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Nord Stream AG Nord Stream

Company

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Nord Stream — a route of export of the Russian gas to Europe. The main target markets of supply of gas on the gas pipeline are Germany, Great Britain, the Netherlands, France and Denmark.

Owners:
Gazprom - 51%
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Assets

Gas pipeline route extent from the bay Port through the water area of the Gulf of Finland and the Baltic Sea directly to the coast of Germany (Greifswald) is about 1224 km.

The main objective of the gas pipeline is long-term ensuring energy security of Europe.

The Nord Stream AG company which shareholders are is engaged in construction of the gas pipeline and its operation:

  • JSC Gazprom — 51%,
  • E.ON Ruhrgas и Wintershall Holding — по 15,5%,
  • Gasunie and GDF SUEZ — on 9%.

The existing and projectible gas pipelines to Europe for August, 2016

"Nord Stream-2" consisting of two threads is supposed to be constructed by the end of 2019, it is considered one of two main transit routes of the Russian gas bypassing Ukraine along with "The Turkish flow" through the Black Sea. Power of "Nord Stream-2" — 55 billion cubic meters of gas a year, project cost — €9.5 billion. Project participants along with Gazprom are key European consumers of gas — the German Uniper and Wintershall, the Anglo-Dutch Shell, the French Engie and the Austrian OMV. The gas pipeline is laid in an exclusive economic zone of several states of the Baltic basin: Finland, Russia, Germany, Sweden and Denmark, bypassing economic zones of the former Soviet republics of the Baltics, for political reasons being opponents in principle of the project. So far the project got permissions also from Germany. Gazprom needs to prove to regulators of the countries that the project of a pipe will not cause ecological damage that is considered a simple task. "Nord Stream-1" constructed by 2011-2012 got all permissions without special difficulties as at that moment the political situation in Europe was more favorable for the Russian power projects.

History

2019

Denmark gave the permission for construction of "Nord Stream-2"

"Nord Stream - 2" is constructed for 34%

The Nord Stream — 2 gas pipeline is constructed for 34%, about 830 km of pipes on a bottom of the Baltic Sea are laid, says Gazprom today.

Such data were read during working meeting of the chairman of the board of Gazprom Alexey Miller and the chairman of the supervisory board of Uniper (one of partners of Gazprom on "Nord Stream - 2") Bernhard Reutersberg on which the parties discussed the current issues of cooperation and Russian gas supply on "Nord Stream - 2".

On March 12 the European Parliament approved the resolution on the political relations of the EU and the Russian Federation which contains offers to stop the Nord Stream — 2 project, and Russia is not recognized as the strategic partner of the European Union any more.

Uniper did not comment on the report, however expressed confidence that "Nord Stream - 2" will be implemented.

2018

Holdings of Rostec will ensure smooth operation of "Nord Stream-2"

The Tekhnodinamika holding and United Engine Corporation of State Corporation Rostec conduct collaboration in production of gas-distributing units for the Nord Stream 2 project. Within cooperation of MPO of I. Rumyantsev, entering into Tekhnodinamika holding, executes deliveries of dosers of management and cut-off gas valves for the benefit of "UEC - Perm Motors" for installation on PS-90GP engines. Further the gas-distributing units created on the basis of the aviation engine will be installed on the new export gas pipeline from Russia to Europe through the Baltic Sea.

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"The project which is implemented Tekhnodinamik and UEC today is an indicative example of successful conversion of our productions and productive cooperation of holdings of State Corporation Rostec", – the CEO of Tekhnodinamika holding Igor Nasenkov noted.
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Under the agreement between the MPO enterprises of I. Rumyantsev delivers to the customer dosers of management stationary DUS-6.5M and cut-off gas valves. Dosers of management are intended for supply of gaseous fuel to engine camera nozzles, and valves – for opening and closing of supply of gaseous fuel in the system of a toplivopitaniye.

More than 2800 dosers and more than 1700 valves of the different modifications intended for electronic and electronic hydraulic systems of automatic control and control of turbine jets, gas-distributing stations and power stations are already shipped to operation.

