Nord_Stream

Nord Stream 2 And Why It's So Contentious

TIMELINE OF RECENT RUSSIA-UKRAINE GAS DISPUTES

Pipeline From Hell?

Pre-Lay Survey A pre-lay survey will be performed before pipeline installation to confirm that the route is satisfactory.

360 pipes have to be delivered to the pipelay vessel every day.

Pipe Carrier Vessel Pipes weighing up to 24 tonnes each are shipped to the pipelay vessel from a number of stockyards located along the route.

Post-Lay Survey As it touches down on the seabed, the pipeline is monitored to ensure that it is correctly positioned.

Remotely operated vehicle (ROV) Fitted with sensors and instruments including cameras transmits information from the seabed directly to the survey vessel.

>1,000 people work on the vessels simultaneously.

Pipelay Vessel This is a floating factory where the pipes are received from carrier vessels, welded together, and then laid in sections on the seabed.

5 Longest offshore pipelines 1. Nord Stream 2: 1,230 km 2. Nord Stream 1: 1,224 km Russia to Germany 3. Langeled: 1,166 km Norway to Great Britain 4. Franpipe: 840 km Norway to France 5. Ichthys Export Pipeline: 889 km Timor Sea to Australia

➜

Financing of the project The total cost of the project is estimated to be 9.5 billion euros ($11 billion). Each participating European company will provide up to 950 million euros in funding. Gazprom is and will remain the sole shareholder of the company that owns the project: Nord Stream 2 AG. Gazprom: €4.75 billion Russia Shell: €950 million U.K./Netherlands OMV: €950 million Austria ENGIE: €950 million France Uniper: €950 million Wintershall: €950 million Germany

Also: Iron ore: 1,550,000 tons Aggregate and cement: 450,000 tons Metal wire: 43,000 tons

Cooperative

In the event of a non-cooperative scenario, Bulgaria, Romania, Serbia, Macedonia, and Bosnia-Herzegovina could be hit with serious supply shortfalls of 40 percent or more.

A cooperative scenario means that EU countries work together to ensure gas shortfalls are spread equally between neighboring member states.

Non-cooperative

Controversy The Russian pipeline is to concentrate 70 percent of Russian gas sales to the EU on the German route when it is built in 2019. That will enable Russia to bypass Ukraine and cut off EU members such as Poland or the Baltic states. The project could be potentially catastrophic to Ukraine, which gets about $3 billion a year in Russian gas-transit fees.

Belarus ➜ Lithuania Belarus ➜ Poland Russia ➜ Finland Russia ➜ Estonia Russia ➜ Latvia Russia ➜ Germany Russia ➜ Turkey Ukraine ➜ Poland Ukraine ➜ Slovakia Ukraine ➜ Hungary Ukraine ➜ Romania

Source: European Commission

Capacity bcm

10.2 37.7 7.8 2.3 6.3 55 16 4.2 72.2 19 23.8

RUSSIAN GAS TRANSITS

80-100

<10%

DISRUPTION SCENARIOS

60-80

20-60

Share of disrupted demand, 6 month disruption.

10-20

January 1, 2006 Russia cuts off all gas supplies passing through Ukrainian territory over a payment dispute.

March 2008 Russia reduces its gas supplies through Ukraine.

Ukrainian officials deny the accusation at first, but later the state energy company, Naftogaz, admits that gas intended for other European countries had been retained and used for domestic needs.

June 2010 A Stockholm court of arbitration rules that Ukraine’s Naftogaz must return 12.1 billion cubic meters of gas to RosUkrEnergo, a Swiss-based company in which Gazprom controls a 50 percent stake.

January 2009 Supply disruptions in many European countries, with 18 EU states reporting major declines in gas transported through Ukraine from Russia, or even complete cutoffs in some cases.

November 2015 The Ukrainian government announces that it has stopped buying from Gazprom because Kyiv can buy cheaper gas from other suppliers. Gazprom halts its exports of gas to Ukraine.

September 2009 Officials from both countries claim the situation is under control and that there will be no more disputes over gas supplies.

October 2007 New disputes begin over Ukrainian gas debts.

January 4, 2006 Gas supplies are restored after an agreement is reached between Russia and Ukraine.

April 2010 Russian President Dmitry Medvedev and Ukrainian President Viktor Yanukovych sign an agreement in which Russia agrees to a 30 percent drop in the price of natural gas sold to Ukraine. Moscow agrees to this in exchange for permission to extend its lease of a major naval base in the Ukrainian Black Sea port of Sevastopol, Crimea, for an additional 25 years with a renewal option for a further five years.

March 2005 Russia claims Ukraine is not paying for natural gas but siphoning off supplies intended for export to the EU.

