«Gazprom» takes away the impact of the mechanisms in Europe
Gazprom for the first time allowed the possibility of delaying the construction of Nord stream 2 due to the fact that Denmark is delaying the issuance of a permit for the construction of a gas pipeline in its exclusive economic zone. Deputy head of the Department of foreign economic activity of the holding Dmitry Khandoga said that Copenhagen is considering three applications at once, but none of them have been decided.
«At the moment, it is planned to complete the construction of the gas pipeline this year. Indeed, at the end of March, the Danish energy Agency required the project company to submit another application for the route South of Bornholm island, on April 15, the company filed an application. Thus, now the Danish authorities are considering three applications for the route of laying the gas pipeline: in the territorial waters and the exclusive economic zone of Denmark. Nevertheless, the company works,» he said.
Handoga added that to date, more than 1,125 kilometers of the pipeline has been laid in the Baltic Sea. This is almost half of the total length of the two thread «Flow-2″. The company analyzes the impact of the Danish permit and works on measures to keep the project on schedule.»I can say that at the moment there is a possibility of building a gas pipeline and launching it before the end of the year,» summed up the top Manager of Gazprom.
Although, in General, he admitted the possibility of putting the gas pipeline into operation on time, that is, until the end of 2019, this is a noticeable change in rhetoric. Previously, the company stated with confidence that the project is not in danger, including Denmark. The fact is that under international law, a country cannot refuse to issue a permit for laying a pipeline in its exclusive economic zone. The catch is that the time of consideration of the application is not regulated.
The first application for the route through the territorial waters, «Gazprom» filed in the spring of 2017, in August 2018, sent a second, already through the economic zone. And at the end of March 2019, the Danish energy Agency asked to submit a third version of the route, which is now also considering.
April 17 Nord Stream 2 filed an appeal against the claims of the DEA, but this appeal can be considered for a long time, so it is not a fact that it will speed up the process.
«The developer of the project, which is the company Nord Stream 2, it is difficult to understand why after 16 months from the date of entry into force of amendments to the law on the continental shelf is still missing any kind of decision on the basic route within the territorial waters of Denmark and why there is no decision on the route to the North-West of Bornholm in the absence of any objection from the point of view of ecology and safety. The requirement to submit an application for the third option of the route, despite the presence of two existing applications that have passed the review process and meet the conditions for issuing a permit, can be considered only as an intentional attempt to delay the completion of the project,» Nord Stream 2 said at the time.
The company stressed that such actions on the part of the Danish authorities not only undermine the fundamental principles of legal trust and legal certainty of the Danish Constitution and European legislation but also limit the freedom of laying pipelines on the seabed in accordance with the UN Convention (UNCLOS) of 1982.
Even if Gazprom manages to deal with Denmark, the commissioning of the gas pipeline is still in question. As experts told the joint venture, the construction of ground infrastructure in the territory of the host European countries is still late and it is unlikely to be ready to receive gas by the beginning of 2020.
In addition, even if this can be solved, there remains the problem of changes in the EU gas Directive. Recall that the European Commission adopted amendments that allowed to extend the norms of the Third energy package to the «Nord stream-2». This means that now one company cannot be both a pipe operator and a gas supplier. In addition, one supplier cannot use more than 50% of the pipeline capacity, the second half should be left for «alternative» gas sellers, even if they do not exist in principle. It is possible to achieve an exception to this rule, as it was with the continuation of the first «Nord stream» OPAL, but it will take more than one year.
Despite all these difficulties, Gazprom continues to assure that the project will be profitable.
«Even if we assume that there will be a delay, the project will remain profitable, because the life cycle of such projects is 25-30 years or more,» Dmitry Khandoga explained.
Changes in the terms — «even if they are» on the Economics of the project will not be affected, and the capacity of the pipeline, in any case, will be needed, he added.
However, taking into account all these problems, the profitability of Nord stream 2 is increasingly questionable. Perhaps it will be more profitable for Europeans than for Gazprom itself. For example, the company recently assured that if Nord stream 2 starts operating in 2020, European gas consumers can save about 8 billion euros a year at the expense of cheaper energy resources.
