several locations of the Central and South Western regions of Latvia. Currently only one of all these structures Inčukalns, is used as an underground gas storage facility, but several more are reviewed as potentially developable UGSs. Among them, Dobele structure is seen as a most perspective, where geological surveys and exploratory activities were carried out in 1990s and accordingly. Results of the surveys approve that Dobele structure is one of the largest potential UGS in the European Union (EU) and it can serve to the improvement of the EU's security of the natural gas supply both in midand long term perspective. Key words: natural gas, underground gas storage, Dobele Structure, security of the natural gas supply. 1

2 There are unique geological conditions for creation of a system of large scale underground natural gas storages (UGSs) in Latvia with a total volume up to 50 billion m 3 (BCM). That is a volume similar to one of all underground natural gas storages in the rest of the European Union (EU) countries. In accordance with estimates, eleven prospective UGSs could be developed in several regions of Latvia, primarily in its Western part Kurzeme (see Table 1 and Picture 1). Table 1 Prospective Underground Gas Storages in Latvia. Name of Area Volume potential covered (BCM) UGS (km 2 ) Snēpele 75 17,5 Aizpute Dobele Blidene 47 9 Lici 65 2,5 Liepaja 39 2,5 Degole 46 3,5 Liga 40 2,5 Ligatne 24 2,5 Amata 25 2 Valmiera 30 2,5 Picture 1 The Geographical Location of Prospective UGSs and Existing UGS Inčukalns UGS. Introduction During 1960 s and 1970 s, number of wells was drilled and single fold seismic analysis, air magnetic and marine magnetic surveys were performed to analyze the underground storage potential in Latvia. As the result of these multiple surveys, in 1972 so called Dobele structure was discovered. The Structure (its central part) is located in the Southern part of Latvia approximately 12 km from town of Dobele and 70 km from country s capital Riga. Geomorphologically, the object is located in the South East part of Highland of Austrumkursa (the Eastern Kurzeme), in Lielauce hilly terrain; not far from it and the so called contact area of Spārnene wavy low land. Currently a territory over the Structure is covered in agricultural lands and forests, and is a part of the nature reserve Lake Zebrus and Lake Svētes. In 1970s, taking into consideration Structure s favorable geological properties and location, 22 wells (including 12 operation wells) were drilled there. It was approved that the Structure can be used for development of an underground gas storage facility with the total gas volume of about 10 BCM and active gas of 5 BCM. This information was re affirmed by the study on the Latvian UGS potential carried out by the Baltic Energy Corporation, CMS Gas Transmission and Storage Company and Michigan University in

3 Picture 2 Potential Latvian UGS indicated by study performed by Baltic Energy Corporation and CMS Gas Transmission and Storage Company. Ten years later, in order to carry out the general interest project Geological and Economic Research of Possible Establishment of Natural Gas Storage Reservoirs in Latvia, Dobele District 2006 G 130/06 TREN/06/TEN E S (co funded by the European Commission), area covering a section of 99,2 km 2 had been outlined. Its boundaries points had been determined by the Regulation of the Cabinet of Ministers No. 524 Regulations for Use of the Section of Subsoil of National Significance the Dobele Structure of July 7, Picture 3 Wells drilled in territory of Dobele structure were sealed, re opened during research done in interest project Geological and Economic Research of Possible Establishment of Natural Gas Storage Reservoirs in Latvia, Dobele District. 3