June 2014 Gazprom states that Ukraine's debt to the company is $4.5 billion and cuts gas supplies to Ukraine. After months of trilateral talks between the EU, Ukraine, and Russia, a deal is reached on October 30, 2014.

October 2009 A disagreement arises about the amount of gas Ukraine should import from Russia in 2010. With the country in recession, Ukraine intends to import less gas in the coming year due to reduced industrial needs, but Gazprom insists that Kyiv should fulfill its contractual obligations.

Norway: 37%

Others: 7.7%

Source: IEA, World Energy Outlook 2016

EU IMPORTS OF NATURAL GAS IN 2017

Algeria: 12.7%

37% Russia

Exported 210.2 bcm of gas in 2017 with an estimated value of $38 billion.

Qatar: 5.6%

25%

32.6%

14.6%

Coal

14%

2014

1990

17.2%

Nuclear

28%

21.9%

Gas

Oil

4.5%

Renewables

2035

15%

18%

37.5%

13.7%

SHARE OF GAS IN EU'S ENERGY MIX (%)

Austria Belgium Bulgaria Croatia Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden U.K.

HOW MUCH EACH EU COUNTRY DEPENDS ON RUSSIA FOR NATURAL GAS (percentage range)

Source: Eurostat

100

Groningen 2,100 km3

Bovanenkovo 4,900 km3

Shtokman 3,100 km3

South Pars 35,000 km3

Hugoton 2,300 km3

Source: IEA

Urengoy 6,300 km3

Hassi R’Mel 3,500 km3

Yamburg 3,900 km3

Galkynysh 2,800 km3

WORLD’S LARGEST GAS FIELDS

Zapolyarnoye 2,700 km3

Poland

Sweden

Belarus

Norway

Lithuania

Estonia

Russia

Finland

Nord Stream 2

Germany

Nord Stream

Latvia

Denmark

Post-Lay Survey As it touches down on the seabed, the pipeline is monitored to ensure that it is correctly positioned.

Pipe Carrier Vessel The pipes will be shipped to the pipelay vessel from several stockyards located along the route.

Over 1,000 people work on the vessels simultaneously.

Pre-Lay Survey A pre-lay survey is performed before pipeline installation to confirm that the route is satisfactory.

Remotely operated vehicle (ROV) Fitted with sensors and instruments, including cameras, the ROV transmits information from the seabed directly to the survey vessel.

Pipes can be laid at a rate of 3 km per day.

BALTIC SEA

Pipelay Vessel This is a floating factory where the pipes are received from carrier vessels, welded together, and then laid in sections on the seabed.

Germany, Italy, and others still appear to be happy to make deals with Russian gas monopoly Gazprom, but countries from the former Eastern Bloc, such as Poland, have become especially wary of Moscow's growing influence. This is despite, or rather because of, the fact that they are most vulnerable to potential disruptions. In 2014, the EU conducted stress tests simulating what would happen if Russian gas was cut off:

Also: Iron ore: 1,550,000 tons Aggregate and cement: 450,000 tons Metal wire: 43,000 tons

Financing of the project The total cost of the project is estimated to be 9.5 billion euros ($11 billion). Each participating European company will provide up to 950 million euros in funding. Gazprom is and will remain the sole shareholder of the company that owns the project: Nord Stream 2 AG. Gazprom: €4.75 billion — Russia Shell: €950 million — U.K./Netherlands OMV: €950 million — Austria ENGIE: €950 million — France Uniper: €950 million — Germany Wintershall: €950 million — Germany

With tensions between Moscow and the West on the rise, a massive energy project is set to snake across the seabed between Russia and the European Union: an underwater gas pipeline called Nord Stream 2.

In different six-month-long disruption scenarios, the EU would have a shortfall of between 5 billion and 9 billion cubic meters of gas supply. Some countries, such as Estonia and Finland, could lose 80-100 percent of their gas supply if Russia halted delivery.

The project aims to double the capacity of the already-built Nord Stream 1, to 110 billion cubic meters (bcm) per year – more than a quarter of the European Union's gas consumption. It will connect Russia to Germany via the Baltic Sea, circumventing the traditional route through Ukraine. Nord Stream 2 has been sharply criticized by several countries, both within the EU and abroad. Opponents of the project fear the pipeline will increase the bloc's substantial dependence on Russian gas and argue that it runs counter to international sanctions imposed on Russia following its annexation of Ukraine’s Crimean Peninsula. Environmental activists have also expressed concerns about the damage the project could do to marine wildlife, with some even calling it the “pipeline from hell.”

EUROPE’S DEPENDENCE ON RUSSIAN GAS Europe has been dependent on Russian energy imports for a long time and for many East European countries the pipelines that bring gas are a legacy inherited from the days of the Soviet Union.

Twenty-eight European companies from 11 countries are directly involved in this project: Germany-based pipe manufacturer Europipe is supplying 90,000, or almost half, of the large-diameter pipes that Nord Stream 2 needs to build.

