Nord Dream?

By bne IntelliNews October 23, 2009

Nicholas Watson in Prague -

Nord Stream is still very much stuck in the planning stages with numerous obstacles to overcome, though talk to the partners involved in building this gas pipeline and a very different picture emerges.

The head of the Nord Stream consortium, Matthias Warnig, told journalists at the World Gas Congress in Buenos Aires at the beginning of October that even though the pipeline has yet to receive approval from any of the Baltic littoral states for the route, which will run from Russian gasfields in Siberia under the Baltic Sea and into Germany, construction is still scheduled to begin in April 2010. "We're stoical about it," Warnig said, adding that Nord Stream had spent "so much money" on environmental-impact studies that it was not considering the possibility that the approvals would be denied.

Russia's strained relations with its former vassals in the Baltics, which are now EU members, was always going to complicate Moscow's attempts to get planning approval for the pipeline, which critics argue could result in huge ecological damage if there's an explosion of long-buried World War II munitions or a break in the pipeline. The Nord Stream Pipeline passes through the territorial waters and/or the exclusive economic zones of Russia, Finland, Sweden, Denmark, and Germany. Therefore, permits to construct and operate the pipeline must be obtained from each of these five countries. "If only one country says 'no', the implementation of the project may be impossible," Jens Mueller, spokesman for the Nord Stream consortium, has admitted. As the other littoral states could also be affected, an international consultation process according to the United Nations Economic Commission for Europe's so-called "Espoo Convention" was initiated, its purpose to allow Poland, Lithuania, Latvia and Estonia to review potential trans-boundary impacts on their environments. So permits are required by Russia, Finland, Sweden, Denmark and Germany, and will take the other four countries' statements into account.

Marcel Kramer, chief executive of the Dutch gas company Gasunie, which holds a 9% stake in the Nord Stream consortium - the other members are Gazprom with 51% and BASF/Wintershall and E.On Ruhrgas with 20% each - accepts that when it comes to major energy projects like this, the countries involved will inevitably regard them in a strategic and political context. However, he is confident that if looked at from a purely environmental perspective, the pipeline will get the necessary approvals. "It's interesting to see the recent debate in the Finnish parliament and how it was emphasised that the way you look at this project is from an environmental point of view... and there were no real objectors to Nord Stream. The Swedish government has also repeatedly stated that it will look at it in environmental terms," he says. "We would not be in it if we didn't think it was environmentally sound or sufficiently transparent or financially responsible."

At the same time, the Nord Stream consortium is succeeding in its attempt to broaden support for pipeline in Europe by bringing in new partners. Jean-Francois Cirelli, vice chairman and president of GDF-Suez, told reports at the WGC that talks over the French firm joining the consortium were going well and that the principal whereby the two German firms would give up about a 4.5% stake each to give GdF Suez 9% had been established. Commercial terms were still being discussed, he said, though he foresaw no problems and the parties had set the objective of concluding the terms by the end of this year, Cirelli said.

"We think that Nord Stream will be an important new route for Europe and it is in the interests of Europe to build Nord Stream," he said, referring to the 55.0bn cm/y of Russia gas that will flow through the pipeline when the second phase is completed in 2012.

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