eCORP European & Global Storage Opportunities

Shale development (production, transportation and marketing) depends significantly on storage and its facilitation of downstream distribution and utilization of natural gas.

eCORP believes that some of the best development opportunities for strategic and highly flexible storage facilities will be located outside of North America. The value of these projects will likely outweigh the expense associated with overcoming the challenging development circumstances ranging from adverse geology and terrain to complex governance and regulation. This critical infrastructure is projected to stimulate economic growth and an increasing market share for natural gas for regional energy needs. The fundamental environmental preference of natural gas to other carbon-based fuels is also expected to drive demand. Areas with increasing LNG deliveries and limited subsurface storage facilities are target areas for market area high performance storage development. The European and Middle Eastern pipeline network continues to expand into Western Europe. New pipeline and transmission interconnections will create demand for strategically placed new underground natural gas storage.

Gas Infrastructure Europe (GIE) was founded in 2005 to explore market-based solutions for gas transmission, storage and LNG infrastructure for the EU. Its subsidiary, Gas Storage Europe (GSE), represents that there is approximately 79.3 BCM (2.8 TCF) of natural gas storage in 27 countries of Europe. This compares to the approximately 107.6 BCM (3.8 TCF) of storage in the United States, which has only a slightly higher total gas consumption than the EU-27 and a significantly more extensive pipeline infrastructure. GSE reports that another 59.5 BCM (2.1 TCF) of storage has been reported as planned for these 27 member countries, and others, by the year 2015. That is the equivalent of 11.6 BCM (420 BCF) per year for the next five years. Currently, there is only about twenty-five percent (25%) of this planned capacity actually under construction. With Europe’s declining domestic production, increasing demand and increasing reliance upon imported natural gas, GSE reports that as much as 130 BCM of storage will be needed by 2025.

The EU has encouraged member countries to develop strategic gas storage facilities in much the same manner as they have sponsored the existing strategic petroleum reserves to protect against supply disruptions. The development of strategic gas storage projects is occurring at the same time that the EU is sponsoring third party access (TPA) to the natural gas transmission and storage infrastructure. The unbundling of the European gas infrastructure is reminiscent of the changes sponsored and guided by the Federal Energy Regulatory Agency (FERC) in the U.S. beginning in the early 1980s. The legacy companies in the European gas storage sector behave similarly in their approach to capacity and economies of scale over efficiency of the natural gas storage fleet. One can see the focus on capacity in the following table. There is very little emphasis on the deliverability or withdrawal capabilities.

GSE Member Forecast of New EU Storage Capacity – June 2009
Capacity Withdrawal Injection Turns
BCM BCM/D BCM/D Yearly
59.5 0.249 0.096 0.5

A deregulated market that values efficiency would give the appropriate economic signals for storage with more storage volume turnover (high performance) capabilities as seen in storage elsewhere. The new storage requirement projections for the EU translate into an investment approaching $8.4 billion per year, assuming U.S. equivalent project cost for high performance facilities. eCORP proposes that a minimum target of five percent (5%) market share for new facilities would be a reasonable threshold to attain for the proposed infrastructure partnership, but believes a greater market share is simply available for those capable of seizing the opportunity on a larger scale. The company also intends to pursue storage opportunities in Asia and South America.