Trade Resources Industry Views Russia's Gazprom and Dutch Company Gasunie Have Signed an Agreement

Russia's Gazprom and Dutch Company Gasunie Have Signed an Agreement

Russia's Gazprom and Dutch company Gasunie have signed an agreement to explore the possibility of expanding the Nord Stream gas pipeline as well as setting up other gas infrastructure projects in Northwest Europe and the UK, the companies said Tuesday in a joint statement.

Gazprom CEO Alexei Miller and Gasunie chairman Paul van Gelder signed the agreement in Amsterdam, in the presence of Russia's President Vladimir Putin and the Netherlands' Prime Minister Mark Rutte.

"We see a potential to expand the Nord Stream. The new line may extend to new markets and for the first time connect Russia and Great Britain," Miller said in the statement.

"We see great interest of British partners in implementation of the [expansion] project. A long-term gas supply agreement with Great Britain should become the basis for construction of the fourth [Nord Stream] line," Miller was quoted as saying.

The statement did not provide information on the possible routes for the line to the UK, or for the third line, which is also under consideration.

According to Russian media, Miller told reporters in Amsterdam that one of the options to deliver Russian gas to the UK would be to build another Nord Stream line to Germany, and then ship the volumes via the Netherlands to UK territory through a subsea pipeline.

The UK welcomes new sources of gas, including potentially from Russia, Chris Barton, head of energy supply security at the UK's Department of Energy and Climate Change, said at an industry event in October.

Russia is "vital" to the UK's energy security, Barton said at the time.

BP "was holding consultations" over joining the project to build a Nord Stream line to the UK, a spokesman for the company's Moscow office said in late 2012.

The Nord Stream pipeline, which runs from Russia to Germany across the Baltic Sea currently has two lines with a total capacity of 55 billion cubic meters/year.

Two additional lines are expected to double the capacity to 110 Bcm/year.

The third line is expected to deliver first gas in 2017 and the fourth line, if there is a decision to build it, in 2018.

Gazprom controls a 51% stake in the first two lines of Nord Stream, while Gasunie holds 9%. The other shareholders in the project are German companies BASF/Wintershall and E.ON Ruhrgas, each with 15.5%, and France's GDF Suez with a 9% stake.

VIABILITY TO BE TESTED

In a separate statement later Tuesday, Gazprom said that Nord Stream shareholders have decided not to sign any legally binding agreements on construction of the third and fourth lines within the next six months.

"Until October, a feasibility study for the Yamal-Europe 2 [gas pipeline] is to be completed, which will provide clarity on technical and economic viability of the project," the statement said quoting Miller.

The statement comes in the wake of analysts' comments which said Gazprom's recently announced multi-billion westbound infrastructure projects were barely viable from an economic standpoint.

"The company might potentially enter another costly project with no clear reasoning for it, given that there is more than sufficient gas export capacity," VTB Capital said last week, commenting on the decision to look at expanding Yamal-Europe 2.

Analysts at UBS and VTB Capital estimated construction costs of Yamal-Europe 2 at over $5 billion.

Gazprom's potential expenses from construction of one additional Nord Stream line stand at some $4 billion, according to Investcafe analysts.

Last week, Gazprom signed an agreement with Poland's EuroPolGaz to consider building a second line of the 32.9 Bcm/year Yamal-Europe pipeline.

The projected line would have a capacity of at least 15 Bcm/year, according to the agreement.

The Yamal-Europe pipeline runs from Russia via Belarus and Poland to the Polish-German border, where it links up with the YAGAL-Nord gas transportation system.

Beltransgaz, fully owned by Gazprom, operates the Belarusian section of the pipeline. EuroPolGaz, in which Gazprom holds 48%, operates the Polish section.

Source: http://news.chemnet.com/Chemical-News/detail-1891830.html
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Gazprom, Gasunie Ink Agreement on Possible Nord Stream Gas Line Expansion
Topics: Metallurgy