Work on Gazprom’s Nord Stream 2 gas pipeline may be set to recommence

Market Line 21 February 2020 (Last Updated February 21st, 2020 15:06)

Work on Gazprom’s Nord Stream 2 gas pipeline may be set to recommence

Movement of a Russian pipe-laying ship has led to rumours Gazprom will resume construction on Nord Stream 2.

The ship, named Akademik Cherskiy, departed Nakhodka on Russia’s east coast, on 16 February, potentially en route to Europe. The Russian state-owned firm has remained quiet on the recent development.

The $10bn Baltic Sea gas pipeline had been nearing completion until US sanctions put a halt to the project last year. The harsh sanctions seem aimed at restricting Russia’s supplier power in the region, forcing European firms to consider purchasing more expensive US LNG exports.

The warning was enough for Swiss pipe-laying firm Allseas Group SA to withdraw, forcing Gazprom to stall and look for alternative solutions.

Russian Energy Minister Alexander Novak had mentioned the ship as an option to complete the Nord Stream 2 pipeline late last year. However, it is yet to be seen if the ship can provide Gazprom with the capabilities needed to complete the project.

If completed, the pipeline will stretch 1,200km to Germany, supplying Europe with up to 55bcm of natural gas per year and providing a timely boost to the European gas utilities industry.

Gazprom believes Nord Stream 2 can be completed without foreign help

Major European backers OMV, Royal Dutch Shell, Uniper, Engie and Wintershall are keen to see the project finished.

With 94% of Nord Stream 2 completed, and the remaining work in relatively shallow waters, the firm is confident that it has the resources needed to finish the project.

Alexei Miller, Gazprom CEO, outlined in January that the remaining work can be completed alone as there are no remaining technological obstacles that require outside assistance.

This was rebuked by Washington with Energy Secretary Dan Brouillette stating just last week that sanctions will create a long delay due to Russia’s lack of technological capability. However, the recent development with the Akademik Cherskiy will raise concerns in the Trump administration.

European officials have been critical of US involvement

With European gas production declining at an alarming rate, there is a growing demand for gas on the continent. Oil and coal are becoming undesirable due to their greater environmental impact.

Gazprom’s Turk Stream project, a gas pipeline across the Black Sea, was put into operation in January, having been completed before the sanctions.

The sanctions were imposed under the pretence of reprimanding Moscow for meddling in the 2016 election.

But with the US having previously voiced fears over the pipeline increasing European dependency on Russian gas, the primary motive is undoubtedly to halt Russian influence in Europe.

Angela Merkel has stated her disapproval of ‘extraterritorial sanctions’ with concerns over European energy policy being decided in the US and not Europe. Although Merkel has refused to retaliate, this will further strain relations with Donald Trump.