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NEGP (Nord Stream) North European Gas Pipeline and energy security in the European Union

Dragica Šuc

 

Energy security in the European Union

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Energy security became a leading issue for national policy makers at the end of the 1990s (Umbach 2007: 7). Despite the great amount of political energy that the European Commission put into achieving the united approach towards a common policy towards regions outside the EU and strengthening its negotiation position with suppliers, energy security has remained nationally rooted. It is an important part of national well-being and the subject to national sovereignty (Kovačovska 2007). In other words, despite the EU’s efforts, many states were inclined to make separate, national deals with energy suppliers.

Even after the gas conflict between Russia and Ukraine in the winter 2005-2006, when the future security of Germany and European energy supplies became the focus of a broader political debate, the national character of energy security remained the same. Almost every single EU member state prefers bilateral policies with energy exporters in order to secure its supplies at the time when global fossil fuel energy resources are steadily being depleted (Larsson, 2007).

Exceptions to this pattern are some new EU Member States (predominantly countries that were part of the former Soviet Union and Eastern Block member states), such as the Baltic States and Poland. Some of these countries are heavily dependent on Russian energy because of their ties to existing Soviet infrastructure and therefore they experience Russian political pressure and interference (Smith 2009). Hence, these member states seek protection by participating in a united EU approach as a way to gain political leverage vis-a-vis Russia.

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A Brief History of the Nord Stream Gas Pipeline

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Nord Stream, formally known as the North European Gas Pipeline (NEGP) is a planned 1200 km long dual pipeline for natural gas from Vyborg in Russia to Greifswald in Germany through the Baltic Sea. When constructed, Nord Stream will be among the longest offshore pipelines of the world, and will have the capacity to supply 55 billion cubic metres (bcm) of natural gas each year. The gas will flow from the already developed Yuzhno-Russkoye field, and, later on, in the Yamal Peninsula, Ob-Taz Bay and the Shtokmanovskoye (Shtokman) fields (Friedrich and Neumuller 2007: 4).

The idea for developing the pipeline dates from 1997 when Russia’s Gazprom (a state-owned company) and the Finnish company Neste (later known as Fortum) established a joint company, North Transgas Oy, to examine alternative gas pipeline routes from Russia to Germany through the Baltic Sea. E.ON Ruhrgas and BASF/Wintershall, two major German companies, became  associated with the project through agreements in 2001 and 2004 respectively. In May 2005 Fortum, a Finnish company, withdrew from the project, presumably due to Gazprom’s 2004 announcement that the offshore Shtokman gas field would be used for LNG (liquefied natural gas) exports. This decision would make the Finnish part of the pipeline unnecessary (Riley 2008: 3).

In September 2005 the project was approved and signed by partners in the presence of Russian President Vladimir Putin and German Chancellor Gerhard Schroder (Whist 2008). The company which is today known as Nord Stream AG is registered and has its headquarters in Zug, Switzerland. Gazprom is the main stakeholder (owning 51 percent), while two German companies, E.ON Ruhrgas and BASF/Wintershall, each have a 20 percent stake and the Dutch gas company Gasunie owes a 9 percent stake.

Two parallel pipelines, each with annual capacity of 27.5 bcm of natural gas per year are planned for construction on the seabed of the Baltic Sea close to the Russian town Vyborg and ending near the German town of Greifswald. According to the original schedule, the first leg of the pipeline was due to be laid between 2008 and 2010 with first deliveries starting in 2010. The second pipeline was scheduled to be finished between 2011 and 2012 with deliveries starting in 2012. It will have an off-shore length of 1,198 km and a capacity up to 55 bcm per year. The lifetime of the system is estimated to be 50 years after which it will be dismantled (Nord Stream 2006: 3). Nord Stream will run through the Exclusive Economic Zones (EEZ) of Russia, Finland, Sweden, Denmark and Germany.

Few major infrastructure projects have aroused so much controversy in Europe (particularly within Sweden and Poland) as Nord Stream. There are several arguments used to support and oppose the pipeline. Turning first to the view of the supporters, they argue that as a major Russian-German infrastructure project, it will bring energy security for Germany in particular and for EU as a whole by adding capacity and an additional transit route.

According to Nord Stream AG, the planned pipeline will be one of the answers to Europe’s growing energy needs. The official documentation states that “it is evident that without Nord Stream, the EU will not be able to cover its gas needs in the future. As such the pipeline will contribute to EU security of supply as it will meet a quarter of additional import needs of Europe” (Nord Stream 2010).

Those who have opposed the pipeline argue that it doesn’t contribute to the diversification of energy suppliers and to common EU energy policy because it divides EU over political and strategic issues (Whist 2008; Larsson 2007; Geden 2006; Smith K. 2009; Smith M 2005; Liuhto 2009). Larsson (2007) argued that Russia is using energy as a political tool and jeopardizes regional stability, while at the same time through Gazprom Russia is entering the European energy market but remains reluctant to open its domestic upstream energy sector to European competitions (Larsson 2007: 6).

The cost of the Nord Stream project was initially (in 2005) estimated at €4 billion, but the projected cost has gradually risen. According to a spokesperson for BASF/Wintershall, the company assumed as early as 2006 that the construction costs could rise to as much as €9 billion (Reuters 2007b). Operational, maintenance and decomposing costs are not included in these figures, however. According to Larsson (2007) costs will be much higher. This claim is used to support arguments that the project is based on political rather than economic motivations (Riley 2008; Umbach 2007; Larsson 2007; Smith 2009). Thus one argument might be that if the pipeline costs more than the profits it eventually brings and this is known in advance, then Russian decision-makers have been motivated by non-economic (or political and strategic) considerations .

Many arguments against the pipeline come from new EU member states. Until recently, members of Warsaw Pact and Soviet Union stated that Russia was going to use the Nord Stream gas pipeline as a political weapon towards them since the Kremlin has never abandoned political and territorial aspirations towards this region (Smith 2009; Larsson 2007). At the national (Swedish) level the reactivation of Russian military activities in the Baltic Sea was part of the national debate.

Despite various security concerns that I will describe in more detail later, the Swedish Government approved the Nord Stream pipeline on November 5, 2009 (Pollard 2009). The approval was based on the Environmental Impact Assessment (EIA) in accordance with the UN Convention on the Low of the Sea and Swedish national legislation. In making its assessments, only environmental issues were considered in the Swedish case since, according to the Convention, no state could veto the pipeline based on political reasons. Finland approved the project as well on that same day in November (ibid.). The pipeline has already been approved by the Danish government due to the decision of Denmark’s largest energy company DONG Energy to diversify gas resources and import of 2 bcm of Russian gas annually by 2012 (Spiegel Online International 2009). All these developments indicated that the Nord Stream pipeline would be completed without any significant political obstacles.

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Source book: Swedish Threat Perception of Nord Stream and the Dual State Energy Security Model: An Analysis of Realism, Resource Interests and Securitization

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