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The two-line Nord Stream project
faces a serious synchronization problem. The first line of the new export
project of Gazprom will be fed by the 917-km
Gryazovets-Vyborg
pipeline being built now. The second line is supposed to receive gas from
the Shtokman gas field in the Barents Sea via the 1365-km
Murmansk-Volkhov pipeline (aka Teriberka-Volkhov)scheduled to be
commissioned in 2013.
According to Nord Stream AG,
the second line of the
project is due to be completed in 2012. It is clear that Shtokman will not
start production in 2013. In my view, it is unlikely to be commissioned before
the mid-2020s.
Without additional gas deliveries to
Vyborg, Nord Stream can work at a maximum of 55% of its design capacity, which
means the second line is not needed. Gazprom can solve the bottleneck at Vyborg
by building another 510-km pipeline from Gryazovets to Volkhov. However, this
asset will not be needed when the Teriberka-Volkhov pipeline gets operational.
Gazprom has to chose between laying
an empty 1200-km pipe from Vyborg to Greifswald or building a temporary 510-km
line from Gryazovets to Volkhov. From the financial standpoint, this is a choice
between freezing $6 billion for several years starting from 2012 or $3 bn
forever after the
pipeline from Shtokman is commissioned. In any case, this is a no-win situation
for Gazprom. For Nord Stream, it would be much better if Gazprom builds the
temporary $3-billion line from Gryazovets. At 55% load, Nord Stream would be a
total loss. As a matter of fact, it may be cheaper to abandon the plan of
building the second line of Nord Stream.
Considering the current market
situation, it looks very unlikely for Gazprom to sell any additional gas under
the old pricing formula. Until the 2020s, the Russian gas monopoly is more
likely to export minimum volumes of about 150 bcm/year allowed by the
take-or-pay contracts. Europe will buy additional gas at the price below the
cost of Russian gas delivered to the EU border. In this case, the project
disapproval by the Swedish authorities will be commercially beneficial for
Gazprom. On the other hand, the EU will be more secure with the financially
healthy Gazprom.
Mikhail
Korchemkin
November 4, 2009
Malvern, Pennsylvania,
USA
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