Gazprom plans to re-route controversial European pipeline

Under pressure because of environmental and security concerns, Gazprom, the Russian state-owned energy monopoly, is planning the first of three re-routings of a controversial pipeline to run under the Baltic Sea, officials said Thursday, a shift that could cost an extra €1 billion.

Ever since the pipeline project was started two years ago, it has been racked by difficulties, with numerous countries in Northern and Central Europe raising objections. The planned re-routing hopes to avoid problems involving Denmark, Poland, Finland and Estonia.

Once built, the joint Russian-German project, whose chairman is the former German chancellor Gerhard Schröder, will allow Russia to reduce its dependence on the transit countries of Ukraine, Belarus and Poland. This means Russia would be able to send uninterrupted supplies of gas to Europe, where it will have guaranteed markets through long-term sales contracts.

However, it could also increase Europe's dependence on Russian gas at a time when several EU governments are already concerned about the bloc's reliance on Russia as one of its main energy suppliers. The EU imports more than a quarter of its gas from Russia, with Germany buying as much as 35 percent of its supply from Gazprom.

But the glitches that have arisen since the project, called Nord Stream, was officially begun by Schröder and the Russian president, Vladimir Putin, in Berlin in September 2005 mean that the cost of building the pipeline could increase, according to the company.

Stakes in Nord Stream are divided among Gazprom, which holds the majority, and Germany's two energy companies, E.ON Ruhrgas and Wintershall.

The cost of the offshore pipeline could increase by €1 billion, or $1.35 billion, according to Nord Stream officials, bringing the total to €6 billion. The overall cost of the project - including the onshore pipeline, which includes building a pipeline on Russian and German territory - could cost €12 billion, depending on the world market costs for steel, according to Nord Stream. There could even be delays because of the difficulties in obtaining construction permits because of the lengthy investigations and hearings into the environmental risks for the 1,200-kilometer, or 1,900-mile, -long project, which consists of two parallel pipelines.

Jens Müller, a spokesman for Nord Stream, said this week that the company had decided to re-route the part of the pipeline that would have passed between the Danish and Polish parts of the Baltic Sea, running south of the Danish island of Bornholm. Instead, it will now run north of Bornholm, adding an additional eight kilometers to the pipeline's total length. The decision to reroute the pipeline will minimize environmental impact and avoid munitions dump sites south of the island of Bornholm, Müller said.

Danish officials said Nord Stream had changed the route because it wanted to avoid entering a potential political minefield because of an unresolved border dispute between Denmark and Poland.

"Nord Stream changed the route because there is no border demarcation between Poland and Denmark," said Birgitta Jacobsen from the Danish Energy Authority, a division of the Danish Ministry of Transport and Energy. "Nord Stream did not want to enter an area with unclear borders."

Re-routing this part of the pipeline will not, however, mean that offshore construction of the pipeline can begin. Nord Stream is under pressure to change routes that pass under the waters of Finland, Estonia and Sweden, according to officials in the region.

"There are two other routes under discussion which involve Finland and Estonia," said Sten Jerdenius of the Swedish Environment Ministry, who is one of the main coordinators in the region monitoring whether the pipeline conforms with UN environmental rules.

The countries affected by the Nord Stream pipeline - Germany, Denmark, Poland, Sweden, Finland, Latvia, Estonia, Lithuania and Russia - belong to the UN Espoo Convention, whose member states are obliged to notify and consult one another on all major projects that are likely to have a significant environmental impact across national borders.

In the case of Finland, its environmental agency wants the pipeline moved farther south.

"The reason is that the proposed route moves over a lot of rocks," Jerdenius said. "This would involve a lot of blasting." Farther south would mean moving into Estonian waters where the sea bed is flat. That means Nord Steam would have to negotiate for permits with Estonia, he said.

Another region of dispute is the Swedish island of Gotland. The Swedish Environmental Protection Agency wants Nord Stream to shift the pipeline south because the island's banks are internationally recognized as protected areas. Even if the company agreed to do this, it could run into problems over munitions dumping sites left over from World War II.

"This is turning out to be a huge project that involves several countries, lots of nongovernmental agencies and big environmental issues," Jerdenius said.

Source:By Judy Dempsey, iht.com