GSE - Gas Storage Europe1 GSE Investment Workshop “ Physical specificities of gas storage” Brussels, 24 May 2007

GSE - Gas Storage Europe2 Agenda Introduction Gas Storage types and specificities Conclusions

GSE - Gas Storage Europe3 Introduction The safest, most secure and economically viable form of natural gas storage is storage in natural or man-altered underground formations. The three principal types of gas storage sites are: –reservoirs in oil or gas fields –aquifers –salt cavern formations In addition, above ground storage facilities can be built (LNG peak shavers) The most important characteristics of a storage facility are its capability to hold large volumes of natural gas for future use and the rate at which the gas inventory can be withdrawn (its delivery rate).

GSE - Gas Storage Europe4 Reservoirs Reservoirs are hydrocarbon formations that – under specific structural conditions – may be accumulated in underground porous rocks. Sealing is guaranteed by cap rocks impeding hydrocarbon migration towards the surface (e.g. clay). Cap rock Basal rock Porous rock Water Gas Reservoirs are the most commonly used underground storage sites because of their availability.

GSE - Gas Storage Europe5 Reservoirs Main features: –Availability of formations (former gas/oil production fields) and geological data –High capital immobilization (e.g. cushion gas) –Working to cushion ratios around 1 (range of 0.5 – 2) –High volumes and deliverability rates –Upstream operational and R&D management and know how –Long lead time for developing capacity (3-7 years)

GSE - Gas Storage Europe6 Aquifer storage 1reservoir 2roof 3upper aquifer 4central station Significant working volume Gas flow linked to the geological structure (porosity, permeability) 5exploration well 6upper aquifer monitor well 7monitor well 8natural gas Aquifers are used in some areas to store natural gas if the formation is overlain by an impermeable layer.

GSE - Gas Storage Europe7 Aquifer storage Main features: –Identification of confining stratum –Selective completion for water and sand management –High capital immobilization (e.g. cushion gas) –Working to cushion ratios around 1.5 (range of ) –Long lead time for developing capacity (5-7 years) except geophysical campaign

GSE - Gas Storage Europe8 Salt cavity storage 1 salt bed 2 cavity 3 central station Low working volume High withdrawal capacity Flexible management of gas flow Salt caverns are “artificial” structures created in some underground salt domes. 130 m 90 m

GSE - Gas Storage Europe9 Salt cavity storage Main features: –Environmental issues (brine disposal) –Low capital immobilization (e.g. cushion gas) –Working to cushion ratios around 3 –Long lead time for developing capacity (3-5 years)

GSE - Gas Storage Europe10 Peak shavers (LNG) Low Working Volume High Withdrawal Capacity Low Injection Capacity

GSE - Gas Storage Europe11 Synthesis Working Gas Deliverability Cushion Gas HighMediumLow ReservoirAquiferSalt cavityLNG peak shaver

GSE - Gas Storage Europe12 Conclusions Storage investments have distinctive specificities depending on their nature. The most important common features of underground gas storages are: –Long lead-time between investment decision and the start of operation (also including permitting requirements) –Exploration (underground), technical and realization risks –High capital immobilisations –Long operational lives