Highly effective industrial PS-90GP engines are developed based on family of aviation PS-90A engines (are intended for Il-76, Il-96, Tu-204/214 airplanes). They are used for the mechanical drive as a part of gas-distributing units and the drive of electric generators of gas turbine power stations. PS-90GP engines, having high rates of reliability, are successfully operated by a number of customers: PJSC Gazprom, PJSC Lukoil. The developer acts as JSC ODK-Aviadvigatel, producer – JSC UEC — Perm Motors.

Sweden approved construction of the Nord Stream — 2 gas pipeline

The government of Sweden approved the request of Nord Stream 2 AG company for construction "Nord Stream — 2", the minister of the industry and innovations of the country Mikael Damberg at a press conference reported in June.

It is about the section of the pipeline from Russia to Germany on a bottom of the Baltic Sea. The application was submitted in April of last year. Sweden became the third country which issued the construction license. Earlier it was made by Germany and Finland.

The USA offered Germany the transaction in exchange for failure from support of Nord Stream 2

The president USA Donald Trump at a meeting with Germany the chancellor Angela Merkel in April asked it to refuse support of construction of the Nord Stream-2 gas pipeline in exchange for negotiations on the new trade agreement between America and Europe, reported on Thursday the edition The Wall Street Journal with reference to officials of Germany, the USA and the EU.

"Trump asked Merkel to refuse support of "Nord Stream-2" … In exchange for it the USA will begin negotiations on the new trade agreement with the EU" — writes the edition.

As noted in the message, without this trade settlement Europe since June 1 will face protecting to duties of the USA on steel import and aluminum.

Helsinki issued all permissions to "Nord Stream-2"

The regional authorities of the Southern Finland allowed Gazprom to build the Nord Stream-2 gas pipeline in an exclusive economic zone of the country in the Baltic Sea. Thereby the project got all relying ecological permissions from Finns, earlier the authorities of Germany also arrived. The pipeline needs to get still approval from the authorities of Russia, Sweden and Denmark, and laws of the last allow prohibition on construction of a pipe in territorial waters of the country not only from ecological, but also for political reasons[1].

Finland issued the second and the last from the being required permissions for construction of the transbaltic gas pipeline of Gazprom "Nord Stream-2" from Russia to Germany, the Swiss company Nord Stream 2 AG (the operator of the project belonging to the Russian monopoly) reported on April 12. Ecological permission according to the Finnish law on Nord Stream 2 AG water issued the Regional state managing agency of the Southern Finland. Earlier the gas pipeline got the first permission from the government of Finland. "The Finnish section" of "Nord Stream-2" makes 374 km of the total length of a pipe of 1230 km.

However, now even obtaining all relying ecological permissions does not guarantee implementation of "Nord Stream-2". So, Denmark changed the legislation, having permitted the government to block construction of the gas pipeline not only from ecological, but also for political reasons. So far Copenhagen did not decide to refuse to Gazprom, but if Danes nevertheless do not permit to build a pipe, Nord Stream 2 AG it is necessary to change a gas pipeline route that will delay project implementation. Besides, the EU within the last year studies an opportunity to expand on "Nord Stream-2" of regulation of the Third Energy Package (the legitimacy of application of the European laws to the sea gas pipeline raises doubts at lawyers).

The European Commission did not support "Nord Stream - 2"

The European Union and European Commission will not support "Nord Stream — 2", but also will not impose the sanction, the head of management of EC of power Dominique Ristori said in April, 2018. According to the official, departments do not consider that Nord Stream promotes diversification of deliveries and their routes.

"If it (the gas pipeline — the Comment red) is constructed, it will not be supported from the EU and from EC, in particular" — Ristori at a briefing on Friday in Kiev reported, having specified that he "about sanctions of the speech cannot go"[2].

Besides, the official noted that the European Commission considers two ways of further actions.

The first of ways provides the mandate on negotiation with Russia on Nord Stream, and the second — making changes in the gas directive of the European Union to distribute requirements of this directive of all gas pipelines, including pipelines from the third countries. According to Ristori, the European Parliament already voted for this offer and now in the European Council there are discussions possible changes in this directive.

Also the official expressed the intention of European Commission to achieve that "Nord Stream — 2" corresponded to the principles of the European legislation: "transparency", "nediskriminatsionnost", "the accessibility of the third parties to network" and in a certain measure to "separation".

