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Cost of the Nord Stream
pipeline is surprisingly high
In October 2006, Hydro
commissioned the Langeled pipeline that brings gas from the Ormen Lange gas
field in the North Sea to Easington in the United Kingdom. The official
opening of Ormen Lange is scheduled for October 6, 2007. Remarkably, Phase 1
of the development, involving the Langeled gas pipeline, the land-based
process plant at Nyhamna and offshore installations on the Ormen Lange gas
field itself, was completed within the total budget of NOK 50 billion (in
2003 Norwegian krone terms - Source:
Hydro). It equals to EUR 6.2 billion or USD 7.1 billion in the money of
2003. The Ormen Lange field is expected to reach plateau production of 25
bcm/year in 2010.
The Langeled Gas Export System
is an ideal project to compare with the Nord Stream pipeline. The
table below shows key technical specifications and costs of both projects.
Note that the first sections of the Langeled pipeline, from Nyhamna to
Sleipner, are made of 42-in pipe and have design pressure of 250 / 215 bar
and capacity of 80 mmcm/day. From Sleipner to Easington it is made of 44-in
pipe and have design pressure of 156.8 bar and capacity of 74 mmcm/day.
Table
1.
Comparison of Nord Stream and Langeled Pipeline Projects
Specifications |
Nord Stream
|
Langeled
|
Pipeline length
|
1198 km |
1200 km |
Diameter
|
48 in
|
42-44 in |
|
Pressure |
220 bar |
157 to 250 bar |
|
Reported steel
pipe requirements (one line) |
1.10 mill. tons |
0.85 mill. tons |
|
Maximum sea depth |
210 m |
360 m |
|
Annual capacity (one
line) |
27.5 bcm/year |
25.0 bcm/year |
|
Daily capacity (one
line) |
88 mmcm/d (1) |
74-80 mmcm/d |
|
Cost
of the first line
(in 2007 euros) |
~EUR 4.0 bn (1) |
EUR 2.5 bn |
(1) Estimated
Sources:
Ormen Lange: Facts & Figures;
Langeled Gas Export;
Nord Stream:
Facts & Figures
The comparison should consider
the price index for construction materials and services. The Langeled construction contracts were signed at a good
time when the price of steel pipe was lower and the number of offshore
pipeline projects was very limited. Nord Stream is being planned at the time
of shortage of offshore and onshore construction teams and at a higher price
of steel pipe.
It is worth
noting that the Langeled pipeline
was completed NOK 3 billion below the budget (Source:
Hydro). This is very unlikely to happen to the Nord Stream pipeline.
Recent cost performance of Gazprom leaves little doubt that the
project would seriously exceed its budget. Monopolies
never have a reason to cut costs and usually have a very good one to raise
them.
Mikhail Korchemkin, Managing Director
September
26, 2007
(Clarification of the Nord Stream cost - December 5, 2007)
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