Nord Stream Set to Grow After Second Leg Goes on Stream

Russian Gas Facility file photo

LENINGRAD REGION, October 8 (RIA Novosti) -Russia intends to sign memorandums on new Nord Stream gas pipeline routes to Europe by December 31, Gazprom CEO Alexei Miller said on Monday as the second leg came on stream.

“Today Nord Stream shareholders considered a preliminary feasibility study for the third and fourth legs, their construction was recognized as economically expedient and technically possible,” Miller said.

‘Before December 31 it is planned to sign a memorandum on the construction of new capacities. One of the branches may go to Great Britain. We see interest from British partners,” Miller said at the pipeline launch ceremony.

The first leg of the pipeline, which runs along the Baltic Sea bed from the Russian city of Vyborg near the Finnish border to Greifswald on the coast of Germany, was launched in November 2011 and has an annual capacity of 27.5 billion cubic meters of gas.

The second leg of the pipeline, which is 775 miles (1,224 km) long and pumps natural gas from the Yuzhno-Russkoye gas field on Yamal Peninsula in northern Russia, will double this capacity to 55 billion cu m annually.

Gazprom’s plans to build new Nord Stream branches comes at a time when demand for gas is flagging on the European market due to the sovereign debt crisis.

In January-August 2012, Russian gas deliveries to Western Europe via Ukraine fell by 22.86 percent year-on-year to 54 billion cu m while gas supplies through the Nord Stream gas pipeline from November 2011 to October 1, 2012 totaled 8.7 billion cu m, Prime news agency reported.

Gazprom’s oil-linked natural gas pricing formula, which makes Russia’s natural gas more expensive than gas supplied by other exporters to the European market, also makes it problematic for the Russian energy giant to fill the Nord Stream gas pipeline to capacity, experts polled by Deutsche Welle said.

In the first eleven months of Nord Stream’s operation, the pipe operated on average at 30-40 percent of capacity, pumping about 9 billion cu m, operator Nord Stream AG press secretary Jens Muller said.

The launch of Nord Stream’s second leg increases the likelihood that the system will have unused capacity unless the supplier agrees to offer its product at a lower price, Deutsche Bank Research expert Josef Auer said.

Before Nord Stream route was launched, Russia delivered natural gas to Western Europe via the pipeline-transit states of Belarus and Ukraine, with Ukraine accounting for two-thirds of these supplies.

Russian gas exports to Europe via a pipeline in Ukraine have been disrupted several times in recent years over pricing rows with Kiev. The most recent dispute in early 2009 left Europe freezing without Russian gas for nearly two weeks.

The pipeline’s core shareholders include Gazprom with 51 percent, Germany’s Wintershall Holding and E.ON Ruhrgas (15.5 percent each), France’s GDF Suez and the Netherlands’ Gasunie (nine percent each).