Nord Stream Construction to Start in 2010

Construction on the controversial Russian-German gas pipeline through the Baltic Sea looks set to start next year, after Denmark recently gave a green light to the environmental impact of the project, Nord Stream's point man in Brussels told this website.

Back in 2005, it was dubbed the "Schroder-Putin" pipeline, after a controversial deal between the then German chancellor and Russian president, announced weeks before the German general elections. Mr Schroder lost the elections that year, but pocketed a well-paid job with Russia's gas giant Gazprom (GAZP.RTS), as chairman of the Nord Stream consortium set to develop the pipeline.

Four years later, after extensive environmental studies, the planned 1,200 km-long pipeline from Vyborg (Russia) to Greifswald (Germany) is nearing its construction phase. "We received our first environmental permit on Tuesday (21 October) from Denmark and we intend to get started with construction next year," Sebastian Sass, the EU representative for the Nord Stream consortium said in an interview. He added that the other four permits needed – from Finland, Sweden, Germany and Russia – would probably be granted by the end of the year.

In a parallel move, Denmark's energy company Dong recently signed a second supply contract with Gazprom Export, totalling 2 billion cubic metres of gas per year to be bought from the pipeline starting 2011, when Nord Stream is set to become functional. At full capacity, Nord Stream will have two parallel steel pipelines delivering 55 billion cubic metres of gas yearly.

The Danish go-ahead is a first breakthrough in what Mr Putin, currently the Prime Minister of Russia, has often criticised as Europe's lack of resolve to move ahead with the project, which has official EU-priority status.

Mr Sass said that Gazprom, which holds 51 percent of the shares in the pipeline consortium, understands the project "is only going to work if it fully complies with EU standards."

"Whatever Mr Putin or Ms Merkel says, it doesn't change a thing. If you look at the Finnish or Swedish legislation, it tells you exactly what the procedure is. So whatever somebody thinks, we have to comply with those procedures, otherwise we are open to appeal. And that would be the worst option," he explained.

The shallow, dying Baltic Sea and especially the Gulf of Finland, pose particular environmental challenges to the developers of the €7.4 billion project. In order to have as little environmental impact as possible, Nord Stream says it will not use conventional construction methods such as digging trenches or cutting rocks to even out the seabed, but instead use gravel to fill up holes and simply go round massive rocks in the gulf. Construction will be allowed only during limited times, taking into account migratory bird and fish mating seasons.

The Russian-German-Dutch consortium also has to clear some 50 unexploded munitions lying on its planned route, mostly in Finnish and Russian waters. Chemical weapons found in the vicinity of the Danish island of Bornholm would not be removed, as the Danish authorities have agreed it would be better to leave them where they are, Mr Sass said.

Estonia votes against pipeline

Meanwhile, the Estonian parliament on Tuesday (27 October) voted a resolution calling on the states concerned not to issue environmental permits, since "not all the risks that the project poses have been taken into account sufficiently."

Based on the UN's so-called Espoo convention regarding trans-border environmental impact, Estonia has a consultative say in the approval of the project. It cannot directly veto it, but it can submit its concerns to neighbouring states which issue the permits.

The Baltic states and Poland have also raised the issue of energy security, for fear that once Germany has a direct link to Russia, Moscow will find it much easier to cut off supplies to Warsaw or Tallinn, without affecting western European consumers, as was the case in 2006.

Valdur Lahtvee, chairman of the Estonian Greens faction in the parliament, said that the Schroder-Putin agreement on Nord Stream was of a similar nature to the division of the Baltic states and Polish territories into Russian and German spheres of influence before World War II.

No precise origin of Nord Stream gas

While stressing several times that the pipeline is designed to bring extra quantities of gas to European markets, not to cut volumes from existing routes via Ukraine, Belarus and Poland, Mr Sass did however acknowledge that his consortium was "just a transporter" and was "not making any decisions on the allocation of amounts [of gas]."

"Our arrangement says that we are being supplied from the Russian gas grid. In fact, an advantage to the project and the consumers is that we'll have diverse sources to supply from," he argued.

Most of the gas is to come from a Siberian field, Yuzhno-Russkoye. At a later stage, the pipeline is supposed to be the main transporter for gas extracted from the Shtokman field in the Barents Sea. So far, development of that field has stagnated due to harsh Arctic conditions.

"It's hard to say where all the gas molecules will come from, already today Gazprom is purchasing amounts from Central Asia," Mr Sass said.

The EU has been trying to push forward a project bypassing Russia and collecting gas from Central Asia – the so-called Nabucco pipeline through Turkey. Moscow responded to that by drawing its own project, South Stream, aimed at transporting that same Central Asian gas to Europe via a submarine pipeline through the Black Sea. Mr Sass said both these projects were needed, since Europe's gas demand was increasing and its domestic production falling.

"In terms of security of supply for the EU it doesn't make any sense now to pick and choose between the different projects [Nord Stream, Nabucco or South Stream], because there's only one [of them] about to become very real, that's us," he explained.

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