Gazprom Confirms Nord Stream 2 Gas Pipeline

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)-- - Russia's Gazprom (PINK:OGAZPY) (Moscow, Russia) and a number of leading European energy firms have signed an agreement to build the Nord Stream 2 gas pipeline, which will boost gas supplies to the European Union (EU).

The deal will see the partners build two pipelines--or strings--along the route of the existing twin Nord Stream pipelines, which run for 1,224- kilometers through the Baltic Sea between Russia and Germany. Nord Stream is the longest underwater gas pipeline in the world and the most direct route for Russian gas reaching Europe.

The new pipelines will cost an estimated $9 billion to construct, and the total project value is put at more than $11 billion. Gazprom will control a 51% stake in the project with partners E.ON (XETRA:EOAN) (Düsseldorf, Germany), Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands), OMV AG (OTC:OMVKY) (Vienna, Austria) and BASF/Wintershall (Ludwigshafen, Germany) getting 10% each, and ENGIE (EPA:GSZ) (Paris) holding the remaining 9%. They have formed the New European Pipeline AG joint venture company to oversee the project.

Nord Stream 2 will have a combined annual capacity of 55 billion cubic meters of gas, effectively doubling the capacity of the existing Nord Stream strings, which were commissioned in 2011 and 2012. The existing Nord Stream runs from the Vyborg compressor station at Portovaya Bay in Russia along the bottom of the Baltic Sea to Lubmin near Greifswald in Germany. The new strings will mostly follow the existing route.

"Nord Stream 2 will double the throughput of our up-to-date non-transit route via the Baltic Sea," explained Gazprom Chairman, Alexey Miller. "It is important that those are the new gas volumes, which will be sought in Europe due to the continuous decline in its domestic production. The fact that the global energy majors participate in the project bespeaks its significance for securing reliable gas supply to European consumers."

He added: "We will use the know-how Nord Stream accumulated during construction and operation of the Nord Stream-1 pipeline. The successful track record on the Baltic Sea will help us to optimize construction costs and timeframe. Both pipelines of the Nord Stream-2 project will be put into operation by 2019 year-end."

Ben van Beurden, chief executive officer of Royal Dutch Shell said: "Building new transport infrastructure along the shortest route connecting the gas fields in the north of Russia and the markets of Europe will improve the safety and reliability of supplies under new contracts."

The announcement of Nord Stream 2 comes at a time when the European Commission is enforcing economic sanctions against Russia and its leading companies--including Gazprom--for its military support of rebels in neighbouring Ukraine. Ukraine is a vital gas transit route for Russian gas into Europe and the ongoing conflict threatens future E.U. gas supplies. Last week, the E.U. stepped up efforts to put an end to the gas war between Russia and Ukraine. For additional information, see September 4, 2015, article - Europe Tries to Secure Winter Gas Deal with Russia and September 16, 2014 article European Union, U.S. Strengthen Grip on Russia with New Sanctions.

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