Insight
Nord Stream 2: More hot air than gas? by Noah Gordon 12 January 2018
Some EU member-states see the Nord Stream 2 gas pipeline as Russia’s latest anti-European weapon. But even if they are right, the threat can be mitigated. Gazprom, the state-owned Russian gas giant, wants to build a new gas pipeline, known as Nord Stream 2, in the Baltic Sea between Russia and Germany. Critics correctly point out that Western Europe would benefit from cheaper gas, while Central and Eastern Europe would still be too reliant on gas delivered through Ukraine. But Europe is less vulnerable to ‘the Russian gas weapon’ than ever, and the threat to some member-states can be mitigated if the EU continues to build a better-integrated, better-connected gas market. If built, Nord Stream 2 would follow the path of Nord Stream 1, doubling the route’s capacity, and enabling Western Europe to import more gas as indigenous production declines. The backers of the project are Gazprom, the state-owned Russian company, and five energy companies from Germany, France, the UK, and the Netherlands. An array of studies project a moderate increase in EU gas import needs by 2040 (though previous projections have proved to be too high). However, the Western European companies partnering with Gazprom may not care whether the pipeline runs at capacity – Gazprom pays the shareholders of the Nord Stream consortium the same amount regardless of gas flows, and enticed the other energy companies to participate with asset swaps and promises of future co-operation. According to projections from the Regional Centre for Energy Policy Research (REKK), a Hungarian think-tank, Nord Stream 2 would slightly reduce costs for Western European consumers and increase earnings for Western European transit system operators, who would sell gas to the East. Russian gas is typically cheaper than alternatives such as liquefied natural gas (LNG); if more were available, EU member-states would buy it.
CER INSIGHT: Nord Stream 2: More hot air than gas? 12 January 2018
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