Rules of the Third Energy Package of the EU will extend to the Nord Stream-2 gas pipeline

The committee of European Parliament on the industry and power is expected supported change of the EU gas directive which distributes rules of the Third Energy Package to the Nord Stream-2 gas pipeline (Nord Stream 2). Moreover, deputies suggested to toughen a number of parameters of the bill, including on formation of exceptions for separate gas pipelines. Full-scale vote can take place in European Parliament at the end of April, however now the EU Council whose approval is also necessary, is about the bill still extremely skeptic. Kommersant[3] writes [4]

The committee of European Parliament on the industry, researches and power approved amendments in the EU gas directive 73/2009 according to which rules of the Third Energy Package of the EU should extend also to the sea gas pipelines connecting the EU with the third countries. In practice this regulation is entered to complicate future functioning of the Nord Stream-2 gas pipeline which building Gazprom with the European financial partners is going to begin in the summer. Members of the committee supported change of the directive by 41 voices, 13 voted against, 9 more refrained.

If rules of the Third Energy Package are applied to Nord Stream, then for the project it will be required to create the independent operator.

So Gazprom which is the only shareholder of Nord Stream 2 AG so far will have to leave the capital of the gas pipeline or will remain only as the financial investor there, having lost an opportunity to influence operating activities.

Besides, rates for pumping on the gas pipeline will need to be approved with the regulator (considering the cross-border project status, at the moment it is not clear with what). At last, to the gas pipeline access for other suppliers except Gazprom (also not clearly how to provide this requirement, considering that the gas pipeline passes on a bottom of the Baltic Sea, and in Russia Gazprom under the law is the only exporter of gas on pipelines) should be provided.

Thus, if amendments to the directive are adopted, it will not prevent Gazprom to construct "Nord Stream-2", but can complicate extremely effective functioning of the project — for example, use of a pipe can be limited at the level of 50% waiting for any future "independent" suppliers of gas. In practice it will mean that, without having an opportunity completely to load "Nord Stream-2", Gazprom will be forced to pump over more gas through Ukraine.

Moreover, members of the committee of European Parliament suggested to toughen bill regulations regarding issue of exceptions. In the present version it is supposed that already constructed gas pipelines can be completely excluded from regulation according to the results of negotiations between the third country and that EU country where the gas pipeline comes. For new gas pipelines exceptions from under action of separate regulations of the Third Energy Package, but in coordination with European Commission are possible.

Now deputies offer that exceptions for the existing gas pipelines also were approved with European Commission, at the same time not only those EU countries where the sea gas pipeline, but also other members of the union on whom this gas pipeline "has an impact" directly comes could participate in a discussion. Besides, the maximum validity period of exceptions for new gas pipelines is offered to be limited five years. At last, according to deputies, at decision-making on issue of exceptions for new gas pipelines the European Commission should take into account whether any restrictive measures and sanctions against that country from where this sea gas pipeline comes are imposed.

This amendment is barefaced directed against Russia.

Approval of European Parliament was absolutely expected, considering its traditional spirit against the Nord Stream-2 project. However in practice the EU Council where the majority of the countries inclines so far to that or seriously to change and mitigate the bill will decide destiny of the bill, or in general to refuse it. Bulgaria which presides in the EU now at the beginning of January asked legal service For suggestions to estimate as far as the bill corresponds to the international, in particular sea, right. At the beginning of March the legal service came to a conclusion that the bill does not correspond to international law and distribution of the Third Energy Package, i.e. domestic legislation of the EU, on the sea gas pipelines passing through the international waters it is impossible. Earlier the legal service of European Commission also came to similar conclusions.

Considering it and also the fact that regulation scale in this case actually is beyond far only a case with Nord Stream, interlocutors of Kommersant consider improbable that the EU Council approved the current edition of the bill. For example, Spain and Italy should conduct negotiations on the existing gas pipelines with Morocco, Algeria and Libya (in the latter case it is not quite clear with what government). Also, if Great Britain completes an exit from the EU, it is necessary to conduct negotiations and under the terms of use of BBL and Interconnector gas pipelines which connect Britain to the continent. According to interlocutors of Kommersant in the European gas companies, all this creates for them unexpected risks.

Gazprom will save $1 billion a year on "Nord Stream-2" in comparison with transit through Ukraine

Gazprom estimated positive effect from transfer of volumes of transit of gas from the Ukrainian route on future gas pipeline "Nord Stream-2" at more than $1 billion a year — EBITDA and a free cash flow of the company will grow by such value. Generally this results from the fact that Gazprom will begin to pay transportation tariff actually to itself and also bigger efficiency of the new pipeline system — shorter distance and more high pressure in a pipe[5].

