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Gazprom’s large-scale project plans suspended - experts

July 22, 2015, 17:58 UTC+3 Alexandrova Lyudmila
Headquarters of Russia's natural gas giant Gazprom

Headquarters of Russia's natural gas giant Gazprom

© AP Photo/Alexander Zemlianichenko

MOSCOW, July 22. /TASS/. Gazprom’s large-scale project plans to build new gas pipelines are complicated both by political and economic reasons, Russian experts say.

The construction of the Nord Stream gas pipeline’s new stretches along the Baltic Sea bed is blocked by the European Commission’s position while the talks with Turkey on the Turkish Stream project are delayed along with the signing of a deal with China on gas supplies via the 2nd stage of the Power of Siberia gas pipeline.

Russian Energy Minister Alexander Novak told Rossiiskaya Gazeta newspaper recently that gas consumption in Europe and Europe’s dependence on gas imports would grow.

"This is one of the reasons why the issue of building the third and fourth stretches of the Nord Stream gas pipeline with a capacity of 55 billion cubic meters has emerged again today. Now work is beginning on a new project and its feasibility study," the minister said.

Meanwhile, the Russian energy minister’s optimism can hardly be shared by European officials who regularly say that the EU will take all efforts to get rid of Europe’s dependence on gas imports from Russia. The European Commission has spoken against Russia’s plans to give up gas transit across Ukraine from 2019, saying the EU will not support any of Russian projects "endangering" Ukrainian gas transit. The European commission has already disrupted Gazprom’s plans for building the South Stream gas pipeline, which was closed in December 2014.

Even though gas production in Northern Europe is declining, the construction of the Nord Stream gas pipeline’s third and fourth stretches (Nord Stream-2) is thrown into question, Director of the National Energy Institute Sergey Pravosudov was quoted by Actual Comment web portal as saying.

"Theoretically, no permission is required from the European Commission for building a gas pipeline. However, this permission is required for the gas pipeline’s operation. For example, in accordance with the decision by the European Energy Commission, Gazprom can use the OPAL gas pipeline, which has already been built, only by 50% while the pipeline’s remaining capacities should be filled by other gas suppliers, which are simply absent," the expert said.

The demand for gas in Europe has been declining in recent years and will grow in a perspective but hardly strongly, Senior Researcher at the Russian Institute of Strategic Studies Vladimir Blinkov told TASS.

"Many large European companies have said they would want to participate in the construction of the Nord Stream-2 gas pipeline. But the absence of any agreements with the European Commission is the main restraining factor. If this problem were resolved, this would also help resolve the problem with gas transit via Ukraine because gas volumes pumped through the pipeline’s four stretches would be enough. However, if the European Commission is against this, we won’t be able to build this gas pipeline because there will be no economic sense in it," the expert said.

There has been no progress in this gas pipeline construction so far and the closer to 2019, when the contract with Ukraine expires, the weaker Gazprom’s positions will be, the expert said. The point is that Europe also has another energy source in the form of liquefied natural gas (LNG), he added.

"They [Europeans] have many capacities for LNG, which are utilized by a third but their can increase their utilization, although this will be more expensive," the expert said.

However, Gazprom and the European Commission can hardly resolve the gas pipeline problem in the current situation, Blinkov said.

"Such problems can be resolved at the level of the leadership of Russia and the largest countries of the European Union," the expert said.

The Turkish Stream gas pipeline will mostly likely be built after all, "although hardly in a volume Russia would like to see," he added.

"The first stretch will go to Turkey but the other three to Europe and, in this regard, political aspects begin to play a big role," the expert said.

"But we’ll be able to build 1-2 stretches at least," he added.

Meanwhile, the situation with the Power of Siberia-2 gas pipeline is quite different, the expert said.

The Chinese are beginning to rely increasingly on renewable energy sources and their requirements for gas are somewhat decreasing, he said.

‘They are now delaying the plans and waiting, estimating whether or not they need this gas, which will be supplied to them in 5-8 years. But Russia can’t afford to reduce the gas price any further," the expert said, adding he estimated the chances of concluding this gas contract with China as 50x50.

"The issues on all of Gazprom’s large-scale gas projects can be resolved only at the level of the heads of state and governments," the expert said.

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