Russian Gas for Europe

Russia to Europe Pipeline
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Sparks flew in the cold winter air as work started on the Russian onshore section of the North European Gas Pipeline (NEGP) on December 9, 2005 in Babayevo, 800 km east of St. Petersburg. The event was witnessed by Michail Yefimovich Fradkov, prime minister of the Russian Federation; Victor B. Christenko, the Russian industry and energy minister; Michael Glos, German economy minister; and Harald Ringstorff, minister president of the German state of Mecklenburg-West Pomerania. Prior to this, the chairmen of the three companies involved in the construction of the NEGP - Alexey B. Miller (OAO Gazprom), Jürgen Hambrecht (BASF Aktiengesellschaft) and Wolf H. Bernotat (E.ON AG) - signed the two long-distance pipelines.

The connecting pipeline, which will now be built quickly, links the planned pipeline through the Baltic Sea with the existing gas pipelines from Siberia. The new onshore pipeline through Russian will stretch 917 km. It will have a diameter of 1,420 millimeters and is designed for an operating pressure of 100 bar. Seven compressor stations will provide the necessary pressure in the pipelines as the gas is transported from its source in Siberia to the Russian Baltic coast close to Vyborg. The start of construction work also marked the launch of a newly founded German-Russian joint venture, North European Gas Pipeline Company. Gazprom has a 51 percent stake in the company, BASF and E.ON 24.5 percent each. NEGP Company will initially deal with further economic, technical and ecological studies for the construction of the envisaged subsea pipeline.

Natural Gas for Europe

Germany is Gazprom's largest export market. Although two long-distance gas pipelines already exist, the NEGP will provide Gazprom, the world's largest gas producer, with an additional delivery route to this growing market, and it will allow the company to improve its position as a reliable supplier in Germany and Western Europe. The NEGP complements the existing infrastructure, which will not be sufficient to supply Europe with natural gas in the future. The timing of the startup and initial gas deliveries via the NEGP are planned such that they help bridge the gap between expected consumption in Europe and volumes that have already been contracted. In the long-term, this import gap is likely to become even larger as demand in Europe grows and dependence on imports rises because of the decline in production in Europe.

The existing Russian import routes via Ukraine, the Slovak Republic and the Czech Republic and via Belarus and Poland will continue to be of major importance in ensuring secure supplies of Russian gas in Europe. The long-term importance of the current transit routes is also reflected by modernization and expansion measures. Expansion of the Jamal-Europe pipeline through Belarus and Poland has increased gas transport capacity from 22 billion to 29 billion cubic meters per year. In the final expansion phase, capacity will increase further to up to 33 billion cubic meters following the startup of a further compressor station in 2006.

NEGP Strengthens Supply Security

The NEGP will link the Russian Baltic coast near the city of Vyborg with the German Baltic coast close to Greifswald. The pipeline will be more than 1,200 kilometers in length, with a diameter of 1,200 millimeters and an operating pressure of 210 bar. The pipeline is scheduled to start operations in 2010. In a first phase, a leg with a transport capacity of around 27.5 billion cubic meters of gas per year is to be built. The project includes the possibility of building a second pipeline, thus doubling the transmission capacity to approximately 55 billion cubic meters per annum. For the two-leg option, the total capital expenditure for the offshore project will amount to more than 4 billion Euro. In addition, Gazprom alone is investing 1.3 billion Euro in the onshore section now started in Russia.

Russian natural gas will become increasingly important for Central and Western Europe because of the decline in production in the North Sea and the rising demand for gas. With a landing point on the German Baltic coast close to the Polish border, the NEGP will have only short distances to important markets such as Germany, the United Kingdom, the Netherlands, Belgium and France, as well as Poland, Scandinavia and the Baltic States.


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