Nord Stream 2 will provide Europe with an additional 55 bcm/y of gas import capacity from 2019. It will connect Germany, Europe’s largest gas consumer, to Russia with its plentiful gas reserves. It is sponsored by six of Europe’s biggest energy companies:
Financing for the €9.5bn project in place and the manufacturing of the pipes is well underway, with construction due to start later this year. Once commissioned, Nord Stream 2 will aid the competitiveness of the European gas market, improve the security of supply, and contribute to a reduction in carbon emissions.
Europe is becoming increasingly import dependent. By 2035 Europe will require an additional 120 bcm/y of gas imports. Nord Stream 2 will give European consumers the choice as to how fill this gap – the choice between competitive pipeline gas and more expensive LNG. By reducing Europe’s LNG import requirements Nord Stream 2 could benefit all European gas consumers by up to €35bn/y. EU market rules ensure gas can flow to where it is needed most within Europe, based on price signals. Plentiful import infrastructure means that no single supplier can impose its pricing on the market – rather the price will be set by the marginal supplier which is likely to be LNG. Nord Stream 2 will be a part of this dynamic market and allow Europeans to “play the market” rather than be “played by the market.”
As a new and separate pipeline system, Nord Stream 2 will improve European security of supply. Problems with three different sets of infrastructure in Europe in December 2017 illustrated the benefit of having more than one way to supply gas to the market; Nord Stream 2 will increase the resilience of European import infrastructure. Moreover, unlike LNG ships which can be, and are, diverted to other markets, Nord Stream 2 is a permanent connection to the largest gas reserves in the world by a route which is up to 2000 km shorter than existing routes.
Lastly, Nord Stream 2 will contribute to Europe’s efforts to reduce CO2 emissions. The pipeline itself could save 8.2 mtpa of CO2 (the total annual emissions of, for instance, Cyprus) compared to existing routes from Russia. Comparing the transportation of 55 bcm/y via Nord Stream 2 to an equivalent volume of LNG, the savings are between 17 and 45 mtpa of CO2, depending on the distance travelled. The savings could be even greater if the gas Nord Stream 2 transports replaces coal in power generation – 160 mtpa of CO2, the total annual emissions of Sweden, Finland, Lithuania, and Estonia combined. It is interesting to know that Europe’s current gas-fired generation capacity could replace virtually all of Europe’s coal generation, simply by increasing its utilisation rate.
So the benefits of Nord Stream 2 are clear, and it won’t be long before European citizens will be able to enjoy them.
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Image courtesy of Nord Stream 2
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