At the beginning of December 2020 it became known that Nord Stream 2 AG, the operator of Nord Stream 2, will resume laying the project on December 5. And, presumably, the vessel “Academician Chersky” will be used for this purpose.
In general, 160 more kilometres of the Baltic Sea are to be laid.
The resumption of the project was announced by Bloomberg with reference to the official representative of the German Maritime and Hydrographic Agency.
Later, the German Federal Office for Navigation and Hydrography (BSH) confirmed to RIA Novosti that it has agreed to lay the Nord Stream-2 pipeline in German waters as of December, an application for continuation of work in January-April next year is being considered.
“The works have been agreed for December. For work in January-April, the change approval procedure (for the general work permit) has to be completed”, – said BSH Deputy Speaker Merle Mansfeld.
She confirmed media reports that the pipe-laying work may resume on 5 December – this is the period from which the agency’s current approval applies. Mansfeld also noted that “according to information available to the BHS,” the pipe-laying work will be carried out by the vessel Akademik Chersky.
The essence of the project
“Nord Stream-2” is a new export pipeline from Russia to Germany along the Baltic Sea, bypassing the transit countries of Ukraine, Belarus, Poland and other Eastern European and Baltic countries. The entry point will be the district of Ust-Luga in the Leningrad region, followed by the gas pipeline in Germany near Greifswald, near the Nord Stream exit point.
In October 2012, Nord Stream shareholders reviewed the preliminary results of the feasibility study for the construction of the third and fourth pipelines and decided that their construction was economically feasible and technically feasible. Later on, the third and fourth pipeline project was named “Nord Stream – 2”.
The project involves the extension of the existing Nord Stream Pipeline, which connects Russia and Germany through economic zones and territorial waters in Russia, Finland, Sweden, Denmark and Germany.
The project is being implemented by the project company Nord Stream 2 AG, of which Gazprom is the sole shareholder.
The two strings of the new gas pipeline are over 1,200 km long. The total capacity is 55 billion cubic metres of gas per year. Once the second line is launched, the total design capacity of the two “streams” will reach 110 billion cubic metres.
The planned service life of the gas pipeline is 50 years. The cost of the project is estimated at €9.5-9.9 billion. The expected investment of the Russian monopolist is €4.75 billion. In April 2017 Nord Stream 2 AG signed agreements with ENGIE, OMV, Royal Dutch Shell, Uniper and Wintershall on financing the Nord Stream 2 project. Five European companies will provide long-term financing in the amount of 50% of the total project cost.
The project is very profitable for its participants: it is assumed that it can pay back within nine years (for comparison: the payback period of Nord Stream-1 is 14 years, because the contract stipulates a reduced tariff).
Lining
The first construction work began in May 2018. Laying of the gas pipeline in the Baltic Sea began in September 2018.
The offshore section of the pipeline was laid in individual sections at impressive speeds. This process involved a whole flotilla of state-of-the-art ships operating under a well-defined logistics plan based on extensive survey work. The differences in seabed topography between the different sections of the pipeline route required preparatory work to be carried out before laying.
This included, for example, the installation of a rock slip on uneven seabeds. In shallow waters off the Russian and German coasts, the pipeline was buried on the seabed. For this purpose, dredging and backfilling were carried out to prevent impacts from the movement of water and sand. Special crossings of existing infrastructure such as telecommunications and power cables or other gas pipelines have been installed at pipeline crossings.
After two World Wars, many munitions have been buried in the Baltic Sea and the pipeline route has been optimised so as to avoid unexploded munitions wherever possible. The munitions remaining in the pipeline installation corridor have been defused. Exclusion zones created around cultural heritage sites ensured that they were protected from the impact of construction works.
Laying of the pipeline was carried out by state-of-the-art vessels operating 24 hours a day, 7 days a week in various sections of the route. Delivery of pipes from logistics centres ensured uninterrupted operation of these floating plants, which allowed welding pipes and laying the finished whip on the bottom at a speed of up to three kilometres per day.
