Controversial Nord Stream 2 Pipeline Could Be Operational By November

By Tim Daiss, an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. Originally published at OilPrice

In what would be an early geopolitical win for Moscow, German news agency DW reported yesterday, citing one of the project’s engineers, that the Nord Stream 2 natural gas pipeline should be operational by November.

Klaus Haussmann, an engineer at Nord Stream 2’s future landfall site at Lubmin on Germany’s Baltic Sea coast, told German public radio station Deutschlandfunk that the “raw” laying of the pipeline would be finished by the middle of 2019, according to the DW report. “Then comes the entire installation of the electrical equipment, security chains. And, then it’s planned on the large scale that we get the first conduit filled with gas in November, from Russia,” Haussmann said.

Haussmann said his concern was more the impact of the Baltic’s winter weather and waves on construction at sea and less so the international pros and cons. “For two years or more, Nord Stream 2 has been pretty much under fire. But at the moment we have more worries with the weather outside,” he said.

Geopolitically Charged Pipeline

Nord Stream 2 is a 759 mile (1,222 km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm.

However, it is arguably one of the most geopolitically charged energy projects ever proposed. Germany maintains that the pipeline is needed to increase natural gas supply as some EU members move away from nuclear for power generation, but not everyone agrees. The U.S., under the past three presidents including Donald Trump, has long countered that the pipeline puts European national security in jeopardy – a concern that seems grounded given Russia’s history of using gas a geopolitical weapon in the middle of winter.

Ukraine, which has argued that it will lose revenue since the Nord Stream 2 project would bypass the country, has tried to form a consortium of EU-based companies to stop the new pipeline, however, those efforts have largely fallen apart and at this point would be too late to make much difference.

The Nord Stream 2 project has so angered President Trump that his administration has recently threatened to put sanctions in place if the project becomes operational. In a televised meeting with reporters and NATO Secretary-General Jens Stoltenberg before a NATO summit in Brussels last year, Trump said it was “very inappropriate” that the U.S. was paying for European defense against Russia while Germany, the biggest European economy, was supporting gas deals with Moscow.

Earlier this month, Richard Grenell, the U.S. ambassador to Germany, said sanctions could be put in place against specific German firms involved in the pipeline project, prompting Berlin to reply that “nothing had changed” and the project had its permits and was proceeding. “We’re not that easy to impress and intimidate,” said German Economy Minister Peter Altmaier.

U.S. Pressure

Though Germany has resisted U.S. efforts to back out of the Nord Stream 2 project, American pressure is likely the impetus for the country to forge ahead with plans to put more LNG infrastructure in place as well as procure U.S.-sourced LNG which would not only diversify its energy mix but also appease President Trump.

Nord Stream 2 is owned by Russian energy giant Gazprom which already has a monopoly over Russia’s network of pipelines to Europe and supplies close to 40 percent of Europe’s gas. Meanwhile, Russia’s gas exports to Europe rose 8.1 percent in 2017 to a record level of 193.9 bcm, even amid concerns over Russia’s cyber espionage allegations, and its activities in Syria, Ukraine and other places.

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31 comments

  1. Peter Moritz

    a concern that seems grounded given Russia’s history of using gas a geopolitical weapon in the middle of winter.

    I have no idea were that claim has any basis in reality. The only threat was against Ukraine when it was actually stealing gas from the transit lines.

    Russia has been supplying gas to Germany reliably since the cold war days , so any claims that Russia will use it as a political tool is just so much propaganda, and to implement such pressure policies would be detrimental to Russian gas business.

    The main concern is of course that now Russia can cut out Ukraine of transit fees by having an alternative to the land lines.

    Reply
    1. Oh

      Besides, if I understand correctly, Ukraine did not pay the bill for gas already received. Isn’t it a purely capitalist action to shut of the supply if the customer is gehind on payments?

      Meanwhile, Russia’s gas exports to Europe rose 8.1 percent in 2017 to a record level of 193.9 bcm, even amid concerns over Russia’s cyber espionage allegations, and its activities in Syria, Ukraine and other places.

      I’m not sure that Europe buys into the argument on ‘espionage allegations, activities in Syria, ..” etc.

      Reply
    2. Piotr K.

      Nooo sire, Russia never put pressure using gas on our eastern european countries. It was always pure capitalism issues ;)

      Reply
      1. The Prescription Was Clear

        No, actually, they didn’t; even during the Ukr-Rus standoff, our national gas company had no problems in supply and was given guarantees that no disruption would occur.

