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Nord Stream explainedNatural gas is the most widespread and environmentally-

friendly fossil fuel. According to the World Energy Outlook 2009, in 2007 the EU needed 312 Bcm of imported natural gas, and demand is expected reach 516 Bcm by 2030. Meanwhile the EU reserves of gas are depleting. This means that the EU will need to import an additional 200 Bcm/a of gas via new routes to provide for its growing needs. Currently Russia is the main supplier of natural gas to the EU.

The Nord Stream Pipeline has been in development since 1996. According to Sergey Serdyukov, Technical Director of Nord Stream AG, the initial plan involved a pipeline with a throughput capacity of 19.2 Bcm, although this later grew to 30 Bcm. The final design involves two 1,224 km long parallel pipelines, 1,220 mm in diameter, with a capacity of 27.5 Bcm/a. The outlet pressure at the Portovaya Bay compressor station in Russia will be 220 bar, while the outlet pressure in Germany will be 106 bar. Construction of the second line is planned for completion by November 2012.

This pipeline will join the Russian gas supply system to the European gas transportation systems, and will deliver gas to Belgium, the UK, Germany, Denmark, the Netherlands, France, and the Czech Republic. The pipeline’s route will run under the Baltic Sea from the Russian coast near Vyborg, to the German coast near Greifswald. The pipeline will be able to provide the EU with approximately a quarter of its additional energy needs.

“No one in the world has yet built a pipeline that could transport such quantities of gas without compression along [the distance of] 1,224 km. As we will have a pressure excess at the

German landfall, it will not be necessary to build a compressor station at Greifswald. This will enable the transportation of gas without any additional compression through the Baltic Sea and for a further 100 km on land,” Mr Serdyukov said.

Nord Stream AGNord Stream AG was set up to design, construct, and operate

the pipeline. The project shareholders are Gazprom, with a 51 per cent stake, the German companies Wintershall Holding AG and E.ON Ruhrgas AG, each with a 20 per cent stake, and Dutch firm N.V. Nederlandse Gasunie, with 9 per cent. Talks are also being held with the France’s GDF SUEZ, which is expected to enter the consortium with a 9 per cent stake in the first half of 2010. Currently, Nord Stream AG has approximately 160 employees.

Each shareholder has a strong interest in the early execution of the project. Nord Stream means guaranteed supplies of natural gas for European companies, and will provide a stable distribution route for Gazprom. The Russian corporation has already signed supply agreements with Dong Energy (Denmark), E.ON Ruhrgas (Germany), GDF SUEZ (France), Gazprom Marketing & Trading (UK), and Wingas (Germany) to deliver 22 Bcm of gas through the pipeline, and amount equal to the capacity of the first pipeline.

FinancingAccording to the financing structure, the shareholders will

invest 30 per cent of the project total cost, in accordance with their respective shares, while the remaining 70 per cent is

On 9 April 2010, a ceremony was held at Portovaya Bay in Russia to celebrate the start of the Nord Stream pipeline construction. The ceremony was attended by representatives from the shareholding companies and participating countries. It is planned that by late 2011 European consumers will receive Russian gas through the new pipeline and, by the end of 2012, the pipeline will reach its rated capacity of 55 Bcm/a.

Nord Stream PipelineBy Alexander Fvolov, Analyst, National Energy Institute, Russia

Saipem’s Castoro Sei pipelaying vessel.

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being funded by external bank finance. On 16 March 2010, the consortium announced that it had successfully obtained the €3.9 billion ($US5.1 billion) required for the first phase of the project, and this meant that construction of the first of the two pipelines could begin on schedule in April 2010. The total cost of the project amounts to €7.4 billion ($US9.7 billion).

The global financial recession has not affected Nord Stream AG’s budget. The stability of the company, even in conditions of energy market fluctuations, guarantees a fixed price for gas transportation, which does not depend on fluctuations of the gas price and, despite the global recession, the project is still attractive for investment. The project financing will be organised by 26 banks, and the consortium will start attracting financial sources for the second phase in 2010.

RatificationThe pipeline will cross the territorial waters of five nations,

and in order to begin construction it was necessary to obtain permits from each government. Since April 2006, Nord Stream AG has gone through the long and complex procedure of project ratification with all the Baltic countries. Russia, together with the other eight countries with access to the Baltic Sea, participated in a long-term process of international consultation, in accordance with the Espoo Convention on environmental impact assessment in a trans-boundary context.

