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Russian Nord Stream gas flows to Europe commence

By Alex Froley in London

November 8, 2011 - The Nord Stream project consists of two pipelines running 1,224 km from Vyborg near St Petersburg in Russia through the Baltic Sea to Greifswald in northeast Germany. The first pipeline, of 27.5 billion cubic meter/year capacity, was officially launched November 8.

The second pipeline, already 65% complete, is due to open in late 2012, doubling the capacity of the Nord Stream development to 55 Bcm/year. That is more than half Germany’s annual 80 Bcm/year gas demand.

After landfall in Germany, the gas can be transported onwards into Continental Europe through two new onshore pipelines, known as NEL and OPAL (Nordeuropaeische Erdgas Leitung and Ostsee Pipeline Anbindungs Leitung).

Analysis continues below...

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The 440 km NEL line, due for completion in 2012, runs westwards across Germany, past Hamburg and towards Germany's giant Rehden gas storage facility.

The 470 km OPAL pipeline carries gas southwards from Greifswald to Olbernhau on the Czech-German border, and is already complete.

Russian gas producer Gazprom is the originator of the project and holds 51% of the Swiss-based Nord Stream development company.

Two German companies, E.ON Ruhrgas and Wintershall each have 15.5%, while Dutch pipeline operator Gasunie and French GDF Suez each have 9%.

The total budget for Nord Stream is around Eur7.4 billion.

Nord Stream operation facilities
Click image to view full size Nord Stream operation facilities map

European supply and demand

The Nord Stream project developers say the twin pipelines could carry some 11% of the European Union’s total gas imports by 2030.

Nord Stream says that the International Energy Agency sees EU gas demand rising from 536 Bcm in 2008 to 587 Bcm in 2020 and 636 Bcm in 2035.

The pipelines will help meet European demand as indigenous production falls, with EU production forecast to drop from 216 Bcm in 2008 to 93 Bcm in 2035.

The developers say the Nord Stream project offers the advantages of “a modern, high-quality pipeline with no intermediate compressor stations and subject to fewer taxes and transit fees, as most of its route is in the high seas beyond territorial waters.”

The new pipelines offer an alternative to the traditional export routes for Russian gas through Ukraine and Belarus.

Up to 80% of Russian gas exports to Europe have been delivered through Ukraine’s pipeline network in the past.

“In any industry, it is generally considered risky for both the supplier and the customer to be so dependent on one route to the market,” Nord Stream’s developers say.

Western European gas consumers remember that in early 2009 there was severe disruption to the gas supply from Russia to Europe during a dispute over prices between Russia and Ukraine.

Flowing gas through the Baltic Sea reduces the likelihood of such transit disputes affecting western European supplies in future winters.

But it is a cause of concern for the existing transit countries whose networks will be bypassed.

As gas flows are diverted away from the traditional routes running through countries such as Ukraine and Slovakia, the gas network operators in those countries will lose out on revenues worth hundreds of millions of dollars from lost transport fees. (See related map: Russian gas export routes to Europe).

Next page: Nord Stream likely to flow high rates

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