4 A feasibility study on prospective commercial use of the Structure was carried out under authority of The Latvian Investment and Development Agency, with a final report of the study published in November, All the geological research activities of the Structure complied both with requirements of the regulatory enactment of the Republic of Latvia and the EU. Furthermore, activities related to project implementation, and their sequences were determined by the Regulations, issued on the basis of Clause 10 of the Law on the Subsoil. As results of the study, actual physical parameters of Structure s Cambrian water horizon (the reservoir) and precise technical data of geological and tectonic characteristics of the Structure, its volume/capacity have been verified. After analysis of the received data, estimated total costs were calculated for two alternatives of Dobele UGS facility development, too, and they are as follows: Table 2 The Project Cost Estimate for 7,7 and 10 BCM (EUR) Alternatives (Dobele UGS facility Investment items capacity) 7.7 billion m 3 10 billion m 3 Land purchase Technological equipment GPA (75 MW) Construction works Setting up boreholes pipelines Assembly of technological equipment First stage cleaning filters separators Filters separators with filter boxes Other costs Blanket gas Total Preparing of technical project (9 %) Construction supervision (3 %) Author s supervision (0.5 %) TOTAL Assessing data regarding potential of UGSs in Latvia, their suitable location between the gas producer and consumers regions, and with respect to concern about security and reliability of the natural gas supply to the EU 4

5 countries in both mid and long time period, it was agreed that Latvian underground gas storage potential can be used as a key element of reliable, sustainable and, what is the most important point secure, gas supplies to a significant part of the EU consumers. The Latvian Natural Gas Transport Network and its Interconnections The Latvian natural gas transmission network is in a sufficient condition with a technical reserve of about 40%, and, if gradual technical enhancements are made, it can assure safe and secure bi directional gas flows to at least three Baltic States, Finland and Poland. Also the integration of a new, large scale UGS facility into the exiting natural gas transmission system is technically possible, although for purposes the Baltic natural gas security of supply its development is not required. As for today, the natural gas supply system of Latvia has three cross border interconnections: with Russia, Lithuania and Estonia. Both the Latvian and Russian, and the Latvian and Lithuanian systems are connected with two pipelines, while the Latvian and Estonian with one. In case of reverse flow the technical condition and capacity of gas pipelines are adequate for present configuration of the natural gas system and are able to ensure required amount of natural gas supply. In the territory of Latvia the natural gas metering station (GMS) Korneti owned by JSC Latvijas Gāze carries out the measurement of all natural gas entering or exiting the pipeline system and the analysis of other parameters for natural gas supplies from Russia to Latvia via Estonia and the other way around meeting the requirement of bi directional flow availability. The maximum entry capacity of GMS Korneti is 20 million m 3 /per diem, maximum exit capacity 12 million m 3 /per diem. The interconnection between Latvia and Lithuania also is bi directional. Natural gas measurement is provided at GMS Kiemenai which is situated in Lithuania and owned by JSC Lietuvos Dujos. The maximum entry capacity of GMS Kiemenai is 5 million m 3 per day, maximum exit capacity 2 million m 3 /per diem. In the territory of Estonia GMS Karksi owned by JSC Eesti Gaas has been designed and built for natural gas supply and metering in one direction - only from Latvia to Estonia. It complies with the natural gas flow regime under normal conditions, when Estonian consumers are receiving natural gas seasonal deliveries from Latvia. However, according to agreements made between natural gas transmission system operators of Latvia, Estonia and Lithuania the issues of change of natural gas flows and operation regimes in case of emergency have to be considered and adjusted without delay. It should be done taking into consideration technical capacities of natural gas transmission systems of three countries and Inčukalns UGS. 5

