Crack and Explosion Show Risks of Europe's Aging Energy Networks

(Bloomberg) -- Just before 9 a.m. Tuesday, the gray skies over the far eastern reaches of Austria lit up with an explosion at a natural gas switching station, killing one worker, injuring almost two dozen others--and sending shockwaves through Europe’s energy supply infrastructure. 

The blast in Baumgarten, a village about a mile from the border with Slovakia, generated a fireball so hot that it melted the plastic on cars parked half a kilometer away. With about 10 percent of Europe’s gas needs passing through the station, the wholesale price of the fuel spiked by 23 percent, to its highest level in four years, as cold weather settled over much of the Continent.

Crack and Explosion Show Risks of Europe's Aging Energy Networks

“I rushed out,” said Walter Hansie, 88, standing in front of his grandson’s tractor shed about a kilometer from the gas facility. “A fireball was rising in the air. Nothing like this has ever happened here before.”

The Baumgarten explosion highlights the fragility of Europe’s energy infrastructure. Hours earlier, a crack no wider than a hair and no longer than a hand shut down the Forties Pipeline System, a web of mostly undersea pipes that brings crude from platforms in the North Sea. And the Rough gas storage site--built to stockpile U.K. energy supplies--is being permanently decommissioned after deteriorating pipelines made it unsafe to operate.

Most of Europe’s gas infrastructure was built from the 1960s to the 1980s, as the Soviet Union began tapping Siberian fields to pump supplies westward in exchange for hard currency and production expanded in the North Sea. Like an old washing machine or refrigerator, those facilities require increasing levels of maintenance--just as rising demand for energy means they’re seeing more wear and tear. With today’s low commodity prices, replacing most of the equipment is out of the question. So repairs, and worries about dangerous incidents, will only become more commonplace.

“Obviously, managing anything capital intensive is a challenge whether it’s new or old,” said James Drummond, a consultant at Lloyd’s Register, an engineering advisory firm. “As it gets older, those challenges change and most likely do increase.”

While the oil and gas industry seeks to mitigate risk and taps new technologies to extend the useful life of equipment, the U.K. government says about half the oil and gas platforms in the North Sea have outlived their expected lifespans. And the European Union has concluded that the bloc’s energy infrastructure isn’t suited to fulfill future demand, with the gas and power networks needing 210 billion euros ($247 billion) of investment.

Crack and Explosion Show Risks of Europe's Aging Energy Networks

The Forties system, begun in the 1970s, can carry some 500,000 barrels of crude a day from about 80 fields. Ineos AG, which operates the network, said the problems may have occurred because the pipeline abutted a rock. Others have said the nature of the issue--a crack rather than the more-typical corrosion--raises broader concerns about the pipeline.

The network “started in 1975, so clearly maintenance of the line is essential, you’re going to find these issues,” Ineos director Tom Crotty told Bloomberg Television. “We want to make this repair as quickly as we possibly can because we’re losing a lot of money.”

Dating to 1983, the Rough gas storage facility sits underground in a depleted oil reservoir, relying on a series of pipes to inject and withdraw gas stored for the winter. Steel casings designed to keep gas from leaking had deteriorated so much that Centrica Plc, the unit’s operator, last year initiated a series of shutdowns for repairs.

Because Rough is the U.K.’s only long-term gas storage site, it had been deemed crucial to the country’s energy security. But facing more than $100 million in repair bills, Centrica this summer decided to close the facility for good.

In Baumgarten, emergency workers were still swarming the gas hub hours after the explosion. A police helicopter circled smoking debris. Fire engines continued to rush along the narrow road leading to the site nestled amid bucolic fields of grain. The fire superintendent at the area said he is still trying to understand what happened.

David Aron, founder of Petroleum Development Consultants in London, said the Baumgarten facility, which opened in 1959, is coming under increasing levels of stress. With the current cold weather across Europe, demand is surging as consumers crank up the thermostat, so the pumping station was likely reaching the limits of its capacity.

“Pipelines are always vulnerable; what we’re dealing with here is explosive substances,” Aron said. “At Baumgarten the pipelines are probably as pressurized as it can be, and they’re huge.”

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