Natural Gas Europe – News & Analysis on European Natural Gas Matters, Sep 21, 2015
Northern Route outpaces Southern Route
The Nord Stream 2 pipeline project is approaching a final deal as Gazprom and its EU partners have been dealing with loose ends. On the 5th of September in the Eastern Economic Forum of Vladivostok, the Russian gas company and its partners, namely: E.ON, BASF/Wintershall, OMV, Royal Dutch Shell, Engie agreed on percentages for each one for this route. Thus, Gazprom will lead the project with a 51% share, whilst the rest of the participants will get 10%, barring French Engie receives 9%.
This project is of outmost importance in circumventing Ukraine’s highly unstable territory and be able to deliver around 55 bcm per annum directly into EU markets. Together with Nord Stream 1 and an additional 55 bcm yearly capacity, Northern EU states and primarily Germany are clearly leading the way in the pan-European natural gas market and strive to reap considerable profits in the coming decades as the primal redistribution hub for gas across the Continent.
Amongst things to consider is that this route is being supported by the major energy companies of the states of Germany, France, the UK, Austria and Russia in a clear sign of defiance of Cold War geopolitical logic that has gripped most EU countries due to the Ukrainian crisis since early 2014. Moreover, it leverages the Russian diplomatic position vis-a-vis Kiev which stands to lose at least 2 billion euros per year from transit fees, and most importantly, its strongest leverage both against Moscow and the rest of the European countries. Concurrently a summit including the heads of states of Russia, Ukraine, France and Germany, will take place in early October 2015 in Paris to discuss an end to the crisis. The Nord Stream 2 project plays a crucial role in ending the brinkmanship by establishing a new “energy security order” in the Continent.
Furthermore this new agreement neutralizes the Turk Stream project which in essence was the Southern-leg of the Ukrainian by-pass. Since large consumers for the Russian gas are to be found in Central-North and West Europe and the quantities to be transferred are rather fixed for the foreseeable future, a project that will deliver an envisaged 63 bcm such as Turk Stream was planned, seems unreasonable and could be even be considered non-realistic. (…)