NORD STREAM GHOST IS WANDERING AROUND EUROPE

The North European Gas Pipeline project, opposed by the Baltic countries, will not give up without a fight. Gazprom and the Dutch company Gasunie signed an agreement on cooperation in the Kremlin on 6 November. Within the agreement, the Dutch company received 9 per cent of shares in Nord Stream AG; the German companies E.ON and BASF having their shares reduced from 24.5 to 20 per cent. This allowed the Dutch company to join the implementation of the project. Russian President Vladimir Putin said at a news conference on the results of the Russian-Dutch negotiations that, "the involvement of the Dutch company in this project makes it really multilateral, and of course, creates a better environment for its implementation". Indeed, Gasunie (N.V. Nederlandse Gasunie) is actually the largest Dutch energy company specializing in storing and transporting gas (the length of its gas pipelines reaches 12,000 km, the capacity of its underground gas reservoirs is 1.1 billion cubic metres, transit in 2006 totalled 95 billion cubic metres and the revenues of the company exceeded 1.25 billion dollars), and its participation in the North European Gas Pipeline will significantly boost the competitiveness of this project.

It must be noted that this agreement is based on the principles of the frame agreement signed by Gazprom chief Aleksey Miller and Gasunie President Marcel Kramer on 5 November 2006 on the mutual participation of the two companies in the Nord Stream and Balgzand Bacton Line (BBL - a gas pipeline with a capacity of 20 billion cubic metres) which links the Netherlands and Britain. One year ago, Gazprom hoped to acquire 9 per cent of BBL shares (the cost of the whole of the BBL is 600 million euros) and 450 million euros in cash in exchange for Gasunie's involvement in the Nord Stream project.

As a whole, it is a large package deal that involves not just Gasunie, but a large number of Dutch companies. In exchange for access to Nord Stream, the Dutch company is ready to offer Gazprom access to domestic European infrastructure projects where the European Union is not willing to allow in the Russian concern. For example, Holland's largest energy company Essent intends to suggest that Gazprom build, on a parity basis, a liquid gas terminal in Eemshaven (Holland) and a number of gas power stations in the Benelux countries and Germany.

Experts believe that, having enlisted Gasunie's support, Russia is using Gazprom to solve political problems standing in the way of the project's implementation. The Russian newspaper Kommersant points out that the director of the American agency East European Gas Analysis, Mikhail Korchemkin, describes Gasunie as a political ally of the Russian gas monopoly. It is important for Gazprom to expedite the process of obtaining licences, and the Netherlands could render great assistance with this," the expert said. According to the publication, the fourth participant in the project will guarantee Gazprom's access to the EU market of end consumers. The deputy head of Gazprom's information policy department, Sergey Kupriyanov, also confirmed that Gasunie's participation raises the level of Nord Stream from a bilateral Russian-German project to a pan-European one. Indeed, concerned to provide the country with gas, the Czech government is also examining the possibility of joining the North European Gas Pipeline. As a result, the German company RWE has already announced plans to build a gas pipeline between the Krkono?e Mountains in the Czech Republic and Weidhaus in Germany. It should connect to the OPAL gas pipeline - the German branch of Nord Stream. Possible routes are being considered for the pipeline - Ust nad Labem, Karlovy Vary, Plzen and central Bohemia. In turn, Gazprom deputy chief, Aleksandr Medvedev, also promised to meet the Czech Republic's demand for gas as soon as the construction of Nord Stream is complete.

The North European Gas Pipeline project is attracting more and more support; however, obstacles to its implementation have yet to be tackled. Sweden has toughened its position on the route of this gas pipeline from Russia to Germany, The Financial Times reports. Quoting Claudia Kemfert, an energy adviser to the current president of the European Commission, Jose Manuel Barroso, the newspaper says that Stockholm, "has begun to express doubts about this project and intends to ensure that its route is changed". Sweden is concerned about environmental issues, Kemfert said: Nord Stream goes along the sea floor in Sweden's maritime economic zone. Sweden's position was announced to the European Commission immediately after Gasunie joined the consortium for the construction of the North European Gas Pipeline. Other North European countries have expressed their solidarity with Stockholm. As a result of their position, a decision has already been made to postpone the construction of Nord Stream for at least half a year - till July 2009, the managing director of the project, Matthias Warnig, has stated. It was earlier planned to start the construction of the pipeline at the end of 2008 and complete all the work of the first stage, including the cleansing of the Baltic Sea floor, the construction of the pipeline and trials by 30 September 2010. Warnig pointed out that the project affects the interests of Russia, Sweden, Denmark, Finland, Germany and the Baltic countries, and much more time is required to agree their positions, carry out a careful, environmental survey and solve all issues with the Baltic states. In reply, the Russian companies decided to expedite the construction of the pipeline itself. The Russian newspaper Vedomosti says that Nord Stream technical director Sergey Serdyukov promised to intensify the construction work and complete it within 17 months - pipes will be laid four months earlier and trials will be carried out in two months instead of four. Work will continue 24 hours a day, he pointed out. Some 380 workers on one pipe-laying vessel should lay pipes on the sea floor at an average speed of 2.5 km per day in two shifts, and each team will spend 43 days on the vessel. Nor will there be break in winter - it is necessary to go out 240 km from the coast (the freezing zone in the Baltic Sea), Serdyukov points out.

In December, it is planned to submit a new schedule to Nord Stream shareholders for approval. According to Gazprom, Nord Stream's estimate is more than 6 billion euros at the moment. Wulf Bernotat, the chairman of the board of the German concern E.ON, (incidentally, according to experts' estimations, the concern owns gas and energy assets worth 25-26 billion dollars in Russia), said that "if there are circumstances that result in an increase in these expenses, the shareholders will definitely consider them, although we, of course, have allocated a certain amount of money for unexpected expenses in our budget. Nord Stream is going to break the record for construction (a similar gas pipeline, Langeland, was built in three years), and experts believe that a bonus will have to be paid to the contractor. But before thinking about bonuses, the parties involved in the North Europe Gas Pipeline project will have a difficult task to overcome the concerns of North European and Baltic countries about the environmental safety of this project.