6 In future several existing natural gas infrastructure enhancement projects are planned as a part of Projects of Common Interest (PCI) scope, namely: capacity increase of bi directional pipeline Latvia Lithuania, reaching transport capacity of 6 MCM/ per diem with capital costs of 60.5 million EUR; enhancement of the Latvia Estonia interconnection to enable reverse natural gas flows with transportation capacity increase up to 1 MCM/ per annum or 10 MCM/ per diem with capital costs of 50 million EUR; modernization of Inčukalns UGS and its capacity increase up to 3.2 BCM of active gas with capital costs of million EUR, and enhancement of transportation capacity of pipeline Klaipeda Kiemenai by construction of a new gas pipeline Klaipeda Kuršenai in Lithuania with capital costs of 64 million EUR. Additionally it should be mentioned that natural gas supply system of Latvia is constructed to ensure natural gas consumption of 4 billion m 3 / per annum, and in winter natural gas is supplied to customers only from Inčukalns UGS. The actual consumption is about 1.6 billion m 3 / per annum. As it was mentioned before, there is a capacity reserve of approximately 40%, so all the reserve or at least great part of it could be used for integration of new delivery capacities or bulk infrastructure objects like Dobele UGS. The Latvia UGSs and Natural Gas Security of Supply in Midterm Perspective Past Options In the end of 1980 s a project foreseeing construction of the natural gas pipeline through territory of Latvia for natural gas deliveries to Europe from Russia, which is the shortest route, was considered with regard to development of Dobele UGS. However, later a decision was made to shift pipeline s route off Latvia through the territories of Belarus and Poland. But in future, taking into account expected increase of the natural gas consumption in the EU, particularly the Western European countries, it would be reasonable to consider construction of another one natural gas transmission pipeline from Russia to EU via the Latvian territory. It would be beneficial not only in aspect of diversification of the natural gas supply routes to the EU, but also in case of reduction of gas transmission related geopolitical risks, which are frequently appearing in connection with political unrests or economical tensions in certain third natural gas transit counties. 6

7 Picture 4 Possible Integration of Dobele UGS in the Regional Natural Gas Supply Infrastructure. It was also stated by the natural gas security of supply and market experts, that now with the North European Gas Pipeline widely known as Nord Stream already in place, one of the best solutions for substantial improvement of security of the natural gas supply to the EU countries via this particular route would be construction of the branch pipeline to Latvia and development of Dobele UGS (or any other potential storage in Latvia depending on the feasible volumes of natural gas). Picture 5 Nord Stream and possible branch to Dobele UGS in Latvia 7

8 The Nord Stream project includes two parallel lines, with the first pipeline laid in the Baltic Sea by May 2011 and inaugurated on 8 November 2011, and the second line laid in and inaugurated on 8 October At the moment Nord Stream is the longest subsea pipeline in the world, and it runs from Vyborg compressor station at Portovaya Bay along the bottom of the Baltic Sea to Greifswald, Germany. Nord Stream transport capacity is 27.5 BCM of natural gas per annum. Both pipes have a diameter of 1220 mm, the wall thickness of 38 mm and a working pressure of 220 bars. The length of the subsea section of the pipeline is 1222 km, of which 1.5 km in Russian inland, km in Russian territorial waters, 1.4 km in the Russian economic zone, km in the Finnish economic zone, km in the Swedish economic zone, 87.7 km in the Danish territorial waters, 49.4 km in the Danish economic zone, 31.2 km in the German economic zone, 49.9 km in German territorial waters and 0.5 km in German inland. It could be presumed that economically feasible and technically just interconnection to Dobele UGS would be made with one of Nord Stream pipelines. The closest point of Nord Stream to territory of Latvia can be located in the Swedish economic zone, off the cost of Kurzeme, the Western part of Latvia. However, currently this project is not considered as technically and economically feasible. Current Midterm Options Current midterm (up to year ) options for utilization of the Latvian UGS potential for ensuring EU countries security of the natural gas supply are falling into two categories: projects which have certain potential to be realized, but not having an urge for technical and financial feasibility studies, and projects that have rather high realization potential and on which technical and financial feasibility studies can be initiated in period of five to ten years. Category one includes a possibility to build a separate on land subsea pipeline from Dobele UGS, as shown in Picture 2, to Germany, however preliminary technical and economic studies have not been initiated and carried out in this regard yet. Only in case of alternative natural gas deliveries to Dobele UGS, and in case of serious gas delivery disruptions to Germany via existing import routs, such an option could be seen as potentially perspective. But it would also mean a necessity to finance a building of a large scale UGS as only one of natural gas security of supply elements. The development of interconnections or pipeline infrastructure of UGS as well as building of the storage itself (with technical design stage, project approval and construction) would take a long time. Bearing in mind that UGS would not therefore serve commercial natural gas deliveries, the project also could face problems of a proof of usefulness, because the Eastern part of Germany will theoretically and 8

