Eurogas Corporation says that on May 16, 2008 the Development Concession for the Castor Underground Gas Storage (UGS) project received official approval from the Council of Ministers of the Spanish government. Eurogas has developed the Castor project over a period of many years, guiding it through numerous technical and regulatory steps, and this approval is a key milestone for Eurogas and its shareholders in becoming a major partner in a large Spanish utility project.

The Castor UGS project, in which Eurogas has a 24.6% working interest, consists of an underground gas storage reservoir that lies at a depth of 1800 meters approximately 21 kilometers off the east coast of Spain in the Mediterranean Sea; two offshore platforms for 13 wells and processing facilities; an onshore compression and processing plant located in the municipality of Vinaroz; and an adjoining 30-inch pipeline. Project approval signals the start of detailed engineering, procurement of equipment and contracts, and construction of facilities and pipelines. The estimated cost of the Castor project is C$2 billion with a completion date scheduled for the end of 2010. Because of its large storage capacity and high deliverability Castor UGS is recognised as being fundamental to the efficiency and security of the Spanish gas system.

In accordance with previously announced agreements with ACS Servicios Comunicaciones y Energia, S.L. (ACS), ACS increased its ownership of the operating company Escal to 66.66%. Control of Escal and the Castor project has passed to ACS who will provide and/or arrange for the funding of the project, including any guarantees, through to the inclusion of the project into the Spanish gas system. ACS has also been granted the EPC contract.

Under the terms of the agreements, within 25 days of the grant of the Development Concession, ACS will repay to Eurogas most of the amount of its prior investment in the Castor project which is approximately $42 million at current exchange rates. At start-up of the Castor UGS facility, ACS, Enagas and the Castor Limited Partnership ("CLP") will each own 33.33% of the Castor project. Eurogas controls CLP through its 73.7% ownership.

Tags: Eurogas Corporation