Desperately seeking alternatives

By bne IntelliNews January 20, 2009

Nicholas Watson in Prague -

The duration of the gas dispute this time around has heightened the sense in Europe that much more needs to be done to protect the region's gas supplies from the effects of such spats between Russia and Ukraine, outside of building more pipelines from Russia or the Caspian.

Most worrying for the EU is that several Central and Eastern European governments are now talking about restarting nuclear reactors that had been, or were to be, mothballed due to concerns over their safety. On January 12, Bulgarian Prime Minister Sergei Stanishev said he had told the European Commission that if the supply cut-off dragged on into February, the government would have to restart one of the two 440-megawatt (MW) Soviet-era units at the country's only nuclear power plant, Kozloduy, that were closed at the end of 2006 as a condition for joining the EU. Slovakia also said it was planning to restart its Bohunice nuclear power plant, criticised by neighbouring Austria as unsafe, which it shut down at the end of 2008.

If the Commission's stance over Lithuania's attempts over the past year to keep open its aging Ignalina nuclear power station are anything to go by, analysts say Bulgaria's appeal will fall on deaf ears. Wrangling between Lithuania and its Baltic and Polish partners in building a replacement nuclear plant on the site has delayed the project, so Vilnius has been pushing the Commission without any success to keep the old plant open past the 2010 deadline to close it.

Poland is also planning to build nuclear plants on its own soil as opinion grows that Russia is wielding energy as a political weapon "with increasing impunity," says Marek Matraszek, founding partner of CEC Government Relations in Warsaw. On January 13, the government approved the commencement of a nuclear energy programme that will see two nuclear power generation plants built over the next 15 years.

Poland is also looking at liquefied natural gas (LNG) as a way to wean itself off Russian gas. The government said it is will submit a bill to parliament to accelerate the tender and construction procedures of the LNG terminal at Swinoujscie, which is planned to have a capacity of more than over 2.5bn cubic metres (cm) and an original completion date of 2013/2014. Design work is already underway. The government will also try to secure a long-term LNG supply contract, possibly with Qatar. Another LNG facility is being planned on Krk Island off the Croatian Adriatic coast by the Adria LNG consortium, which comprises E.On Ruhrgas, OMV Gas & Power, Total Gas & Power Ventures, RWE Supply & Trading, and Geoplin. Construction is slated to start at the end of 2009 and the facility up and running by 2014. The Krk facility is set to have an initial annual capacity of 10bn cm and cost a little over $1bn.

Storage is another area in the region that can be improved. RWE Gas Storage said the total capacity of all gas storages in the Czech Republic should increase to 4.3bn cm by 2013, thus covering almost half of the country's annual consumption, from the current 3bn cm of capacity. Bulgaria is looking for €250m from the EU to expand its sole gas storage facility at Chiren.

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