But Europeans seem ready to sacrifice economic interests for the sake of policy — reducing «gas dependence» on «Gazprom», as well as ensuring transit through Ukraine. After all, it is already clear that given these difficulties, Kiev will have to agree on transit at least in 2020, and, most likely, later. The current transit agreement expires at the end of this year.
Ukraine in transit negotiations was still not very constructive, putting forward obviously impossible requirements such as pumping through its territory 100 billion cubic meters of gas at the current 80-90. Russian President Vladimir Putin even had to remind the other day that if there is no transit through Ukraine, it will also remain without gas.
«And if there is no transit? You understand that then there will be no reverse. After all, the reverse, it’s virtual. Our gas, which goes to Western Europe, is a gas pipe from Soviet times, how does it work? From the transit gas pipe, there are branches to the whole of Ukraine. These are absolutely well-known things for professionals, the public just may not understand it,» Putin said.
Analyst of the group of companies «Finam» Alexey Kalachev believes that the position of Denmark — not the main problem of «Nord stream-2». It may indeed move the deadline somewhat, but this is not critical. But the Third energy package can really lead to the fact that in the first years Nord stream-2 will work almost in the negative.
To begin with, I note that the cost of laying pipes on the bottom of the Baltic Sea is one thing, and all those pipes that come to the coast from our side — is quite another. They are not even included in the profitability calculations of the project. Stretching pipe across the country is pretty expensive, but it’s all about forgotten.
As for the delay in the construction of the gas pipeline, it is possible due to the fact that Denmark is already considering the third option of the route and can again delay this process for eight months. Then work on this site just do not have time to start on time. The most cunning thing is that they can not refuse, so they just spend a long time agreeing, thereby putting the timing of implementation at risk.
That is, in theory, before the end of the year the gas pipeline should have time to finish, but because of Denmark, there may be a delay of several months. As the representative of Gazprom said, this will not affect the profitability of the project too much since it is long-term.
The main problem with profitability will arise not because of Denmark, but later, when the gas pipeline is built and its operation begins. Here we meet opposition to amendments to the EU Gas Directive, the notorious Third energy package. Everything that operates in the European economy must obey its principles, and one of them is the lack of monopoly. If there is a pipe, it must be accessed by third-party vendors.
«SP»: — What to do?
— Actually, this problem is solved for us. LUKOIL, NOVATEK, and Rosneft have long wanted to sell their gas directly through the Gazprom pipe. But we have established Gazprom’s monopoly on gas exports. It is enough just to make a decision to allow for the supply of our own Russian alternative suppliers, as this problem will be removed. It is a question purely of the interests of «Gazprom». If we proceed from the interests of the country, this problem is easily solved.
The second important point is the separation of gas production and transportation. In fact, we ourselves did something similar when, for example, we separated the production and transportation of electricity. This is how all natural monopolies are reformed. Even China is now making a decision to allocate the pipeline business to a separate company.
This requirement, of course, does not like Gazprom, but from the point of view of a reasonable approach to the market economy, it is correct. According to the Third energy package, Gazprom cannot be the operator of the pipe it is building. But the building has not formally Gazprom and the company Nord Stream AG, 2. Now it is one hundred percent owned by Gazprom, as because of the sanctions, the other European partners did not enter there. But they still continue to Finance this project and want to receive income from it. So let them buy this company out, and please the separation is over.It is clear that at that time, although Gazprom will remain a large energy company with a large weight in Europe, it will no longer have such a lever of political influence as it does now. He will not be able to set prices for each client himself, conclude such long-term contracts as now, and so on, and he does not want to lose this influence.
«SP»: — Can Gazprom simply get an exception from the Third energy package for Nord stream 2, as in the case of OPAL?
— Yes, in principle, it is possible. But here just there is a question of profitability. In order to get an exception, Gazprom will first have to keep its pipe half a year,or even more, half empty. Then say that other vendor there, so you need to give the exception. Naturally, this will affect the payback of the project.
In addition, Ukrainian transit will be extended indefinitely. After all, if the pipe is used only in half of the capacity, the rest of the gas will have to be driven to Europe through Ukraine. And Gazprom would like to quickly get away from Ukrainian transit, as well as to ensure the payback of its project.
Finally, as far as I understand, the European partners receive a return on their investments, regardless of how much gas is actually pumped through the pipe. Therefore, it turns out that pumping will be very expensive for Gazprom if you use the pipe half-heartedly.