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HydroWingas secures 1.5 bcm gas deliveries

March 16, 2005, 14:30 CET

HydroWingas Limited, a UK joint venture between Hydro and the German company Wingas, has successfully debuted in the UK market - securing delivery contracts for more than 1.5 billion cubic meters (bcm) of natural gas.

"We’re more than happy with the results achieved to date and are aiming for a market share of about 10 percent," says HydroWingas managing director, Solveig Hinsch.

Of the 1.5 bcm volume contracted, HydroWingas already delivers some 830 million cubic meters per year to UK customers. The UK gas market currently consumes about 100 bcm gas per year. Gas meets about one-third of the UK’s primary energy demand.

Key factors supporting HydroWingas’ positive market entry are its flexible price models, competitive natural gas prices and security of supply, Hinsch explains. Customers include global consumer products manufacturer, Newell Rubbermaid; essential services supplier, Centrica; and Scottish & Southern Energy, one of the largest energy companies in the UK. Others include US full service energy trading company, Sempra, and Hydro subsidiary, Hydro Polymers, one of Northern Europe’s largest producers of raw materials for making plastics.

Considerable experience

Both parent companies of HydroWingas have extensive gas sales experience throughout Europe. HydroWingas combines the two companies’ skills and experience and establishes an energy supply position in the UK.

Hydro’s development of the giant Ormen Lange gas field in the Norwegian Sea as well as the 1,200 kilometer Langeled pipeline to Easington, in south-east England, secure substantial gas supplies to the UK for decades.

When Ormen Lange starts producing in 2007, Norway’s gas export volume will be the second-largest in the world. Gas travelling through the Langeled pipeline will supply some 20 percent of the UK’s gas needs for up to 40 years. Most of Hydro’s share of gas production in Ormen Lange will be sold to the UK market through HydroWingas.

Most of Wingas’ gas is supplied by Russian gas giant, Gazprom, which owns 35 percent of the company. This provides HydroWingas the opportunity to offer both long-term and short-term delivery contracts. Another advantage is that Wingas has storage capacity for about 32 percent of its annual gas volume. Because the UK has traditionally been gas self-sufficient, it has only 3 percent storage capacity. While still currently able to meet its average demand from domestic production, UK gas reserves are declining and the country is expected to import 40 percent of its annual gas consumption by 2010.

Wingas owns the largest onshore gas storage facility in Western Europe, in Rehden, Germany, capable of storing 4.2 bcm gas. It also recently acquired the UK’s largest onshore gas storage facility at Saltfleetby.

One step further

The HydroWingas joint venture generates new market opportunities.

"Whereas previously we sold most of our gas at the NPB (one of many European gas hubs) to large wholesale companies, we are now going a step further and selling gas to large industrial customers and energy companies," says HydroWingas deputy managing director, Terje Totland. "We want to build a broadly based customer portfolio and acquire important market positions."

HydroWingas enjoys the financial benefit of having two well-established parent companies. In addition to solid financial backing from Hydro and Wingas, the two parent companies provide secure access to gas supplies. HydroWingas also offers seasoned complimentary risk management and gas marketing services.

Down the middle

The Norwegian energy and aluminium group, Hydro, and German gas transportation and supply company, Wingas, each own 50 percent shares in HydroWingas. The joint venture company operates independently and will purchase the required gas from the market, third parties or from its owners. The scope of business is to sell natural gas to major industrial end customers as well as to redistributors.


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