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Nord Stream studies two more pipelines

May 14, 2012 at 6:30 AM   |   Comments

ZUG, Switzerland, May 14 (UPI) -- The Russian-led ownership consortium of Nord Stream says it's conducting a feasibility study for the potential construction of two additional pipelines.

The five shareholders of Nord Stream -- Russia's Gazprom, Germany's Wintershall Holding and E.ON Ruhrgas, the Dutch firm N.V. Nederlandse Gasunie and France's GDF Suez -- issued a statement Friday from its Swiss headquarters in which it announced a study on the possibility has been initiated.

The first of Nord Stream's two parallel pipelines shipping Russian gas to western Europe via the Baltic Sea became operational in November. The second has been laid and is expected to come online late this year.

Together, the 750-mile pipelines are expected to provide 55 billion cubic meters of natural gas per year to European users, allowing Russia to bypass Ukraine as a transiting country for some of its gas production.

Now Nord Stream says it's looking at potentially doubling its capacity through the construction of up two more pipelines -- a move it says would greatly enhance Europe's energy security by further reducing its dependence on the fractious relationship between Russia and Ukraine.

"Over the next eight months, Nord Stream will make an assessment of various criteria of up to two potential additional pipelines, including technical solutions, route alternatives, environment and financing," the statement said.

"The feasibility study is intended to assist the shareholders in evaluating possible solutions to meet the need for the EU to increase its imports of natural gas over the coming decades and to secure gas deliveries under existing contracts."

The study, the company said, will "evaluate the potential for further infrastructure with an operating life of at least 50 years" and is being spurred by a conviction Europe's demand for cleaner-burning fossil fuels will rise in the coming decades as it implements its greenhouse gas reduction directives.

Also, Nord Stream said, it is anticipating "the decline of indigenous production in the North Sea."

Dmitry Lutiagin, the deputy director of the analytical department of the Alor-Invest group, told the Voice of Russia majority owner Gazprom is determined to take advantage of Europe's growing appetite for natural gas.

"The consumption of gas on the European market is expected to grow by 10-15 percent annually. Europe will need gas but it has no gas of its own," he said. "In the fields where they traditionally extract gas the resources have depleted. For this reason, Europeans will in any case depend on the import of Russian gas, shale gas from the U.S. and pipeline gas from North Africa."

Unrest in North Africa and the Middle East has made those resources unreliable, whereas Russia "is a reliable partner which regularly sends the required volumes of gas to Europe," Lutiagin added.

Complicating matters for a Nord Stream future expansion, however, are the requirements of the European Union's Third Energy Package, which in part are aimed at decoupling the vertically-integrated business models of state-owned companies such as Gazprom that control both the production and distribution networks of energy.

While Nord Stream's first two lines were exempted from the EU requirements, any expansion likely wouldn't be, necessitating the involvement of third parties.

That's opposed by Gazprom, which calls such requirements inefficient.

"It means about 50 percent of the capacity should be allocated to third parties," Alexey Golubnichiy, the deputy head of Gazprom's subsidiary Gazprom Export, told RT Television. "I still have questions what this third party will be since all of the gas is coming from Russia."

© 2012 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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