WHAT IS IT? Nord Stream 2 is set to be the longest offshore pipeline in the world, transporting natural gas 1,230 kilometers from Russia’s Baltic coast to Greifswald in Germany.

Geographical proximity to a neighbor that is rich in natural resources and short on cash seems like it could be an advantage for the EU, but this is not always the case. A 2009 dispute between Russia and Ukraine left many member states without gas imports for two weeks in the dead of winter. Russia's annexation of Crimea in 2014 added another geopolitical complication to the issue of Europe's gas supplies.

On the way, it will pass through the territorial waters of Russia, Finland, Sweden, Denmark, and Germany, where it will link up with Europe's gas network. Preliminary work on the project has already begun and the pipeline is due to be completed in late 2019. The twin pipeline will consist of around 200,000 individual pipes, each 12 meters in length and weighing 24 tons. Like its "older sibling," Nord Stream 2 will have the capacity to transport 55 bcm of natural gas per year, enough to supply about 26 million homes, or 13 percent of Europe's needs. (The EU consumed 428.8 bcm in 2016.) Nord Stream 2 will deliver gas to Europe from one of the largest known natural-gas fields in the world -- the Bovanenkovo field in northern Russia’s Yamal Peninsula, which holds some 4,900 cubic kilometers of gas reserves.

HOW WILL IT BE BUILT? Altogether, 2,424,000 tons of steel will be needed to build the pipeline. That is 332 times the amount of steel used to build the Eiffel Tower.

Nord Stream 2 And Why It's So Contentious

UKRAINE'S ROLE Ukraine's position as a major transit country for Russian gas gives it some political leverage, in addition to much-needed funds. "Once Nord Stream 2 is built, [Russian President Vladimir] Putin can do with Ukraine whatever he wants, and then we have potentially his army on the eastern border of the EU," said Polish Prime Minister Mateusz Morawiecki in February 2018.

1. Pre-Lay Survey A pre-lay survey will be performed before pipeline installation to confirm that the route is satisfactory. 2. Pipelay Vessel This is a floating factory where the pipes are received from carrier vessels, welded together, and then laid in sections on the seabed. 3. Pipe Carrier Vessel The pipes will be shipped to the pipelay vessel from several stockyards located along the route. Pipes can be laid at a rate of 3 km per day. 4. Post-Lay Survey As it touches down on the seabed, the pipeline is monitored to ensure that it is correctly positioned. Remotely Operated Vehicle (ROV) Fitted with sensors and instruments, including cameras, the ROV transmits information from the seabed directly to the survey vessel.

THE POLISH AND BALTIC POINT OF VIEW Poland’s antimonopoly regulator has issued a legal challenge to the creation of a consortium between Gazprom and the Western firms participating in the project, based on Gazprom’s strong position on the Polish market and the possibility that Nord Stream 2 would further strengthen Gazprom's position in negotiations with Polish gas consumers. Russia's oldest buyer of natural gas (since 1944), Poland currently relies on the country for two-thirds of its supply but does not plan to extend its contract with Gazprom past its 2022 expiration date. It has built a liquefied-natural-gas (LNG) terminal through which it can purchase gas from the United States and hopes to build its own Baltic pipeline -- one that would carry Norwegian fuel. "We're not diversifying our supplies in order to continue with Russia. It's a question of security and the Baltic Pipe is not a part of negotiations with Gazprom," said Piotr Naimski, who oversees Poland's strategic energy infrastructure. Likewise, neighboring Lithuania has built an LNG terminal and received its first shipment from the United States in 2017, ending Gazprom's 100 percent monopoly in the country. "We are happy to reach a point where importing gas from the United States is not only politically desirable but also commercially viable," Energy Minister Zygimantas Vaiciunas said. Latvia and Estonia have echoed Polish and Lithuanian concerns. All three Baltic states and Poland have signed a joint letter that calls Nord Stream 2 "an instrument of Russian state policy," which "should be seen in the broader context of today's Russian information and cyber-hostilities and military aggression."

BY Carlos Coelho AND Wojtek Grojec SEPTEMBER 12, 2018

WHAT IS IT? Nord Stream 2 is set to be the longest offshore pipeline in the world, transporting natural gas 1,230 kilometers from Russia’s Baltic coast to Greifswald in Germany.

HOW WILL IT BE BUILT? Altogether, 2,424,000 tons of steel will be needed to build the pipeline. That is 332 times the amount of steel used to build the Eiffel Tower.

CREDITS Story: Carlos Coelho and Wojtek Grojec Editing: Coilin O’Connor Production: Carlos Coelho Research assistance: Ivan Gutterman and Kaisa Alliksaar Russian translation: Ivan Gutterman Illustration: Carlos Coelho