Cablegate: Netherlands: Economic Minister Visits Russia,

VZCZCXRO1993
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHTC #1041/01 3570704
ZNR UUUUU ZZH
R 220704Z DEC 08
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC 2361
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 1838
RUEHNY/AMEMBASSY OSLO 5030
RUEHAT/AMCONSUL AMSTERDAM 4067
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 02 THE HAGUE 001041

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET NL RS
SUBJECT: NETHERLANDS: ECONOMIC MINISTER VISITS RUSSIA,
ADVANCES ENERGY RELATIONSHIP

REF: A. THE HAGUE 589
B. THE HAGUE 365
C. 07 THE HAGUE 1999

THE HAGUE 00001041 001.2 OF 002

SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY.

1. (SBU) SUMMARY. Dutch Economic Affairs Minister Maria van
der Hoeven returned from her December 4-5 Moscow visit with a
handful of energy announcements. Her meeting with Gazprom's
CEO touched on Nord Stream, a gas storage project in the
Netherlands, and selling future output from Yamal gas field
to a Dutch utility. But scratching the surface reveals mixed
evidence of concrete progress. The Dutch government and
corporate sector will continue to woo Russia as they position
themselves to remain an important energy player in Europe as
their own gas production declines. END SUMMARY.

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Energy Dominates "Economic Framework" Talks
-------------------------------------------

2. (SBU) EconOff met December 15 with Bert Roukens and Erik
Janssen, energy security experts at the Ministry of Economic
Affairs (MEA) who accompanied Minister van der Hoeven on her
December 4-5 visit to Russia. (Note: MEA has lead
responsibility for energy issues in the Dutch government.
End note.) The trip took place under the rubric of the
Netherlands-Russia economic framework agreement and follows
on Prime Minister Jan Peter Balkenende's November 2007 trip
to Russia (ref C). During that earlier visit, the two
countries announced that Dutch state-owned gas infrastructure
company Gasunie would acquire from Gazprom a 9 percent stake
in the Nord Stream pipeline. (Note: The Netherlands has
identified Russia, Algeria, Saudi Arabia, and Kazakhstan as
its priority bilateral relationships among fossil fuel
producers. End note.)

3. (SBU) Van der Hoeven's visit culminated in a plenary with
Russian First Deputy Prime Minister (and Gazprom chairman)
Viktor Zubkov. Although the bilateral talks included working
groups to promote trade in various sectors, energy issues
took center stage. Several Dutch energy companies
participated, including Shell, GasTerra (privatized gas
trading company), and Essent (largest Dutch gas and
electricity utility). Roukens described key outcomes on the
energy front: discussion about Nord Stream, a letter of
intent for Gazprom to join a consortium developing a gas
storage site in the Netherlands, and a commitment in
principle to supply future gas from the Yamal field to
Essent.

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Nord Stream: Optimistic Atmospherics
------------------------------------

4. (SBU) In her meeting with Gazprom CEO Alexei Miller, van
der Hoeven stressed that international treaties spelled out
clear procedures for how the Nord Stream pipeline ought to be
constructed and operated. According to Roukens, van der
Hoeven told Miller that the Netherlands expects Gazprom and
its partners to live up to their environmental and governance
obligations as Nord Stream moves forward. Roukens said
Gazprom was irritated by the European Commission's November
2008 Second Strategic Energy Review (SER). Specifically, the
SER contained a table showing a scenario where if the EU
meets its "20-20-20" energy and climate goals, it will not
need extra gas imports from Russia. He added, however, that
in private Gazprom sounded bullish about Nord Stream despite
recent statements to the contrary by Russian officials.
Roukens said the mood was "positive" that development of the
QRoukens said the mood was "positive" that development of the
Shtokman field is progressing and will help fill the Nord
Stream pipeline with new gas. Gazprom claimed its upstream
investment plans remained intact in the face of economic
turmoil.

--------------------------------------------- ------
Gazprom to Participate in Dutch Gas Storage Project
--------------------------------------------- ------

5. (SBU) Gazprom and Abu Dhabi-owned energy company TAQA
signed a letter of intent December 4 to develop a depleted
natural gas reservoir in North Holland, Bergermeer, as a gas
storage facility. The project consortium includes TAQA's
Dutch subsidiary, Dutch state-owned gas production concern
Energie Beheer Nederland (EBN), Dutch private energy company

THE HAGUE 00001041 002.2 OF 002

Dyas, PetroCanada, and Gazprom. The project aims to create a
gas storage site with a capacity of 4.1 billion cubic meters
(bcm), or 145 billion cubic feet (bcf), which equates to
about 10 percent of annual Dutch natural gas consumption.
The Bergermeer project's estimated cost is 700 million euros
(USD 1 billion). It is part of the Dutch government's
efforts to position the Netherlands as a "gas roundabout" hub
to supply gas from diverse sources to the rest of Europe.
Roukens cautioned that the project is not yet ready to
commence due to lack of agreement over who will supply and
fund the injection of base gas into the reservoir. The
consortium hopes to start construction in mid-2009 and
commercial operations in 2013.

-----------------------------------------
Dutch Utility Seeks Gas Supply from Yamal
-----------------------------------------

6. (SBU) Van der Hoeven and Miller also discussed the
development of Yamal gas field. Gazprom reportedly agreed to
negotiate a deal with Dutch utility Essent to sell 5 bcm (177
bcf) per year from Yamal. Essent and other Dutch utilities
have made no secret of their desire to secure long-term gas
supplies from new sources as domestic gas production declines
over the next 20 years. According to Roukens, the
Gazprom-Essent announcement was a symbolic gesture and had
little substance behind it. (Note: Rumors have circulated
that Gazprom wants to buy Essent to establish a downstream
position in the Netherlands. Van der Hoeven has repeatedly
stated her support for the EU's "third country" -- or
"Gazprom" -- clause, which would prevent Gazprom from
acquiring an unbundled Dutch energy company. End note.)
Roukens said other Dutch firms in the energy, engineering,
and dredging sectors were also seeking Yamal-related
contracts.

--------------------------------------------- ---------
Slow Progress on Dutch-Russian Energy Efficiency Links
--------------------------------------------- ---------

7. (SBU) The Netherlands is keen to move forward on
implementing a bilateral agreement with Russia to promote
energy efficiency. Roukens said the Dutch government is
pushing to set up a work program with the new Moscow-based,
UNESCO-funded International Sustainable Energy Development
Center (ISEDC).

-----------------------------
Netherlands to Observe Gaspec
-----------------------------

8. (SBU) The Netherlands received Russia's backing to become
an observer of the fledgling Gas Exporting Countries Forum
(or "Gaspec"). Roukens said the Dutch have not yet received
an official invitation to attend an inaugural event in early
2009, but would likely attend. Roukens reiterated van der
Hoeven's public stance that the Netherlands would withdraw
immediately if the group assumed cartel-like behavior.

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Comment
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9. (SBU) Minister van der Hoeven's Russian trip underscores
how badly the Netherlands wants to maintain its traditional
role as a key European gas hub after its own gas is gone. As
a result, when it comes to energy security, the Dutch wish to
have their cake and eat it too. They realize the
contradiction of wooing Russia as a bilateral energy partner
while they concurrently champion the cause of a common EU
energy security posture. They also know it is risky -- Dutch
officials still smart from Russia's about-face on Shell's
investment in the Sakhalin project. The Dutch have been
Qinvestment in the Sakhalin project. The Dutch have been
extremely patient in developing their energy relations with
Russia. They can afford to be because they do not need the
gas now, but they will in a few years when large Russian
fields might be coming on stream. END COMMENT.

CULBERTSON

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