Gazprom, European partners to build new gas pipeline to Germany

Russian gas behemoth OAO Gazprom and its European partners are planning to build a new gas pipeline to deliver Russian gas to Europe through the Baltic Sea, bypassing east European transit countries.

Representatives of Gazprom, Germany's E.ON SE, Anglo-Dutch oil and gas giant Royal Dutch Shell Plc and Austria's OMV signed a memorandum of intent to construct the pipeline yesterday in the Russian city of St Petersburg.

"The memorandum demonstrates the intention of the sides to implement the project of construction of two strings of the pipeline from the coast of Russia through the Baltic Sea to the coast of Germany. The capacity of the new pipeline will be 55 billion cubic meters (bcm) annually," Gazprom said in a statement.

The partners agreed to form a joint venture company for the creation of the new gas infrastructure to secure reliable supplies of fuel to European customers and will draw on their experience from the similar Nord Stream pipeline, which was completed in 2012.

Gazprom chairman Alexey Miller said, ''Upon commissioning of the Nord Stream gas pipeline, Gazprom has been looking into the possibility of boosting the capacity of this route.''

''Extra gas transmission facilities along the shortest route connecting gas fields in Russia's north to European markets will provide for higher security and reliability of supplies under new contracts,'' Miller further stated.

''The experience gained in Nord Stream has demonstrated that transportation of gas through the Baltic Sea is a reliable solution for the EU energy needs from the economic, technical and environmental points of view,'' commented E.ON's management board member Klaus Schaefer.

The proposed gas pipeline will be the second major project designed to create direct supply route for Russian gas to Western Europe through the Baltic Sea.

Overall, Gazprom supplies over 30 per cent of the European requirement, over half of which is transported via Ukraine. Gas supplies through Ukraine are often affected due to tensions between Russia and Ukraine in recent years.

Gazprom owns 51-per cent stake in the 1,224-km Nord Stream gas pipeline, which has a capacity to transport 55 bcm of natural gas through its two parallel streams. The pipeline connects Russia's Vyborg near the Finnish border to Greifswals on Germany's northern coast. It was built at cost of €7.4 billion.

Apart from E.ON which holds a 15.5-per cent interest in the venture, other Nord Stream partners include BASF subsidiary Wintershall Holding GmbH with 15.5 per cent stake, Netherland's NV Nederlandse Gasunie and France's GDF Suez, each holding a 9-per cent stake.