Nord Stream

The Nord Stream natural gas pipeline, which runs along the bottom of the Baltic Sea, entails big opportunities for Russian gas exports into the EU. In the past, Russian state-owned energy conglomerate Gazprom could only deliver gas to EU countries via onshore pipelines - via Ukraine and Belarus. Nord Stream, however, avoids these transit countries by connecting the Russian and German gas networks.

The total length of the undersea pipeline from Vyborg in Russia to Lubmin in Germany is 1,224 kilometers. The project includes two parallel lines capable of delivering some 55 billion cubic meters of natural gas annually, as opposed to the 35 billion cubic meters of gas Gazprom delivered to Germany in 2010.

The first line of the Nord Stream pipeline has already been laid and is scheduled to start operation on November 8, 2011. The second line is still under construction and is expected to be complete in 2012. According to the operating company Nord Stream AG, the overall cost of construction will amount to some 7.4 billion euros ($10.2 billion) - twice as much as initially forecast.

Putin and Schröder had the idea

Russian gas monopolist Gazprom first devised the plan to build a direct pipeline to Germany via the Baltic Sea in the late 1990s. In 2000, the European Union agreed that the bloc would benefit from such a project. Supporters used two main arguments: The pipeline would help meet increasing demand for natural gas in Europe, and politically unstable transit countries like Ukraine and Belarus could be bypassed.

Five years later, with the help of government officials in Moscow and Berlin, the project began to take shape. In September 2005, both Vladimir Putin, Russian president at the time, and then-Chancellor Gerhard Schröder were present in Berlin when Russian and German companies signed an agreement to build the gas pipeline.

The Nord Stream pipeline is operated by a company of the same name based in Zug, Switzerland. It's a joint venture between Russia's Gazprom (51 percent) and German companies BASF and E.ON Ruhrgas (15.5 percent each). The two other investors are Dutch Gasunie and French GdF Suez (9 percent each). BASF is represented by its oil and gas subsidiary Wintershall.

The supervisory board is chaired by former Chancellor Gerhard Schröder. The Managing Director of the Russian-German gas consortium is Matthias Warnig, the former supervisory board head of German investment bank Dresdner Kleinwort.

Contracts of delivery have been signed

Together with Gazprom, BASF/Wintershall and E.ON Ruhrgas will tap new gas fields in Russia. The largest share of the natural gas pumped through the Nord Stream pipeline is expected to come from the Yamalo-Nenets autonomous district in Western Siberia.

In order for the natural gas to reach European consumers, however, the Nord Stream pipeline has to be connected to the German grid – something that requires two additional onshore pipelines. The OPAL pipeline, which connects Lubmin with the grid in Eastern Germany, has already been completed. The NEL pipeline, which is to deliver the Russian gas to the Western part of the country, is still under construction.

Contracts of delivery have already been signed. The main consumers are Nord Stream AG shareholders and their subsidiaries, as well as Denmark's DONG Energy.

Authors: Viacheslav Yurin, Markian Ostaptschuk / nh
Editor: Sam Edmonds