Permissions
“Nord Stream 2 runs through the waters of five Baltic Sea countries: Russia, Finland, Sweden, Denmark and Germany. All the countries whose territorial waters or exclusive economic zones the pipeline will cross, except Denmark, have granted permission to build the pipeline.
Denmark has not granted permission for the construction of Nord Stream 2 for a long time. The Russian Ministry of Energy and Gazprom also associated the delay in obtaining permission for the construction of Nord Stream 2 with geopolitical issues. One of the reasons that Gazprom was unable to complete the construction of JV-2 on time was the deliberate delay in obtaining permission from Denmark, which made it possible for Nord Stream 2 AG to start work near Bornholm not in summer, but only in early November.
However, the Danish Energy Agency (DEA) has always worked with Gazprom in a constructive manner. Their partnership began in 1998, and together they built Nord Stream 1. The first application for the JV-2 route was made by the Nord Stream 2 AG operator company to the DEA in April 2017, the route running through Danish territorial waters. The Danish government was well aware of what the DEA’s response would be, so there was a rush to amend the law on the continental shelf: if the pipeline route passed through Danish territorial waters, the Ministry of Foreign Affairs was given the decisive word in coordinating its construction.
In total, Nord Stream 2 AG has submitted three applications for the three pipeline routes to Denmark since 2017. These included applications for the route north-west and south-east of Bornholm. Two years of procrastination were the work of the Danish Ministry of Foreign Affairs, the DEA could only observe this from the outside and nothing more.
“It was only in the summer of 2019 that the “Gazprom – DEA manoeuvre” was developed and brilliantly implemented, with several other participants successfully working on the project side – Anglo-Dutch Shell, French Total and Danish Maersk Oil, which, with the help of the Dansk Undergrund Consortium and the Tyra field, ‘crushed’ the Danish government so hard that it simply had no way of resisting a joint attack by Russian and European energy companies,” explains the energy expert and editor-in-chief of the Geoenergy portal. ru” Boris Martsinkevich.
The Danish Energy Agency issued a permit for laying pipes in its exclusive economic zone in October 2019. The DEA assessed that the south-eastern route on the continental shelf is preferable to the north-western route – it is shorter and creates minimal risks in terms of ecology and shipping.
The Danish permit effectively removed the last restriction on the construction of Nord Stream 2. Otherwise, the timing and cost of construction of the pipeline would have increased, said Alexander Novak, head of the Russian Ministry of Energy. So far, the project is estimated at around 10 billion euros, and it was originally planned to be completed by the end of 2019.
Updated “Gas Directive” against Nord Stream-2
The updated EU Gas Directive was agreed in record time in early 2019. Four Eastern European countries insisted on its approval. The essence of the amendments is to extend the Third Energy Package, which previously only applied to pipelines running in the EU’s maritime economic zone, to all gas pipelines starting or ending in the EU.
These regulations oblige third party suppliers to provide half the capacity of the pipeline and give the local regulator the right to control the gas tariffs. Furthermore, according to the Gas Directive, a gas supplier cannot be an operator of a gas pipeline.
The European Commission of course argued that this provision would apply to all offshore pipeline projects. However, it was clear to everyone that the amendments to the EU Gas Directive have the sole purpose of making the operation of the Nord Stream 2 pipeline as difficult as possible.
The updated terms of the Gas Directive do not apply to projects that have been completed before 23 May 2019. Previously, the firm that Gazprom set up for the construction and management of the pipeline tried to prove that Nord Stream 2 can be classified as one of them in terms of “economic functionality”. Although work is continuing on the pipeline, it had already made multi-billion dollar investments by May last year. Nord Stream 2 AG believes that changing the conditions of use of the pipeline at this stage does not comply with the principle of protecting legitimate expectations and is contrary to the German Constitution.
The Federal Network Agency, for its part, has indicated that it understands the completion of the project in the constructive and technical sense. All EU member states could also familiarise themselves with Nord Stream 2 AG’s arguments and influence the regulator’s decision, but none of them supported Gazprom’s subsidiary.