        Or so they claimed in front of the cameras, as I have no inside information.

        The observable facts on the ground were: a) no supply shortage, and b) no price increase; IMO confirming the publicly made statements.

        Further, I would say that, If anything, Russia was constrained in it’s actions (they technically could stop Ukraine from stealing, or if you will, not paying for its share of gas) precisely because of obligations to eastern-european countries.

        Looks to me that the neocon anti-Russia troll line ( “economic cooperation is bad because “influence” “) is as false as it gets. In reality, those business deals have ameliorated potential escalations and reduced consequences (especially for Ukraine).

        But feel free to keep on repeating Russia-Russia-Russia…, if it helps you.

        Reply
  2. Peter

    a concern that seems grounded given Russia’s history of using gas a geopolitical weapon in the middle of winter.

    I have no idea were that claim has any basis in reality. The only threat was against Ukraine when it was actually stealing gas from the transit lines.

    Russia has been supplying gas to Germany reliably since the cold war days , so any claims that Russia will use it as a political tool is just so much propaganda, and to implement such pressure policies would be detrimental to Russian gas business.

    The main concern is of course that now Russia can cut out Ukraine of transit fees by having an alternative to the land lines, and the fact that it cuts into the US attempt top sell more pricey LNG to Europe.

    Reply
      1. John A

        My thoughts exactly. Russia is not at war with the EU by any means and it is a straightforward trade deal involving energy. The political weapon is held by Ukraine, that engages in both blackmail and also syphons off gas for its own consumption, effectively stealing it.

        Reply
        1. Colonel Smithers

          Thank you, Gents. Agreed.

          With regard to Peter’s reference to the Cold War, when Maggie “Iron Lady” Thatcher closed many of the UK’s mines, much of the UK’s coal imports were then sourced from Poland, then in the Warsaw Pact and run by General Jaruzelski.

          Reply
          1. Cat Burglar

            Very similar to what happened during the big push for US “energy independence” through nuclear power in the 1970s — utilities were optioning Chinese uranium real estate to guarantee fuel supply.

            The Washington Public Power Supply System (WPPSS) did it prior to the bond defaults. I laugh when they trot out the energy independence argument.

            Reply
  3. Ignacio

    The “controversial” part of the pipeline as stated in this article is just and plainly new cold war. The US is supporting Ukraine just to piss off russians, for this reason dislikes the NordStream pipelines that reduce Ukraine transit gas income by 720 million dollars per year. The argument that the pipeline increases dependence on Russia is stupidly onesided. The situation in the EU, particularly the EU nortwestern countries, is that Natl. Gas production is in steady decline so that consumption increasingly depends from imports. There is no solution to that except reducing Natl. Gas consumptiom. Ukrania alliance with the US had the consequence that existing continental pipelines from Northwest Russia to Europe no longer were reliable. Reliability is a must for NG supply.

    The logical consequence of this was Nordstream 1 and 2 that were agreed in 2005 (as you can see we are talking about long term contracts with many strings attached to ensure reliability). These mean that “dependence” is mutual and “Germany+Netherlands+France” is obliged to buy certain amounts of gas supplied by NS1+2 and Russia is obligued to supply it with sanctions attached if they don’t comply. These contracts are designed to be solid compromises. No wonder why Germany (Eon) and their dutch and french partners ignored US pressure. Besides, US pressure did not have attached a viable alternative. First, there aren’t LNG facilities that could compensate for the loss of Nordstream 2. This pipeline alone can supply about 1.9 trillion standard cubic feet per year. To my knowledge, Dominion Cove facilities in Maryland can handle 0,27 trillion scf/year. I bet the cost of LNG marcellus shale gas export is much higher that that supplied via NordStream2. The article states that NordStream is owned by Gazprom but this is not correct. It is a partnership of Gazprom, Eon and other EU partners that has been registered in Switzerland (lack of transparency here is another controversy).

    Another aspect that I believe is bypassed and in my opinion the main reason american shale producers want to export is just because IMO they suffer from low regional prices and they wish to benefit from the gap between regional and Henry Hub spot prices and UE NG import prices.

    There are other controversial parts of the pipeline about environmental risks but those are not dealt hera.

    Reply
    1. Ignacio

      So if Trump wants to push his pressure too far with sanctions the rift between the US and the EU will be too wide, and there is no longer the UK to bridge. There is still Poland, but I guess is not sufficient.