Input of the Nord Stream-2 gas pipeline should increase EDITDA and a free cash flow of Gazprom more than by $1 billion a year, the chief financial officer of the company Andrey Kruglov at a meeting with investors in New York said in February, 2018. He reminded that expenses on pumping of the corresponding volume — 55 billion cubic meters — through the territory of Ukraine make $1.5 billion now. Mister Kruglov noted that if "Nord Stream-2" is consolidated completely in the reporting of Gazprom under IFRS (Gazprom the only shareholder of the project now), then as the company will pay for transportation, in fact, to itself, in items of expenditure only operating expenses whereas investment expenses are replaced with a non-cash item — depreciation will be reflected.

"In terms of formation of indicators of EBITDA and a free cash flow investment a component it will become equal to zero. Providing formation of profit of a component it will become equal to zero. The difference in full will go for increase in key financial indicators and a cash flow" — he said.

Besides, as already reported Gazprom, even the full rate of "Nord Stream-2" (taking into account investment costs) will be one third lower than the current rate for pumping through Ukraine at the expense of shorter transport shoulder and more high pressure in a system.

Speaking about the Ukrainian gas transmission system, the deputy chairman of board of the company Alexander Medvedev said that "the Ukrainian corridor can function only thanks to the fact that it is loaded not for 100%". He also gave assessment of the consulting company of Mott MacDonald company according to which Ukraine needs to invest in upgrade of the system $4.8 billion in seven years, "at the same time upon Kiev invests five-seven times less". Let's note that capital costs of "Nord Stream-2" make €8 billion, i.e. it is twice more than costs for upgrade of the Ukrainian system while the power of the Ukrainian GTS (at the exit) is three times higher.

2017: Germany permitted construction "Nord Stream 2" in the waters

The operator of the Nord Stream — 2 project got the permission for construction of the gas pipeline in the German territorial waters, says on the website of Nord Stream 2 AG company (reports in February, 2018 [[RIA Novosti]). Also laying of an overland part of the gas pipeline near Lyubmin near Greifswald was approved.

"Mountain department of Stralsund issued the formal permission on construction of the 55-kilometer section of the pipeline according to the law on the energy industry" — noted in the company.

The manager of Nord Stream 2 Jens Lange called this event "an important stage in complex process of approval of the project".

In November, 2017 Mountain department of Stralsund approved works near the German continental shelf (an analog of an exclusive economic zone). The construction license also should issue Federal agency on navigation and hydrography.

Procedures of obtaining permissions in other four countries along a gas pipeline route — Russia, Finland, Sweden and Denmark — go according to the schedule. Nord Stream 2 fulfilled all requirements and expects approval of the request.

"This key solution which opens already now an opportunity to begin construction of the most important section of the new sea gas pipeline "Nord Stream — 2" in territorial waters of Germany and the coastal receiving terminal in Greifswald" — the chairman of the board of Gazprom Alexey Miller said.

2016: Poland blocks creation of the joint venture

In July, 2016 the Polish office of protection of the competition and consumers of UOKiK did not approve creation of joint venture for construction and control of the pipeline, referring to possible restrictions of the competition. The international consortium was forced to withdraw the request and decided to implement the project without creation of joint venture. In August, 2016 the head of Gazprom Alexey Miller said that partners confirmed the participation in the project, but until the end of 2016 will define new model of financing.

2015: Agreement on construction of "Nord Stream-2"

"Nord Stream-2". On September 4, 2015 between Gazprom and its foreign partners (E.ON, Shell, OMV, Wintershall, Engie) the agreement on construction of two new gas pipelines "Nord Stream-2" was signed. Their performance will be 55 billion cubic meters a year, and cost — €8-9.9 billion.

2011: Start of the first thread on 27.5 billion cubic meters of gas a year

Design capacity of the first thread started in 2011 — 27.5 billion cubic meters of gas a year. It is exactly a half from the overall rated output capacity of all gas pipeline. By the end of 2011 more than 900 km or more than 76% of the second thread were already constructed, it was put into operation in 2012.

See Also

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