Advertisement

Fitch Ratings: Russian gas pipeline faces obstacles

Western sanctions and soft demand hindering Nord Stream II development.

By Daniel J. Graeber
Ratings agency questions durability of Russian plans to twin existing Nord Stream gas pipeline through the Baltic Sea. File photo by Kodda/Shutterstock
Ratings agency questions durability of Russian plans to twin existing Nord Stream gas pipeline through the Baltic Sea. File photo by Kodda/Shutterstock

MOSCOW, Sept. 22 (UPI) -- Funding and market challenges could get in the way of further progress in Russian plans to add on to an existing European gas pipeline, Fitch Ratings says.

The existing twin Nord Stream pipeline through the Baltic Sea to Germany carries about 1.9 trillion cubic feet of gas per year to the European market. An expansion, Nord Stream II, would relieve geopolitical constraints on conventional gas network through Ukraine, which hosts about a quarter of the Russian gas headed to Europe.

Advertisement

"We believe raising multi-billion dollar project financing for Nord Stream II in the capital markets would probably be much harder now," Fitch Ratings said in a statement. "This is because Western sanctions have significantly hindered international funding to Russian corporations, even those not directly sanctioned."

Sanctions on Russia were tightened in part because of the Kremlin's stance on lingering conflict in Ukraine, a former Soviet republic that started pivoting toward the European Union in late 2013.

RELATED U.S. oil sector downturn lifts crude oil prices

Fitch said Nord Stream I is operating at about 55 percent of its total capacity because of weak European demand and European restrictions on the use of the OPAL pipeline, which in Germany links to the Nord Stream network.

Advertisement

Europe is wary of Gazprom's activities in the energy market because it controls both the supplies and the transit networks.

The European Commission said that, "ultimately, each member state in the region should have access to at least three different sources of gas."

RELATED Report: Post-sanctions Iran still tricky

Gazprom said the additions to Nord Stream would be in service by 2019.

Bulgaria's decision in 2014 to back away from South Stream led in part to a derailment of a project Russian planned through Turkey. A scaled back version of that pipeline, dubbed Turkish Stream, has obstacles of its own.

RELATED New European gas pipeline closer to launch

RELATED Report finds U.S. energy squeezed by prices

Latest Headlines

Advertisement
Advertisement

Follow Us

Advertisement