      Reply
  4. The Rev Kev

    There are few other factors to mention. A lot of the pipelines going through the Ukraine are old and need a major upgrade but there is no way that the Russians will spend the billions doing that on behalf of a country continuously threatening it and stirring up trouble. Come the end of this year the 10 year contract negotiated by former prime minister Yulia Tymoshenko in 2009 will close out just as the Nord Stream 2 pipeline comes online.
    The EU proposed this month that Russia guarantee 60bn cubic meters of gas transits from Russia to the EU via Ukraine after the current contract expires but the Russians said nyet. The gas is worth $3bn a year, or about 3% of GDP, to the Ukrainians not to mention other countries that it crosses which is why they are up in arms about losing the transit fees and are thus opposed to Nord Stream 2. And that means that these countries will come to the EU for more loans to make up the shortfall.
    This sounds a lot like the noise that Reagan was making to the Europeans back in the 80s when the Russians started to send gas to Europe. As Peter pointed out, the Russians have been reliable and it has been the Ukrainians that have been stealing Europe’s gas for their own purposes. I cannot see Germany backing down on this and already there are plans for a Nord Stream 3. If it was stopped, then Germany would have to can a lot of their development plans which would mean a lower GDP, more unemployment and maybe a reconsideration for coal and nuclear energy for Germany which is a bit of a third rail in Germany from what I can see. And Trump would never thank them for this sacrifice but would probably demand that they spend more money on NATO or US weaponry or something else stupid.

    Reply
    1. Ignacio

      Here you put some more background and question third rails for Germany energy policy. My opinion is that the third rail in the EU, that has already dismissed shale gas (except UK and Poland) is to reduce Ntl. Gas consumptiom.I think this can be accomplished in the long term by limiting or focusing Ntl. Gas to power production (because its flexibility) and reducing household heating consumption which in turn is the main concern when talking about supply reliability. This can be achieved by replacing gas boilers by new electric powered aerothermal/geothermal/waterthermal heat exchangers whose efficiency has increased lately. This matches other EU policies and laws recently passed on limitations in the efficiency imposed to HVAC appliances manufacturers.

      EU climate conditions are generally appropiate fot the use of these heat exchangers. Their efficiency is much lower in very cold climates.

      Reply
      1. Yikes

        Their efficiency is much lower in very cold climates.

        That could happen if, or rather when, Gulf Stream shuts down due to Fresh Water incurrions from Greenland / Arctic.

        Reply
        1. Marlin

          There are different types of heat exchangers, depending on the medium with which the heat is exchanged. The air-based ones use just that – the surrounding air -, which can get quite cold in the winter and then they lose efficiency. The (more expensive at point of installation) alternative is exchanging the heat with a liquid, which then is warmed up by pumping it through the ground up to 400 meters deep. Winter/Summer variability underground is much less than in the air. Therefore those soil-based heat exchangers are very robust in their efficiency, even in case of very cold winters. The additional investment for the soil-based system is about 8000 Euro in Germany for a family home.

          However, the theoretical limit is in any case still high enough, that burning gas in a power plant (which becomes more efficient, if the weather is cold) and then using the electricity in a heat exchanger has better energy efficiency than directly burning the gas to heat the home even in case of the air based heat exchanger.

          Reply
          1. Ignacio

            However, the theoretical limit is in any case still high enough, that burning gas in a power plant (which becomes more efficient, if the weather is cold) and then using the electricity in a heat exchanger has better energy efficiency than directly burning the gas to heat the home even in case of the air based heat exchanger.

            I must be tired because it took me to long to understand your phrase, but yes that is the point. It all depends on the coefficient of performance (COP) of the heat exchanger. There are ventilation devices with heat exchangers that function with very high COP. Instant COP can be as high as 8kW of heat produced per kW of electricity power consumed and this is more or less independent on external climate because the exchange occurs within autonomous units inside the building.

            Reply
          2. Yikes

            Furnaces have become more energy-efficient over the years. A gas furnace made in the early 1970s typically has an AFUE of about 65 percent. The lowest efficiency allowed by law for new gas furnaces is 78 percent, and some new models achieve 97 percent, near-total efficiency.

            https://www.consumerreports.org/cro/gas-furnaces/buying-guide/index.htm

            Most combined cycle turbine machines at best hit near 70%, and simplex cycle machines, which are taking over the market, are slightly less efficient at base load, if more efficient at peak lopping and far less capital intensive. Distribution losses would be similar for gas and electric. Hence I’m not sure about your last paragraph, though your first two paragraphs make a clearer case (if limited to very small loads for short periods of time in case of water injection to soil).

