Nord Stream 2 Moving Ahead with Procurement
Nord Stream 2 (NS2) is moving ahead on the procurement front and the 55bn m³/yr planned pipeline project will help Europe meet its gas import needs, projected to grow by 140bn m³/yr by 2035, CFO Paul Corcoran told the Russian Energy Forum in London June 22. It is a shorter route to market; it links the Yamal Peninsula with northwest Europe – where production is declining – and it will have lower transport tariffs than the onshore routes.
“It is absolutely compatible with the Energy Union,” Corcoran – who had the same role in Nord Stream 1 – told delegates. It will be sustainable, affordable and help security of supply, he said. It will increase liquidity in Europe but nobody will be forced to buy the gas, which will be priced against hubs. “That should be the stimulus for the EU: the gas can go anywhere.”
Having awarded the linepipe tenders in March and paid some $100mn to the steel mills to set up their plant to meet the project needs, among the next tasks for 50% shareholder Gazprom will be to evaluate the bids for the concrete coating the lines will need. That should be in July, Corcoran told NGE, with the work itself starting in January, the pipes being delivered from September.
For the actual laying, six companies have bid, and the company will award the contract in September, contingent on the offshore permits being granted. And given that Nord Stream 1 (NS1) received the permits, and that NS2 follows substantially the same route, no problems are expected, he said. Survey vessels are now surveying the sea bed to provide data for the environmental impact assessment.
Paul Corcoran CFO of Nord Stream 2 - Photo credit Nord Stream
The legal framework governing the line will be the same as for Nord Stream 1 (NS1) and as the same management team has moved into equivalent Nord Stream 2 roles, he is not expecting any difficulties. The UN Convention on Laws of the Seas grants cable and pipe-laying across countries’ exclusive economic zones, provided the infrastructure complies with the environmental requirements of each. As with NS1, these are: Russia, Finland, Denmark, Sweden and Germany.
Financing is expected to be concluded by the end of 2017, with first gas two years later. Like NS1, NS2 is devised of two pipelines, each of 27.5bn m³/yr capacity. The first of the two will start up at some point in Q4 2019 and the second line a month later. “Everything is on time to meet construction,” he said.
Nord Stream 1: landfall at Greifswald, N Germany (Credit: Nord Stream AG)
Debt will cover 70% of the total amount of $9.9bn, of which $1.9bn is interest and fees for the construction. French bank Societe Generale and Italy’s Unicredit will be advising. The payback period will be 12 years and yield $14bn, half to Gazprom, and the other half to its five partners: Anglo-Dutch Shell, Austrian OMV, German Uniper and BASF, and French Engie. Transit fees will be cheaper than existing onshore routes, he said, partly because of the shorter distance and the much greater pressure it will operate at – 200 bar – saving on fuel gas.
As has been said before, NS2 is an entry point into the European Union which has stipulated separate ownership of supply and transport, and once onshore, gas transport agreements will be subject to the local rules, as set by the German grid regulator, Bundesnetzagentur. The EU has a very good framework in place for gas markets, he said.
William Powell | www.naturalgaseurope.com