EAST GERMANY FORGING TIES WITH FOREIGN FIRMS

East Germany has started to build closer relationships with foreign oil and gas companies.

In recent action:

Two West German companies are involved in projects that will allow East Germany to import gas from its western neighbor.
A combine of Japanese, Finnish, and West German companies is studying the feasibility of building a $1.2 billion grassroots refinery in East Germany.

GAS PROJECTS

In the gas business, Ruhrgas AG, West Germany's biggest gas supply company, formed a joint venture with VEB Verbundnetz Gas to sell 2 billion cu m/year of gas in East Germany.

In a separate move, Kombinat Gasanlagen of Mittenwalde, East Germany, plans to lay a 155 mile pipeline to tie into Wintershall AG's proposed Midal line and allow East Germany to bid for supplies from the North Sea.

Ruhrgas said East Germany is looking for increased supplies of natural gas to help combat chronic pollution caused by extensive burning of lignite in industry and power generation.

More than 64 million tons/year oil equivalent of locally mined lignite is used in East Germany according to figures for 1987, the latest available data. Oil use amounts to 12.2 million tons/year and natural gas only 8.7 million tons/year of oil equivalent.

Demand for natural gas, either imported from the Soviet Union or produced locally, comes mainly from power stations and large industrial users. In addition, 3.4 million tons/year of oil equivalent in town gas is manufactured from lignite and blended with natural gas. The low heating value town gas accounts for 44% of the residential market.

Ruhrgas plans to lay a 37 mile, 48 in. spur line to the East German border from its new transmission line from Werne in North Rhine-Westphalia to Schluchtern in Hesse.

Across the border, the new joint venture will lay a 30 mile extension of 48 in. and 24 in. line into the existing East German natural gas transmission system at Jena.

The new system, to move gas to the industrial areas of Eisenach, Erfurt, Jena, and Gera, is scheduled for start-up in winter 1992-93.

The pipeline project by Kombinat Gasanlagen will cost 350 million marks ($210 million). The new line will extend from Wintershall's Midal pipeline at Philippsthal on the East German border to Sayda on the border with Czechoslovakia and will link into a trunk line that delivers Soviet gas into East Germany.

Initial capacity of the line will be 2 billion cu m/year, but Wintershall said it is designed to handle as much as four times that volume to meet anticipated increases in demand and transit requests from third parties.

By linking into Midal, the new line, which is scheduled to start operations in 1993, will give East Germany a link into North Sea gas import facilities in Northwest Germany.

The line will help supply gas to Mark-Marx-Stadt, Gera, Erfurt, and Suhl. It also will provide another link between the west European and eastern bloc gas transmission systems.

REFINERY STUDY

The refinery combine, made up of Marubeni Corp. of Japan, Neste Oy of Finland, and Thyssen industrial group of West Germany, signed a contract with the Rostock port authority on the Baltic Coast for a feasibility study for a 120,000 b/d refinery.

The study could lead to a joint venture between the consortium and the port authority, which would hold a 51% interest in the project. The study should be complete within 3 months, and construction could begin within 1 year.

East Germany buys most of its crude oil from the Soviet Union. But feedstock for the new refinery could be supplied by Neste from western sources, mainly the North Sea and Nigeria.

Completion of the new processing unit would enable East Germany to close some of its older, inefficient refineries that find it hard to meet higher products standards that might follow reunification of East and West Germany.

The East German government has approved in principle the concept of a new refinery at Rostock. Negotiations on financing for the project are in progress, with East Germany looking to West Germany to provide as much as 70% of the capital.