            Reply
    2. integer

      Regarding the gas dispute between Russia and Ukraine, Naftogaz, Ukraine’s state-owned energy firm, took Gazprom to the Stockholm arbitration court in 2014 over gas volumes and pricing. The dispute came to a climax early last year when the ruling was handed down, with Naftogaz being awarded approximately $2.5b. Ukraine attempted to recover this via the freezing of Gazprom assets in the EU, however Gazprom appealed the ruling and it was suspended. My understanding is that Gazprom regarded this incident as the last straw.

      Reply
      1. Ignacio

        The current is dispute is precisely the reason behind concerns on gas supplies to Europe in January 2020 given that the current contract between both companies ends in december 2019. It could well occur that Russia ends exporting gas to Europe through Ukraine and disrupt supplies during the winter but if Nord Stream 2 is supplying gas in november it seems that such disruption would be minor or at least not dramatic. European companies have been trying to convince Ukrania to let european transit operators manage the transit of russian gas through Ukrania as a way to convince Gazprom that Ukrania would be reliable.

        The Stockholm arbitration came with more or less a salomonic solution somehow favourable to ukranian interests but then the ruling was suspended. Uncertainty in this issue continues.

        The followink link is from april but still germane. It provides a different view of the geopolitical problem compared with the post above and discusses the role of the US.

        The Gazprom-Naftogaz Stockholm Arbitration Awards: Time for Settlements and Responsible Behaviour

        Reply
        1. drumlin woodchuckles

          I remember reading that European companies want to manage the Ukrainian gas pipelines . . . which those European companies never lifted a finger to help build . . . so as to charge and capture themselves all the transit fees across Ukraine for that gas, meaning Ukraine would no longer get those fees.

          In other words, those European companies are offering to take over Ukraine’s gas-transit money in return for precisely nothing at all of any value whatsoever. The simulacrum of “greater reliability” is simply an excuse so lame that so far the Ukrainians have not been impressed by it. (Maybe the Euramerica-backed Nazi Coup Regime in Kiev will be more sympathetic to that line.)

          Or so I have read.

          Reply
  5. Steve H.

    “Gerhard Schröder, former Chancellor of Germany, former Prime Minister of Lower Saxony, Chairman of the Board”

    Iirc, before the Berlin Wall fell, it was Putin’s job to have the dirt on German power-players. He, himself, was in the perfect spot to leverage the reunification. That’s not ‘Russia Russia,’ it’s an acknowledgement that he has been a masterful spider. The nearest we’ve had in the US was Cheney, but Dick was never a nationalist, he sold out the country for Halliburton. We have Cheney to thank for scuttling the PNAC plan. Thanks, Dick! In the Face!

    Reply
    1. Yikes

      “Putin and his colleagues were reduced mainly to collecting press clippings, thus contributing to the mountains of useless information produced by the KGB.”

      https://books.google.ca/books?vid=9781594488429&redir_esc=y

      This from the ages of 25 to 30. So much for your spider mastermind.

      If Cheney scuttled the PNAC plan, then every American from poor or middle class families owes him a debt of gratitude for not re-instating the draft and sucking the USA into many, many versions of Afghanistan, Iraq, and Vietnam.

      Reply
      1. Steve H.

        Thank you, Yikes, I ordered the book.

        I’ll come back to this and post after I read it. Until then, in my opinion, that guy gives every indication of being one of the top three political operatives of the past generation+. Look at how he has played the hand he was dealt.

        There’s also this: in fundraising, a single whale compensates for an entire organizational structure in efficacy. It’s not the quantity of your sources, it’s the quality. And you never give up your sources.

        As for Cheney, yeah, nauseating, isn’t it?

        Reply
          1. Bill Smith

            Putin’s Kleptocracy: Who Owns Russia? By Karen Dawisha doesn’t paint Putin as very ‘spider’ like mastermind either.

            More of an opportunist / Mafia boss.

            Reply
            1. integer

              How the West continues to fatally misunderstand Russia & Putin Off Guardian

              Almost every book published in the West about Russia and Putin is misleading, but the authors cannot see this. They come from within self-indoctrinated intellectual communities that – whether physically living in the West, or even in Western journalistic and diplomatic enclaves within Russia, it makes no difference really – have internalised group mindsets of hostile Western perceptions of Russia to the point where they cannot see outside this framework. Anti-Russian assertions of belief, repeated and exchanged often enough, become the alternative reality. As Goebbels understood.