9 practically have another, more cheap options for the natural gas deliveries in case of standard transport route disruptions such as deliveries from the Polish LNG terminal in Świnoujście via interconnector in Lasowo on the Polish German border or other local system interconnection points. The planned natural gas interconnection pipeline Poland Lithuania (GIPL) falls into the second category. It is designed to be constructed as single pipeline linking Warsaw (Poland) and Vilnius (Lithuania), with length of 562 km, transportation capacity of 2.3 BCM/ per annum that could be expandable to 4.5 BCM / per annum if required. Capital costs of the project will be approximately 558 million EUR for maximum capacity. Along with the Baltic regional LNG terminals GIPL is expected to significantly reduce a dependence of Lithuania, Latvia, Estonia as well as Finland on existing natural gas supply sources and routes. But firstly and foremostly GIPL will connect gas transmission systems of the Baltic States and Finland, if the Estonian - Finnish subsea natural gas pipeline Balticconnector is built by then, with the EU natural gas transmission grids. Balticconnector project foresees a construction of a single pipeline in the Baltic Sea linking Inkoo, Finland, and Paldiski, Estonia, with length of 80 km, transportation capacity of 2.4 BCM/ per annum and capital costs of 200 million EUR. It will also provide crucial possibility to deliver natural gas resources via alternative pipeline route to the Baltic, and ensure strategic integration of the Baltic natural gas sector into the common EU natural gas infrastructural layout. As for development of Dobele UGS facility and prospective placement of the EU natural gas reserves in this storage, the physical interconnector between the Baltic region even if it is not directly from Latvia, would play a crucial role. Picture 6 The Route of the Natural Gas Pipeline GIPL. In a context of the security of supply of natural gas resources and market liberalization in the Baltic region, different options had been considered, 9

10 including a development of the liquefied natural gas (LNG) import facilities also the second category projects in one or a few of above mentioned countries. However, a financial support by the European Commission (EC) to be provided only for regional LNG project, where common interests of all countries are met. At the moment, only Lithuania is developing its own national LNG import terminal project in Klaipeda port, near the Pig s Back Island. As for the Baltic regional LNG terminal location, the Estonian and Finnish preferences are strongly supported by the following considerations. The Finnish natural gas market is the largest in the area with annual consumption of about 5 BCM/annum (the same consumption as for three Baltic States in total), and with potential to grow significantly. Only the Southern part of the country is gasified with well developed natural gas transport and distribution network. The Finnish option is also attractive in terms of security of supply and import sources distribution in the Northern part of the region, as in the South, GIPL is expected to be built around With the Świnoujście LNG terminal in Poland and Klaipeda LNG terminal in Lithuania in operation, the Southern and Central part of the region might not experience physical hardships to access diversified natural gas supplies from more than two sources and via more than one route. The Estonian natural gas market is the smallest in the Baltic region however it is the only one which can be directly, physically interconnected with the largest one the Finnish market via Balticconnector. Estonia therefore can be seen as interconnection point between currently separated two equal parts of the Baltic Finnish natural gas market. As for historical development, both parts have one crucial common feature 100% of the natural gas deliveries here come from one source via single route. Picture 7 The Natural Gas Consumption in the Baltic Countries and Finland, BCM/ annum, 2010,

