Gazprom and partners put second Nord Stream on-stream
Gazprom and partners started up the second line of their dual Nord Stream gas pipeline to Europe in early-October – and edged forward with plans for third and fourth Nord Stream pipelines
Less than a year after starting up their first pipeline direct from Russia to the German coast, the Nord Stream group – Russia’s Gazprom together with four European gas companies – sent first gas through the second line. The link’s capacity has been doubled to 55 billion cubic metres a year (cm/y), which Nord Stream estimates will cover a quarter of the additional gas the EU will be importing by 2030.
But, ever ambitious, Nord Stream participants met on the day the new pipeline was inaugurated to discuss a feasibility study into expansions. The study “confirmed that the extension of Nord Stream with one or two additional lines is possible from the technical, environmental, permitting and financing perspectives”, Nord Stream said.
The company’s shareholders – Gazprom, 51.0%, Germany’s Wintershall (part of BASF) and E.On Ruhrgas with 15.5% each, and the Netherlands’ Gasunie and France’s GDF Suez with 9.0% each – are to decide over the next few months whether they want to participate in the expansion, and a new company will be set up to own the new pipelines in the first quarter of next year. There are no hints about timing for the project.
With the heady growth in Europe’s gas consumption having been flattened by sick economies – EU gas use dipped last year by 9.9% to below that of 2001, according to the BP Statistical Review of World Energy – the market is not calling for an early decision. Neither are engineering considerations: despite the magnitude of the project, construction of the two Nord Stream lines, each 1,224 km long, took only 30 months using two of the world’s largest-capacity lay-barges.
Meanwhile, utilisation of the first Nord Stream pipeline, on stream since November last year, has been low at only 34%, according to a Reuters report which quotes a Nord Stream executive. Some gas due to be delivered through the first line is now being diverted into the second.
But Nord Stream was conceived on a grand scale with a political back-drop. Before the first pipeline started flowing, about 80% of Russia’s gas exports to Europe had to cross Ukraine, and the two countries are in dispute over prices and control over the transit pipelines. Completion of a direct connection across the Baltic Sea has allowed Russia to cut the volumes sent across Ukraine.
Ukraine, seeing its transit revenues reduced and locked into paying a high price for its own imports of Russian gas, is retaliating by cutting its purchases. In 2011, Ukraine imported 40.5 billion cm of Russian gas but the government has set a target of reducing the volume to 27bn cm this year. Indigenous coal and gas production are being stepped up, and energy-saving measures are being implemented.
Unease and attractions
While many are uneasy about Europe relying heavily on Russian gas, the EU has backed Nord Stream as a priority project – although, as Nord Stream points out, there was no cost to the European taxpayer because the five shareholders put up 30% of the €7.4bn ($9.6bn) investment and the rest was raised from commercial banks. The EU’s gas production has declined by 33% over the past ten years and now covers only 35% of consumption, so rising imports are inevitable.
Hence the attraction of linking the world’s second-largest gas market (after the US) to the world’s largest gas reserves, through pipelines designed for a life of 50 years. According to the EU, Nord Stream will enhance long-term security of supply by by-passing Ukraine’s elderly pipelines, while providing competition in northern Europe for Norway’s pipeline deliveries. With no transit fees or taxes to be paid in international waters, the direct link should also cost less to run than overland routes.
Additionally, pipelines have the advantage of locking seller and buyer together – in contrast to liquefied natural gas (LNG) deliveries, which can easily be diverted elsewhere. For the four EU gas companies in Nord Stream, completion of the link should help in expanding their markets and enhancing their corporate positions.
For the Netherlands, Nord Stream is a vital part of the country’s “gas roundabout” hub strategy – which sees gas coming in from many sources and flowing out to other countries, backed up with security of supply from the immense delivery capacity of the Groningen field. From Nord Stream’s German landfall at Lubmin, near Greifswald, gas can flow west through the NEL pipeline, due to be completed in November, to Rehden – home of western Europe’s largest storage facility. From Rehden it can flow onwards into the Netherlands’ pipelines, south of Groningen.
After years of extensive pipe-laying to implement the hub strategy, the Netherlands’ Gasunie has great capacity to export gas to southern and western neighbours – and to the UK through the underutilised BBL pipeline, with a landfall at the Bacton hub. Nord Stream can also send gas south through Germany through the Opal pipeline.
Nord Stream is unusual among long-distance pipelines in achieving its delivery capacity without intermediate compression. Gas from fields including Yuzhno-Russkoye, in western Siberia, is piped to a compressor station at Portovaya Bay, near Vyborg, where it is pumped-up to 220 bar – sufficient to carry it for the entire 1,224 km journey. The pipelines are the same internal diameter throughout – 1,153 millimetres or just over 45 inches – but the wall thickness reduces in steps as the distance from the compressor station increases, to save steel.
Most of the pipelaying was carried out by Saipem’s Castoro Sei, which was responsible for the Baltic Sea crossing, and Allseas’ Solitaire, which undertook the Gulf of Finland section. Saipem’s Castoro Dieci was used in the shallow waters off Germany.