              Look at these examples of titles of a few well-regarded recent books about Russia:

              The New Tsar: The Rise and Reign of Vladimir Putin, Steven Lee Myers, 2016

              Winter is Coming: Why Vladimir Putin and the Enemies of the Free World Must be Stopped, by Garry Kasparov, 2016

              Mr. Putin: Operative in the Kremlin, by Fiona Hill and Clifford Gaddy, 2015

              Putin’s Kleptocracy: Who Owns Russia? by Karen Dawisha, 2015

              Putin’s Wars: The Rise of Russia’s New Imperialism, by Marcel H Van Herpen, 2015

              The Man Without a Face: The Unlikely Rise of Vladimir Putin, by Masha Gessen, 2013

              Since at least 2008, perhaps earlier, the majority of Western commentators and writers on Russia have come to live in such a distorted mental world of their own imagining. They prefer to re-circulate their own Russian nightmare images – their own language of Russian politics – than to reckon with the reality of what is now a generally decent and serious, well-governed and well-mannered country. To these writers, Putin is simply a greedy criminal whose brutal kleptocratic regime threatens the peaceful world order.

              Reply
        1. Yikes

          Don’t waste your money. The point was to show even a Putin hater would have hardly called him a mastermind in his youth. Putin isn’t nearly as powerful as the west makes him out to be, but he was dealt a country full of extremely intelligent administrators like Lavrov and the skills to know when to get out of their way, and finally an oligarchy which for the most part is very patriotic, if still corrupt. That can make a huge difference.

          RealNews Networks series on Putin would be a better investment of your time.

          Reply
          1. Peter

            Russian politics seems to be a balancing act more than exerting outright power.
            This author seems to be closer to portraying the reality of Russian politics than the dreamworld Ms. Gessen occupies.
            https://blogs.ucl.ac.uk/ssees/2013/03/11/sistema-how-putins-russia-is-governed/

            Personalised power networks enable leaders at all levels to mobilise and to control, yet they also lock politicians, bureaucrats and businessmen into informal deals, mediated interests and personalised loyalties. This is the ‘modernisation trap of informality’: one cannot use the potential of informal networks without triggering their negative long-term consequences for institutional development…..
            Quite the opposite, it is amazing how much does get done in Russia despite the infrastructural problems and institutional inefficiencies, and the explanation lies in the effectiveness of networks and relationships. Sistema’s output is impressive because it is capable of mobilising people, of recruiting youth and of creating opportunities. ……
            Putin’s sistema, which he had shaped by mobilising his personal networks, is not really controlled by him. Like everyone else, leaders are ‘locked’ into their networks while relying on them in performing their public functions and satisfying their private needs. Reversely, not relying on networks might also limit, if not undermine, the leadership capacity – they have to operate within the culturally acceptable codes and discourses, otherwise they lose their base. Thus, the main implication of the ambivalence of sistema is that its leader is also its hostage.

            Reply
      2. Peter

        destroyed years of progress and made his country once more a threat to her own people and to the world.

        Years of “progress”? – with the help of US “consultants” Yeltsin in true Neo Con/Neo Lib manner sold the USSR assets to any bidder, helped to rape the country, drove Russian population into poverty, helped to drive down reproduction rate and upped alcohol misuse …that kind of progress, and began the first Chechen war? That kind of progress?

        Reply
  6. drumlin woodchuckles

    If Nordstream really gets all the way built, and then used, it could encourage Europe to buy less American LNG than what Europe might otherwise have bought.

    And if the American gas industry can’t sell as much LNG as they hoped, they won’t be able to create the shortage of NatGas they hope to create right here in America, which means they won’t be able to raise the NatGas price as high as they were hoping. And that means that a still-low gas price would still help to undercut coal in the electricity industry.

    Meanwhile, lets hope that every proposed LNG export port on the Pacific Coast can be stopped and blocked, to prevent the leakage of our gas that way. In a perfect world, all the millions and millions of #Resistance members would be putting their money where their hashtags are . . . and strangling back their use of electricity and natural gas as hard and deep as they could bear for the next few decades to come. Such action could perhaps strangle the thermal coal side of the industry to eco-salvational extinction.

    Fifty million pairs of strong blue hands . . . wrapped around the neck of Big Koch and Coal.

    Reply

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