Nord Stream 2 AG started legal proceedings against the EU due to amendments to the Gas Directive. Nord Stream 2 AG considers that the EU has violated its obligations under Articles 10 and 13 of the Energy Charter Treaty by adopting discriminatory amendments to the Third Gas Directive. The Tribunal was formed in February 2020. It will be located in Toronto, Canada. A complaint to the tribunal was filed by Nord Stream 2 AG on 3 July 2020. In response, the EU submitted an application dated 15 September 2020 objecting to the jurisdiction of the Tribunal.
Opponents of Nord Stream-2
“Gazprom” made no secret of building expensive bypass pipelines in order to reduce the risks of gas transit through unfriendly states that are under US influence.
The main opponents of Nord Stream-2 are Ukraine and Poland. They are supported by the Baltic States, the Czech Republic, Hungary, Slovakia, Romania, Croatia, Moldova as well as the USA and the European Commission. Denmark also expressed its fears, calling the project political. Their main argument is the political motives for the project, as well as violation of the principles of the EU’s third energy package – transparency, non-discrimination and free access to energy resources.
Ukraine insists that this is a politicized project aimed not only against the economy, but also against the security of Eastern Europe as a whole. In order for its GTS to break even, Ukraine must pump at least 40 billion cubic metres of gas per year, with the technical capacity to pump up to 146 billion cubic metres.
According to the 2009 contract between Naftogaz and Gazprom, for 10 years the Russian side had to supply Ukraine and transit Europe with at least 110 billion cubic metres of blue fuel per year. According to the European Commission, in 2017 Ukraine accounted for 44% of Russian gas deliveries to the EU. Another 30% was provided by Nord Stream, the rest via Belarus. In 2018, Gazprom pumped about 87 billion cubic metres of gas through the Ukrainian route. Naftogaz estimates that Ukraine’s profit from Russian gas transit was $3 billion in 2019.
The launch of Nord Stream-2 will significantly reduce Russia’s dependence on Ukrainian pipe. Officially, Russia has no plans to abandon the Ukrainian gas transport system, and Germany, one of the largest consumers of Russian gas in Europe, insists on it. However, the ‘pumping’ of gas could be significantly reduced. Not only Naftogaz will suffer losses – Ukraine will miss 3% of its GDP.
Making Nord Stream 2 a construction project in progress is a fixation for many. Including Poland, which is clearly fulfilling the US order. And the United States has not concealed or hidden that it intends to deprive Gazprom of the European market.
At the beginning of September 2020, Polish government spokesman Petr Müller announced that Warsaw was prepared to offer Germany the Baltic Pipe pipeline instead of Nord Stream 2. According to him, different options must be considered when it comes to energy security, and he also said that an initiative such as the Russian-German pipeline contradicts the idea of solidarity and energy security.
The Polish-Danish project called Baltic Pipe, which competes with Nord Stream 2, involves supplying natural gas from the Norwegian shelf to Poland via Denmark via a pipeline that will cross the Baltic Sea. Baltic Pipe is scheduled to be launched in 2022. According to preliminary data, it will have a capacity of 10 billion cubic metres per year.
In October 2020, Poland imposed an unprecedented fine on Gazprom for Nord Stream 2. Antimonopoly regulator of Poland (UOKiK) decided to fine “Gazprom” in the amount of more than 29 billion PLN (6.467 billion euro at the current exchange rate) as a result of antimonopoly investigation in respect of the project “Nord Stream – 2”, said the regulator on October 6. Gazprom’s partners in the project – French Engie, Austrian OMV, Anglo-Dutch Shell and German Wintershall Dea and Uniper – have been fined over PLN 234 million (EUR 52.2 million).
