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Nord Stream costs Ukraine $720 million

May 20, 2011 at 2:52 PM   |   Comments

KIEV, Ukraine, May 20 (UPI) -- The Russian-European Nord Stream pipeline will drain Ukraine's natural gas transit revenues by up to $720 million a year starting in 2012, the country's state-owned gas transit company said.

Ukrtransgaz, which operates the pipeline network in Ukraine, said it would lose between $700 million and $720 million once the pipeline, which stretches from Russia under the Baltic Sea to Germany, becomes fully operational in 2012, the Kiev Post newspaper reports. Ukraine's economy is in shambles and the country desperately needs the gas transit money.

Launched by Russian state-controlled energy giant Gazprom in a bid to bypass traditional transit countries, including Poland and Ukraine, the 760-mile pipeline is designed to move up to 55 billion cubic meters of natural gas to Western Europe, enough to meet the demands of 25 million homes.

The pipeline's first leg was finished in early May and could deliver gas before the end of this year, the companies involved said. Those companies apart from Gazprom include Eon Ruhrgas and BASF/Wintershall from Germany, Gasunie from the Netherlands and GDF Suez from France.

Construction of the second leg is to be completed by the end of 2012. Nord Stream was delayed by a lengthy and difficult permitting process that involved major environmental impact assessment studies.

Frustrated by several gas price rows with Kiev, Russia has also launched South Stream, a large pipeline likely to be fed with Russian gas that is now flowing through Ukraine. Still in the planning stages, South Stream could move 2.2 trillion cubic feet of gas per year from Russia under the Black Sea to Bulgaria and then on to Western Europe, once again bypassing Ukraine.

The Europeans, meanwhile, have been pushing their own energy diversification strategy that could hurt Ukraine.

European leaders are backing Nabucco, a pipeline project by Germany's RWE and OMV from Austria that could transport up to 31 billion cubic meters of gas per year from the Caspian and Middle East to Europe, bypassing Russia and Ukraine. Ever since the gas price rows in the past, which in one case temporarily cut off gas supplies to Eastern Europe, Nabucco has been given more backing from Brussels.

Ukraine has in the past pleaded with Europe to help modernize the Ukrainian gas transit system to stay in the gas game, but to no avail.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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