The company conducted a thorough and in-depth study of the Baltic Sea, spending approximately €100 million ($US132 million). More than 2,000 sq km of sea floor was thoroughly examined, and water and seabed were extensively tested. In addition, the company took part in more than 30 public consultations, as well as numerous open discussions and expert seminars, at which measures to minimise any environmental impact were discussed. Also, in light of the recommendations of some countries, it was decided to optimise the pipeline route in various sections. All the necessary permits were received by the beginning of 2010.

One of the most important tasks of Nord Stream AG is to ensure the safety of the fishing community throughout the pipeline construction period. The company will pay the indemnity to those fishermen who will have to adjust their fish trawling methods because of the pipeline. Together with fishing organisations, Nord Stream AG will establish a special information programme which will explain how fishing should be organised near the pipeline

during its construction and operation. The exact co-ordinates will be presented in a format that is compatible with the electronic systems used by professional fishermen and fishing organisations.

At the Baltic Sea Action Summit, held in Helsinki in February 2010, the management of Nord Stream AG decided to establish a Data and Information Fund, containing data on the ecology of Baltic Sea, to further the study and preservation of this marine ecosystem. The newly established fund will have databases of information, as well as relevant software and equipment.

The start of constructionAmong the guests at the ceremony were Russian Federation

President Dmitry Medvedev, EU Energy Commissioner Günther Oettinger, Aleksey Miller, Chairman of Gazprom, Reiner Seele, Chairman of Wintershall Holding, Bernhard Reutersberg, Chairman of E.ON Ruhrgas AG, and Marcel Kramer, President of Gasunie, as well as Matthias Warnig, Managing Director of Nord Stream, and Gerhard Schröder, the head of Nord Stream’s shareholder committee.

In his speech, President Medvedev pointed out the importance of the Nord Stream Pipeline to all the project’s participants. “The Nord Stream Pipeline is an example of effective multilateral co-operation in power engineering. It opens up possibilities for the development of transnational energy infrastructure and joint development of gas deposits. And it means that it can create production facilities and new jobs in Russia and EU countries,” he said.

The Russian President also emphasised that the project “is a key factor in providing global and European energy security”, and will provide European consumers with secure fuel supply at reasonable prices. According to Mr Medvedev, despite the numerous EU experiments into alternative energy supplies, consumption of gas – as an environmentally-friendly fuel – will increase in Europe.

Mr Seele noted that “natural gas is the environmentally safe energy carrier of the 21st century” and Nord Stream “will add to our other supply sources in Europe, northern Africa and the Middle East”.

Mr Reutersberg also expressed his opinion about the new route of gas supply to Europe. “E.ON Ruhrgas has strong reasons to participate in the Nord Stream project – Germany and Europe need this pipeline as a diversification element of the contingent gas transportation infrastructure,” he said. Furthermore, Mr Schröder declared that Europe not only needs Russia but Russia, as a supplier, needs Europe. Accordingly, their co-operation in projects such as Nord Stream is mutually beneficial.

Mr Miller and the Director of the Hermitage Museum Mikhail Piotrovsky presented an original portrait of the Russian empress Catherine I, painted when the imperial couple visited Greifswald in 1712. Greifswald will be the first city to receive gas through the Nord Stream Pipeline, 300 years after this historic visit. The portrait of Catherine I will be exhibited in the Hermitage, and will also be copied for the Portovaya Bay compressor station.

At the conclusion of the ceremony, Mr Warnig gave a signal and two pipes, symbolising Russia and Europe, were welded together, and President Medvedev wrote ‘Good luck’ on the ‘Russian’ pipe.

Opening Ceremony at Portovaya Bay.

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Pipeline routeingAt the beginning of 2008, the shareholder committee of Nord

Stream AG confirmed the effective schedule, according to which gas supplies will start in 2011. However, route planning and environmental research took longer than originally foreseen. Thus, in accordance with requests by Denmark and Finland, the route was optimised near Bornholm Island in Denmark and in the exclusive economic zone of Finland. Each new route variant required additional seabed research, detailed technical design, and environmental assessment.

