November 18, 2011

Nord Stream: a partnership at all levels

Anisimov Sergey, Anna Forostenko
Nov 12, 2011 14:56 Moscow Time

The Nord Stream offshore gas pipeline came into operation this week. Running along the bottom of the Baltic Sea, the pipeline will supply gas direct to European consumers.

Nord Stream runs from Portovaya Bay in Russia’s Vyborg to Greifswald in Mecklenburg-Vorpommern, Germany. The 1,224-kilometer pipeline consists of two parallel pipes and its capacity is 55 billion cubic meters a year. The pipeline will hit its intended capacity after the commissioning of the second line in 2012. For now, the second line is 70% ready. Nord Stream holds a particular significance given that the gas deficit in EU countries will reach 200 billion cubic meters by 2030.

President Medvedev has described the Nord Stream pipeline as important for European security.

"The launch of Nord Stream marks a significant step in relations between Russia, the EU, Germany and a number of other countries which participated in the project. In the long run, it will bolster security in Europe, including in the energy sector, particularly amid the current economic difficulties."

The pipeline brings economic benefits to 26 million households and is environmentally-friendly. It is subject to fewer duties and taxes and it doesn’t use compressor stations, which makes it possible to cut maintenance expenditures and reduce carbon emissions. Opponents of the project argued that Nord Stream carries environmental risks, a Russian energy expert Dmitry Lyutyagin recalls.

"Some EU countries expressed concern about the project’s failure to comply with a number of environmental requirements. At the same time, they claimed that the Nord Stream gas supply system would make Northern Europe dependent on Russian gas. They were concerned about energy security and the project's environmental risks."

The Nord Stream project underwent a thorough scrutiny for compliance with all international requirements: it runs along the Baltic sea bottom, bypassing munition dumps from the Second World War. Each line consists of more than 100,000 steel pipes, each weighing 24 tons. While the pipes’ diameter remains the same, the thickness of their walls varies depending on the operational pressure. Nord Stream guarantees safety at all levels, Director of National Energy Institute Sergei Pravosudov says.

"Nord Stream is currently the longest offshore gas pipeline in the world. It was built on the basis of advanced technology and guarantees maximum security."

From the outset, it became clear that such a sophisticated project would require the combined efforts from several countries in order to succeed. The Nord Stream AG consortium comprises Russia’s Gazprom, which has 51% of the shares, the German BASF SE/Wintershall Holding and E.ON Ruhrgas with 15.5% each, and the Dutch Gasunie and French GDF Suez, each having 9%. Each of the partners invested in the project according to their respective share in this enterprise. All in all, shareholders accounted for 30% of total investment in Nord Stream. The remaining 70% was raised by banks. The banks have found the project lucrative, Sergei Pravosudov says.

"The project will surely yield profit. Gazprom is supplying gas and companies in Europe are buying it. We have guarantees from both suppliers and buyers."

The banks that finance the project stake on its participants, Dmitry Chizhov, President of the Russian Gas Union, says.

"The banks that invested in Nord Stream did not study its feasibility report. Members of Nord Stream AG provided the guarantees. In the assessment of the banks, the project is lucrative for Russia, which supplies gas, and for buyers in Europe."

By linking Russia’s and Europe’s gas supply systems, Nord Stream will mark a new chapter in Russia-Europe partnership. Europe is fully aware that Nord Stream will give it access to Russian gas reserves in the north. For this reason, the project is exempt from the requirements of the discriminatory Third Energy Package. The Nord Stream project follows general economic laws to the letter: we offer the goods, you buy them. Why waste time?

1 comment:

Anonymous said...

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