London (Platts)--31Dec2010/710 am EST/1210 GMT

Physical gas flows into Europe are set to be reshaped in 2011 as new supply routes open up and transform the dynamics of the market.

In northern Europe all eyes will be on Nord Stream, which is due in 2011 to start up its initial 27.5 Bcm/year pipeline, offering the first direct gas link from Russia to western Europe. The pipe runs from St Petersburg through the Baltic Sea to Germany's northern coast, bypassing Ukraine.

Nord Stream may not actually offer new gas to western Europe, with some saying it is just an alternative route for Russia's existing gas. But as it is a direct link, that could reassure western European customers that they will not face their supplies being disrupted in the future by any further disputes between Russia and Ukraine.

The European gas industry, meanwhile, is expected in 2011 to continue with studies that were started after the last Russia/Ukraine crisis looking at ways to boost flow capacity from western to eastern Europe, aimed at making the continent's system more resilient to any disruptions that could occur.

In southern Europe, the Spanish situation could be transformed by a new, albeit somewhat delayed, pipeline. The 8 billion cubic meter/year Medgaz line from Algeria to Spain is expected to come into full operation during 2011, after teething troubles in 2010.

It could substantially alter Spain's supply picture, replacing a chunk of its current demand for LNG imports, and even perhaps offering long-term prospects for a better-supplied Spanish market to export to France.

Turning to an existing route, Italy got an early Christmas present on December 24 when the Transitgas pipeline restarted gas flows, after a five-month outage.

Transitgas carries supplies from northern European producers such as the Netherlands and Norway through Switzerland into Italy. It was shut down in late July after storms exposed the pipeline to possible damage at a Swiss river crossing. During 2011, work will be carried out on an improved permanent solution. Transitgas' return will help to alleviate security fears in Italy.

The coming year will also see debate continue between rival developers over the best project to supply gas from the Caspian and Middle East to Europe through the "southern corridor" route into Austria or Italy, with contenders including the Nabucco pipeline, the Trans Adriatic Pipeline and IGI Poseidon.

LNG TERMINAL FOR THE NETHERLANDS

Europe's LNG import capacity will be boosted in 2011. The Netherlands, home of continental Europe's current most liquid trading hub, is due to open its first LNG terminal in Rotterdam. The 12 Bcm/year Gate LNG facility, owned by Gasunie and Vopak, is expected to be operational by September, offering capacity-holders DONG of Denmark, Essent of the Netherlands, OMV of Austria and E.ON of Germany new abilities to land cargoes into Europe.

Belgium already has an LNG terminal at Zeebrugge, and the UK, France and Spain have several terminals each, but until Gate opens there are no LNG terminals east of Belgium on the Dutch, Danish or German coasts.

The economic downturn of recent years has, however, put a stop to plans for further terminals in the region, with another Rotterdam project, LionGas LNG, having been dropped, as well as plans for full-scale LNG terminals at Eemshaven in the Netherlands and Wilhelmshaven in Germany.

US Excelerate and German RWE are still considering a facility for ships with their own onboard regasification at Wilhelmshaven, but Germany's E.ON and VNG have put their plans for a full terminal there on hold.

The UK could benefit from Gate LNG, since the Netherlands can flow gas into eastern England through the BBL pipeline, currently undergoing a small upgrade that will boost its flow rates from around February 2011, a little behind schedule. The work had been due by December 2010.

The UK could also see a little extra storage capacity coming on stream in 2011, with additional salt caverns entering operation at Aldbrough in Yorkshire, and possible startup of some storage caverns at Holford in Cheshire during the year. And developers will continue to push projects for major new offshore storage sites for future years.

--Alex Froley, alex_froley@platts.com

Similar stories appear in European Gas Daily. See more information at http://bit.ly/EuropeanGasDaily