D. Medvedev has suggested to Germany expanding Nord Stream

Today President Medvedev and the Chancellor of Germany, A. Merkel will hold  intergovernmental consultations in Hanover. A source of Kommersant has learnt one of the main issues will be the the possibility of the construction of a 3rd branch of Nord Stream from Russia to Germany via the bottom of the Baltic Sea. Moscow wants to use the a chance of the closing down of the nuclear industry in Europe to increase the gas supply to the European market. The expansion of Nord Stream has become necessary as there is a delay to the realisation of South Stream  due to the position of Turkey. However, the analysts and the German chairmen interviewed by Kommersant doubt if the project’s realisation is reasonable.

The 3rd branch
A high-ranking source in the Russian delegation told Kommersant that D. Medvedev might offer A. Merkel to construct the 3rd branch of Nord Stream. According to him, it is about the 1st presentation of this idea to the key European partner of Russia in the gas sphere. The main thing for us is to listen to is the opinion of the German party and have their political support, an interlocutor of Kommersant said. The President’s assistant S. Prikhodko confirmed that Nord Stream would be discussed: taking into account the decision of Germany on the full shutdown of the nuclear sphere by 2022, new possibilities to expand our cooperation in the energy sphere are open, including the capacities of Nord Stream. 
The Russian Prime Minister V. Putin was the first to speak about the construction of the 3rd branch of Nord Stream. Last Friday at the meeting with the workers of MMK he said that the market is open for the plant’s products for the near future: the 2nd branch of Nord Stream via the bottom of the Baltic Sea will be under construction. South Stream is the next, and maybe another stage of Nord Stream.
 We really realize the possibility of constructing the 3rd line of Nord Stream, the press secretary of Mr. Putin, D. Peskov told Kommersant. It is still in theory. We base on the fact that Europe might soon face a gas deficit. There is a tendency of gas consumption growth in Europe due to the shutdown of the nuclear industry. In these conditions, according to Mr. Peskov, even 2 lines of Nord Stream might not be able to pump the necessary volumes. 
Nord Stream from Russia to Germany via the bottom of the Baltic Sea is one of the priority new routes of Russian gas supply to Europe. The 1,224 km long gas pipeline is constructed by Gazprom (51% in the project) together with the German E.On Ruhrgas and Wintershall, Dutch Gasunie and French GDF Suez. The first line with 27.5 bln cubic meters capacity has already been constructed and will be put into technical operation in the autumn. The 2nd line of the same capacity is to be launched at the end of 2012. Nord Stream costs €7.4 bln.
The participants of Nord Stream are not still aware of Moscow’s initiative. At the present moment we construct 2 parallel branches of the gas pipeline and don’t plan the 3rd one, a representative of the Nord Stream AG operator N. Vorontsova said. The representatives of E.On Ruhrgas, Wintershall and GDF Suez commented the same way. Gazprom and Gasunie didn’t answer.

Non-talkative Turkey 
The necessity to start negotiations about the 3rd line of Nord Stream with the German partners arose due to the problems of another Gazprom’s project – South Stream, a source of Kommersant in the Government of Russia explains. Russia hasn’t as yet obtained the permission from Turkey to construct the pipe on its territorial sea as yet.
South Stream is a gas pipeline with the proposed total capacity of 63 bln cubic meters of gas a year, it is supposed to go via the bottom of the Black Sea from Russia to Bulgaria, then to Serbia, Hungary, Slovenia, Austria and North Italy. The branches will be constructed to Croatia, Macedonia, Greece and Turkey. The latter 3 – from the territory of Bulgaria. The shareholders of the operator of the sea site are Gazprom and ENI, EDF is supposed to join them by the end of the year.
V. Putin agreed with the Prime Minister of Turkey R. Erdogan on laying of the underwater part of South Stream via the territory of Turkey in Ankara in August 2009. In the exchange Moscow agreed on the construction of a profitable for Turkey oil pipeline Samsun-Ceyhan harmfully to its own project Burgas-Aleksandrupolis, it made advances in the issues of construction of the 1st nuclear power station in Turkey that will be built by Rosatom on lucrative for Turkey conditions. However, the final permission hasn’t been issued by Ankara though it undertook to do it by December 10th 2010. Now the Turkish party promises to issue the permission by November 1st, but according to an interlocutor of Kommersant in the Government, there is a good possibility of not obtaining anything by that time. 
Sources of Kommersant in the Ministry of Foreign Affairs of Russia explain the delay by 2 reasons. First, Russia is not eager to fulfill the agreements on Samsun-Ceyhan. Initially we agreed on it but now we have more doubts if it is economic efficiency. It is cheaper to ship oil by tankers via Bosporus and Dardanelles, he says. Second, Ankara plays an active political game around South Stream.
The project is of no economic interest to Turkey – it doesn’t take the volume it might receive by Blue Stream. The transit profit is not that important for Turkey, an interlocutor of Kommersant thinks. The geopolitics and the possibility to become the largest gas hub in Europe are more important for it. So Turkey might bargain for a long time choosing lucrative conditions. In this situation, according to the interlocutors of Kommersant in the Government of Russia, Moscow might freeze the idea of South Stream for a while, and grow the export capacities into Europe with the support of the trustful partner – Germany.
If Gazprom had turned away from South Stream or even cut the capacity of this gas pipeline, it would have been positive news for Gazprom’s investors, V. Nesterov from Troika Dialog says, as the economy of this project is at least disputable. It is doubtful that the €15.5 bln cost pipe will be totally filled. M. Korchemkin from East European Gas Analysis adds that the banks might not finance Gazprom’s project with a low pay –off. The 3rd line of Nord Stream would be  cheaper to Gazprom, both analysts think – about €3-4 bln. It is possible to re-direct the gas supplied by Nord Stream from Germany to the Southern Europe, on which South Stream is oriented, with the help of the inner European networks, V. Nestrov thinks. Moreover, Nord Stream already has a status of the trans-European project that allows it to hope for a number of preferences (first of all, stop the action of the 3rd energy package), however, the European Commission doesn’t want to give it to South Stream.

The analyst can’t but believe that Gazprom will really turn away from South Stream in favor of the 3rd line of Nord Stream. The monopoly has declared that South Stream will be realized not depending on the market situation, M. Korchemkin says. V. Nesterov adds that Gazprom will for sure lay at least 1 line of South Stream otherwise the competitor Nabucco will be laid.
The analysts doubt whether the 3rd line of Nord Stream will be in demand. The capacities of the existing Russian gas pipeline to Europe (200 bln cubic meters) even today significantly exceed the annual consumption of Russia gas (not more than 160 bln cubic meters taking into account the “take or pay” principle), M. Korchemkin says. The main reason to construct the gas pipeline is the intention not to expand the export capacities but to explain the necessity of the construction of new pipelines inside Russia. This year Gazprom announced the record cost of the investment program – 1.2 trln roubles. 
The interlocutors of Kommersant in the Ministry of Foreign Affairs of Germany and the Chancellor’s office also doubt if it is reasonable to lay the 3rd line of Nord Stream. Russian gas is a reliable variant but it is too expensive. We would like not to have lots of Gazprom’s pipes but to construct LNG acceptance terminals and develop the alternative energy sphere, a German delegate says.  

http://www.kommersant.ru/doc/1681445
Translated by Galiya Davletgareeva