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EU must push Baltic Sea gas link to meet 2011 goal

The European Union needs to push harder to get the Nord Stream pipeline project to pump Russian gas to Europe by the end of 2011 as planned, analysts say. The key Nord Stream project to bring gas from Siberia via the Baltic Sea to Germany has been delayed for years because of concerns over its environmental impact and fears that it might harm the interests of some eastern European countries.  

A consortium of companies from three nations formed in late 2005 still plans to send up to 55 billion cubic meters (bcm) of gas a year through the 1,200 km (746 mile) subsea link, bypassing eastern Europe across which Russian gas now flows to the EU.

Nordic and Baltic states are concerned the pipeline could harm the local environment -- fears that could be partly offset by Russia’s Gazprom, Germany’s E.ON Ruhrgas and Wintershall and Dutch Gasunie sharing some of the spoils of their new energy link. “It is a political task for the EU to make Nord Stream a part of a wider energy plan for the bloc. It may have to include more partners,” said Florian Haslauer, analyst at the A.T. Kearney consultancy, referring to both companies and countries.

“Nord Stream is a must, otherwise we would have to change our entire energy supply around, and that won’t work before 2020,” he said. A.T. Kearney said in a recent study that European demand for imported gas is set to rise to 250 bcm by 2020, double the amount of gas imported in 2005. European gas production is expected to continue falling while demand for the fuel will keep rising, especially from the power generation sector, the consultants said, adding that at least two more gas import pipelines were needed to meet demand.

OPPOSITION

When Nord Stream was conceived, Germany wanted a top transit position for gas arriving in Europe while Gazprom, Russia’s natural gas export monopoly, wanted to diversify its export routes away from Ukraine, Poland and Belarus. But the Baltic countries have called for several environmental impact probes before agreeing to the plan.

Warsaw has joined their opposition, concerned that it would be isolated if Gazprom pumped gas to western Europe directly, while Sweden and Finland are also playing for time. “The geology arguments are a smokescreen, the main reason is fear of prospective loss of transit fees (in Poland and the Baltics),” Tatiana Mitrova, an energy researcher at the Russian Academy of Sciences, told visiting journalists last week. “The opposition simply causes technical delays.”

Sweden wants another environmental impact study for the entire pipeline, not just the stretch that would lie close to its southern coastline, and expects results next January. Finland in September rejected an environment assessment. The Kremlin has sneered at the environmental arguments but has interpreted the requests as a sign the project may falter.

Prime Minister Vladimir Putin and Gazprom Deputy CEO Alexander Medvedev said last week Russia could scrap Nord Stream and instead opt for tanker exports of liquefied gas. Despite the delays and costs that have mushroomed by 50% in the last year to €7.4 billion ($9.34 billion), the financial director of the Swiss-registered Nord Stream consortium, Paul Corcoran, said the pipeline remained on track.

REMEDIES

EU politicians have grasped the need for a more coherent strategy on Nord Stream as part of a wider plan to diversify supply routes and sources. “Nord Stream is important for EU energy supplies and for EU energy security,” said Elmar Brok, a conservative member of the European Parliament close to the debate, in a written statement. “The project has to benefit all EU member states and all countries have to be reassured that this will be the case,” said Brok, who is a member of the parliament’s foreign committee. His political faction wants as many pipelines as possible, including the Nabucco project which is meant to reduce Europe’s reliance on Russia by bringing Caspian area gas to Europe from 2013. (Reuters)