Also in 2008, research was conducted to detect chemical munitions sites on the route. In the Danish sector three sites were detected. These objects are not viewed as explosives, because their detonators were withdrawn before dumping, and Danish experts do not recommend moving them. It is planned to lay the pipeline away from these sites, to avoid any contact. During the seabed research, approximately 70 conventional munitions were detected in the pipeline corridor. It is intended that these will be de-activated prior to construction in the area.

ContractorsThe project contractors were chosen following an international

tender, and were selected on the basis of technical, commercial and time criteria. Saipem Energy Services S.p.A. (Italy) has the lead contract for technical engineering, while Germany’s Europipe and Russia’s OMK are manufacturing the pipes for the first line. The pipes for the second line will be manufactured by Europipe, OMK, and Japanese firm Sumitomo. Nord Stream AG has concluded a contract with French company EUPEC to provide logistic and concrete coating services. Saipem, who recently finished construction of the Dolphin Pipeline in the Persian Gulf, and the deep-water Blue Stream Pipeline in the Black Sea, will be responsible for pipelaying. Russian company Stroygazconsulting LLC is responsible for construction of the 1.5 km Russian onshore

section of the pipeline, as well as onshore facilities including pig launchers and receivers, and shut-off valves.

Preparations for constructionNord Stream AG plans to reduce construction time by using two

pipelayers simultaneously, optimising the construction schedule and supply chains. For more effective pipelaying, a special infrastructure was created, including concrete weight coating (CWC) factories, warehouse terminals, and port terminals to store the pipe. To minimise transportation distances, Nord Stream AG has set up logistic centres on the Baltic coast: Kotka (in the Gulf of Finland, Finland) and Mukran (Rügen Island, Germany) were chosen for the CWC plant and warehouse terminals, while Slite (Gotland Island, Sweden) has become the centre of pipe storage. The ports of Hanko in Southern Finland and Karlskrona in Southern Sweden will be used as additional storage centres to reduce transportation distance to less than 160 km.

Special pipeline steel with high strength and elasticity was developed in Germany for the project. The interior surface of the pipe is processed to have a roughness of only 4–5 microns, which will considerably increase flow along the finished pipe and improve capacity by up to 15 per cent. The pipeline will have three segments with different wall thicknesses, designed for different pressures. In total, more than 200,000 steel pipes will be needed to lay both lines of Nord Stream: each 12 m pipe length and its concrete coating will weigh between 19 and 31 tonnes, and the total weight of all the pipe that will be used is nearly 4.7 million tonnes.

The additional weight provided by the concrete coating is necessary for ‘on-bottom’ seabed stability. “The pipes are covered with a special corrosion-resistant coating and the concrete weight coating which contains high-density iron oxide extracted from deposits in Sweden. The iron oxide is granulated, mixed with concrete, and then laid on the pipes in the form of an armored spiral shell which is covered with this concrete and then cured

The planned pipeline route.

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with steam in special tunnels. As a result, the covering becomes high tensile,” Mr Serdyukov said. Each pipe is assigned an individual number, and undergoes a strict quality examination. The pipes will also be monitored during the whole lifetime of the pipeline, which is designed to be at least 50 years.

Production has also started on the special gravel backfill that will be used to support the pipeline on certain sections of the route. Finnish contractors Rudus and Destia, and Swedish Eaglerock/NCC, will provide the material for the first phase, which will then be delivered to the ports of Kotka, Mussalo, and Oskarhamn. This will start in April 2010, depending on the weather, and preparations for the landfalls are also currently being conducted in Russia and Germany.

Control and operationThe Nord Stream Pipeline will be equipped with an emergency

repair system and the company will undertake regular inspections along its route. In course of these inspections, the

pipeline position on the seabed and damage to its exterior surface will be checked. The cathodic protection current will also be carefully recorded.

Internal inspection during operation will be performed with the help of in-line inspection pigs which will be launched at the onshore facilities in Russia, travel the whole pipeline route propelled by the gas pressure, and then received and removed in Germany. Nord Stream AG will use two main types of pig: the first will detect defects in the pipe wall by measuring leakage in the magnetic flux induced by the tool; the other type of pig records the position and roundness of the pipeline, checking for displacements and the possibility of deformation.

If scheduled shutdowns are required, the operation will be coordinated with the operation of the compressor station and the consumption levels of the European gas distribution system. Due to European gas reserves, and the availability of gas from other sources, such shutdowns on the Nord Stream Pipeline will go unnoticed by consumers.