11 In case if the Latvian UGS potential and particularly Dobele structure is developed and turned into technically feasible UGS facility, significant natural gas emergency reserve volumes for the whole Europe could be kept within its territory, so the impact of temporary and even middle term distortions in the natural gas supply to the EU customers would be minimized. In case of Dobele UGS development, the natural gas supply infrastructure of Latvia could face quite intense transformations in certain period of time in comparison with its current design. After finalization of the project Geological and Economic Research of Possible Establishment of Natural Gas Storage Reservoirs in Latvia, Dobele District certain interest in development of Dobele UGS is shown from potential foreign investors, as the principal being the Polish party the Ministry of Economics of the Republic of Poland and the Polish gas system operator Gaz System S.A. In order to straighten bilateral cooperation in sector of natural gas, The Polish Latvian Gas Cooperation Group that includes representatives of the Ministry of Economy of the Republic of Poland, and the Ministry of Economics and the Ministry of Foreign Affairs of the Republic of Latvia and Gaz System S.A. was established according to Memorandum of Understanding Concerning Cooperation in Gas Sector signed on November 23, 2012 in Riga. It works on establishment and deepening of cooperation between Latvia and Poland in the natural gas sector projects like development of potential and existing UGS facilities in Latvia (Dobele and Incukalns UGS facilities) and lobbying of sooner realization of GIPL project. The development of Dobele UGS (and its connecting to the EU s gas supply network) is in a scope of group s direct interest and activities, and informational exchange on results of geological survey of Dobele structure carried out under project of would significantly increase the security of EU s energy supply. With Dobele UGS Central and Eastern regions of the EU would have internal natural gas reserves for meeting demand, if internal natural gas consumption is growing, however, taking into account object s capacity and parameters regarding its commercial usage it is neither in scope of the national interests of Latvia nor of the Baltic region. Prospective development of Dobele UGS should be considered only as an object of joint interests of larger regions then the Baltic such as the Eastern Europe or the EU as a whole. Conclusions In a midterm perspective, a possible development of Dobele UGS could be based only on an evaluation of project s technical and economic feasibility, with an accent to its function as the regional natural gas security of supply strategic reserve for at least Central and Eastern European region. 11

12 The volume of prospective UGS and investments (including capital costs and cushion gas cost) presented in a Table 2, need to be verified and updated for each scenario. A technical outlines or precise plans of Dobele UGS s integration into the Latvian natural gas infrastructure should be developed with regard to significant changes, if any, of the existing high pressure natural gas grid. The most suitable and economically feasible regional interconnection routes to Dobele UGS, including ones related to subsea gas interconnectors category, should be defined and analyzed in a scope of at least midterm Baltic natural gas infrastructure enhancement plans. Further studies are required in order to define expected functions of Dobele UGS as the transnational natural gas security of supply guaranty with and without foreseen additional commercial use of this facility. Bibliography 1. BALTIC ENERGY MARKET INTERCONNECTION PLAN Final report; available at: lg_report_ pdf 2. A. Davis, M. Gedrovics, J.Ekmanis, N. Zeltins Trends in the Development of the use of Natural Gas in Latvia in the EU Context //Latvian Journal of Physics and Technical Sciences (2004), 1, Valsts nozīmes zemes dzīļu nogabala Dobeles struktūra ģeoloģiskās izpētes rezultāti (2010), Gala ziņojums, Vol. 1, K. Mikelsons, A. Davis, V. Zebergs, N. Zeltins Latvian Underground Gas Storage Facilities for the Development of a Safe Gas and Power Supply System of North European Gas /IRAEE International Conference on "Energy & Security in the Changing World" (2004), Teheran, Iran, CD - 10 pp. 2. A. Davis, A. Jesinska, A. Kreslins, V. Zebergs, Zeltins N. Increasing Role of Underground Gas Storages For Reliable Supply of Gas to Latvia, Lithuania, Estonia, Finland and NW Russia and Prospects of Development of Incukalns Underground Gas Storage // 23rd World Gas Conference, Amsterdam (2006), CD - 13 pp. 3. J.Ekmanis, V. Zebergs, N. Zeltins, A. Davis, Risk-reducing Problems of the Latvian Gas Supply// Int. J. Global Energy Issues, 34, Nos. 1/2/3/4, (2010) Inderscience Enterprises Ltd., London: I. Niedrite A. Kreslins, A. Davis, N. Zeltins Security of Gas Supply Risk Assessment Alternatives // Proceedings of 22th World Energy Congress, Daegu, Korea 17 October (2013) Nr pp. 12