Why do we need additional gas pipelines like Nord Stream?
According to one likely scenario for the period up to 2035, European economies will continue to experience moderate growth. Because energy intensity will decrease, overall energy demand will more or less stagnate. But gas demand will grow because gas will come to substitute coal and nuclear energy in electricity production. By 2035, European gas demand is likely to have increased by about 100 bcm.
Because gas is obviously more climate-friendly than coal, and far less dangerous than nuclear energy, natural gas can function as a “bridge” to the era of renewable energy.
On the supply side, European domestic gas production will fall because most gas provinces in Europe are in decline. Unconventional gas, such as shale gas, tight gas, biogas and coalbed methane, will partly offset declining European natural gas production, but will not reverse the trend completely. Across Europe, shale gas production will remain low due to environmental concerns.
European demand for imported gas will increase as a consequence of the combined effects of increasing gas demand and decreasing domestic European supply. Where will this additional supply come from? LNG will partly be rerouted from the United States to Europe, but there will still be a significant increase in pipeline gas import demand. Gas from Russia, North Africa and possibly from the Near East and the Caspian Region will fill this import gap.
The construction of additional pipeline capacities from Russia to Europe, like Nord Stream, as well as South Stream, will enhance gas transport flexibility. To a certain extent the construction of additional export pipelines will increase the overcapacity in gas pipeline transport from Russia to Europe that already exists. But both Nord Stream and South Stream will enable Gazprom to reroute gas flows from transit to direct (subsea) pipelines thus increasing gas transport flexibility. Gazprom’s bargaining power in negotiations over transit issues with either the Ukrainian or the Belorussian sides will undoubtedly grow.
If Gazprom could explain the commercial basis underpinning its pipeline strategy to the European public, the doubt that exists today regarding its motives would be eliminated.
Roland Götz is Energy economist, German Institute for International and Security Affairs, (ret.)