“Gazprom fundamentally disagrees with the position of the Polish antitrust authority. In fact, the project was implemented not through a joint venture, but by a subsidiary of Gazprom, which raised debt financing, the company said. “The decision of UOKiK violates the principles of legality, proportionality and fair trial, and the unprecedented amount of the fine demonstrates the desire to oppose the implementation of the project “Nord Stream – 2″ by any means,” emphasized in “Gazprom”. The Company will appeal against this decision because it “does not believe that it has violated Polish antitrust law”.
Ecology
Opponents of the new pipeline have also identified environmental damage as another negative factor. According to statements by some international environmental NGOs, such as the German Naturschutzbund Deutschland (Nabu) and Greenpeace Russia, the construction of the pipeline could cause harm to the animal and plant life of the Baltic Sea, as well as to the Russian ecosystem, including plants listed in the Red Book. German environmentalists are convinced that Germany does not need a JV-2 because its ability to import gas is three times greater than actual consumption.
All attempts to stop the project through the courts have ended unsuccessfully for environmentalists. In March 2018, the Supreme Court of the Russian Federation dismissed Greenpeace Russia’s complaint that the construction of the gas pipeline was illegal because it passes through a specially protected area in the Kurgal Nature Reserve in the Leningrad Region. In June 2018, the Supreme Administrative Court of the German city of Greifswald dismissed Nabu’s complaint that construction of the gas pipeline in German Lubmin had been halted. The court justified its decision by the fact that the public interest and reliability of energy supply are of paramount importance in this matter.
According to a statement by the German Federal Ministry of the Environment in October 2020, liquefied natural gas from the USA is just as harmful to the environment as coal because American gas is extracted by hydraulic fracturing, which is harmful to the global ecosystem. The Ministry stated this in response to a request from the Green Party faction of the German Bundestag. Following these findings, the Green Party stated the need for a complete ban on the production and import of oil and gas extracted by fracturing, which is liquefied gas supplied to Europe from the USA.
At the same time, Russian Gazprom has provided objective data that gas from Nord Stream 2 is more than three times as environmentally friendly as LNG from the US. According to the Russian company, the carbon capacity of the JV-2 is 6.3 CO2 equivalent per 1 megajoule, of Turkish Stream 7.3, of the Ukrainian transit route 10.6, but the American LNG figure is as much as 22.3. At the same time, American LNG is also much more expensive than Russian LNG, which is a negative factor not only for German parliamentarians, but above all for German business, which needs large volumes of gas.
US sanctions
The U.S. sees North Stream as not only a political threat, but also an economic one, as the U.S. itself wants to supply the reduced gas to the European market.
In August 2018, it became known that the US government had begun to draft sanctions against the construction of Nord Stream 2. Before that, a bill with similar goals had appeared in the US Congress.
Through the efforts of U.S. senators, another sanction package against JV-2 was included in the Pentagon Budget Finance Act for 2020, which Donald Trump had to sign before the end of the year. The US President had no options – under no circumstances could he afford to leave the US Department of Defence without funding for the coming calendar year.
On 20 December 2019 Trump signed the military budget for 2020 (National Defence Authorisation Act, NDAA). The document imposes sanctions on individuals and companies that have sold, hired or provided vessels that have laid pipes at a depth of 100 feet (30.48 m) or more during the construction of Nord Stream 2. Companies on the blacklist will be banned from dollar transactions and their accounts and property in the US and in US banks will be seized. The restrictions are immediately enforceable.
United States Ambassador to Germany Richard Granell said on 22 December that the purpose of the sanctions imposed by Washington against the Russian export pipeline is to protect European countries from Russia’s monopoly in the market for fuel supplies to Europe. According to the diplomat, the sanctions against the gas pipeline are part of US policy, which was formed during the administration of Barack Obama, Donald Trump’s predecessor as US President. Diversifying energy sources in Europe is necessary so that no country or organisation can have too much influence in Europe.
And already on 23 December, the Swiss company Allseas, which is laying the pipes for the Nord Stream 2 pipeline, announced a shutdown and took the Pioneering Spirit and Solitaire pipelaying ships out of the area where the pipeline is being built in Danish waters. All the auxiliary vessels involved in the construction of the pipeline have also left the laying area.
The Russian Gazprom Group had to look for replacements for these vessels, involving domestic vessels that were not fully adapted to the project – the Akademik Chersky pipelayer and the Fortuna barge. The owner of Akademik Chersky, Gazpromflot, works mainly on Gazprom’s own orders and does not conduct business in the USA, does not count in dollars, so sanctions will not affect its current operations.
The equipment that was supposed to be made at Chersky Academy has become a serious long-term modernization. Electronics, navigation and control equipment has been replaced. The main components and mechanisms of each of the three cranes on board were changed. New winches and anchors, test and welding equipment were installed. Additional power generators were installed and the noise insulation of the engine room was increased. Even the crew quarters were modernised. The work was scheduled to be completed in October.
On 20 October, the United States of America extended the application of the sanctions previously imposed on the Nord Stream 2 project under the so-called “European Energy Security Protection Act” (PEESA). A clarification published on the US Department of State’s website states that not only pipe-laying ships but also companies providing various services to such ships fall under these sanctions. They were given 30 days to wind down their operations.
The next day, Russian President’s Press Secretary Dmitry Peskov said that the Kremlin considered the U.S. actions against Nord Stream-2 to be “unfair” and “raider” competition. “In general, a rather unfriendly destructive line of constant restrictions on us, our economic operators and our economy. Unfortunately, this has already become such an integral part of unfair competition, not covered by anything, raiding competition from Washington,” Peskov told journalists during the press conference on 21 October. He noted that this “destructive line” has been going on for many years and is harming relations between Russia and the USA.
According to energy expert Boris Martsinkevich, it is too late to impose sanctions on European companies that will retrofit ships involved in the construction of the Nord Stream 2 gas pipeline.
“Most probably these works have already been completed, because the Academician Chersky has already moved to the port of Kaliningrad, and there is an operation with service vessels. So it’s good that they remembered these sanctions quite late,” said Martsinkevich.
He noted that the sanctions were introduced on 20 October, and 30 days have been given to complete all work. In his opinion, this is enough time to complete the project. “We made it,” said the expert.
But “Chersky” should not only be modernized, but also insured. And the International Group of P&I Clubs refused to sign contracts on the project “Nord Stream – 2” because of the risk of falling under American sanctions. However, it then turned out that the Chersky ship and its support squadron could be insured by a Russian company which is already under US sanctions. It is true that the issue is more about reinsurance than pipe-laying insurance.
According to the State Department, the agency is ready to “use the full range of sanctions measures to stop the construction” of the gas pipeline. It is expected that by the end of this year the US Defense Budget Bill will also include an additional, toughest, package of sanctions against JV-2.
“Navalny Poisoning has launched a new discussion on the future of Nord Stream-2. However, as the project is almost completed and about 8 billion euros have been invested in it, it is doubtful that the countries will stop cooperating. Proponents of the pipeline say that stopping the project will significantly damage Europe’s reputation as a stable partner for investment and lead to higher gas prices for consumers.
German Foreign Minister Heiko Maas is confident that the Nord Stream 2 pipeline will be completed. He said this in an interview with Redaktionsnetzwerk Deutschland on 17 October.
“I believe that Nord Stream 2 will be completed to the end. The question is when,” he said.
With regard to Washington’s criticism of the project, Maas said that “we make decisions about our energy policy and energy supply here in Europe.
“We are not criticizing the fact that the United States more than doubled its oil imports from Russia last year and is now the second largest importer of Russian heavy oil,” the German minister said. “The United States has the right to pursue its own energy policy. We do the same,” concluded Maas.
Twenty-four European Union countries have signed a note of protest against US interference in the construction of the Nord Stream-2 pipeline. In early September, German Chancellor Angela Merkel said that Berlin was determined to help complete the construction of the Russian natural gas pipeline Nord Stream 2.
Fyodor Tychy