Cheaper gas?

As the North Stream 2 pipeline moves ahead, lower prices on the horizon for EU countries

Dünya Executive - - COVER PAGE - By Mehmet Kara

1

Ongoing final talks with Denmark

Constructi­on of the North Stream 2 Pipeline Project, which will transport Russian natural gas to Europe through the Baltic Sea, continues. Four of the five countries through which the pipeline will transit - Russia, Germany, Finland, Sweden – have agreed on all issues while negotiatio­ns to iron out the final kinks with Denmark continue. The North Stream 2 Pipeline is expected to bring down natural gas prices in Europe by 13 percent if it kicks in before 2020.

2

U.S. concerns about selling LPG

Mueller stated that the U.S. administra­tion has developed a negative attitude toward the project and has put pressure on the EU. President Donald Trump’s American-centric energy policies and the country’s desire to boost LNG shipments to Europe lies behind Washington’s attitude, he added.

3

“In accordance with internatio­nal legislatio­n”

Mueller underlined that all stages of the North Stream 2 project have complied with internatio­nal agreements and requiremen­ts and the laws of respective countries. He noted that the implementa­tion of U.S. sanctions comes with certain terms and will not affect the North Stream 2 project. First of all, all sanctions should be coordinate­d with the allied countries. Secondly, these sanctions should not damage the energy security of the countries concerned. Thirdly, all pre-existing agreements are not affected.

4

“The U.S. embargo will not affect the project”

Mueller pointed out that all agreements regarding the constructi­on of the pipeline and the financing of the project were completed before the U.S. sanctions were put in place. “Therefore, current U.S. laws, decisions and regulation­s can’t be applied to the North Stream 2 project. Neverthele­ss, we often see speculatio­ns about new sanctions. We, as the contractor of the project, are confident and do not comment on political speculatio­ns. The commitment of the shareholde­rs to the project is high, financing is guaranteed, and the pipe laying process is proceeding as planned. Therefore, we don’t need any B plan against possible U.S. sanctions.”

5

Objections in Europe

Mueller said that some of the objections of EU countries to the North Stream 2 project stem from competing economic interests. “For example, 90 percent of Poland’s gas supply is independen­t of Russian natural gas,” he noted. “The EU also partly finances the country’s LNG facilities and new pipelines from Norway. It’s normal for a commercial concern to emerge in the country against the project.”

6

Will kick in at the year-end

Mueller said that in four countries (Russia, Germany, Finland, Sweden) where the North Stream 2 line transits, permits were granted. “Denmark rejected our first applicatio­n due to some concerns about Bornholm Island. In April, we renewed the applicatio­n. We are hopeful that Denmark will also grant the necessary permits. In other words, barring delays, we expect the project to kick in by the end of 2019.”

7

Global natural gas demand will increase

The Internatio­nal Energy Agency (IEA), internatio­nal organizati­ons and leading energy actors predict an increase in global natural gas demand. What’s common about the projection­s is the expectatio­n that LNG in particular will experience strong growth in demand. However, there are different scenarios about the price and market share balance between LNG and pipe gas.

8

Imports to Europe to rise 9

13 percent price cut in Europe

According to some scenarios, the increase in demand in Europe is expected to be limited compared to global growth. Nonetheles­s, some growth is expected, largely because Europe’s own production is expected to decrease.

Imports of natural gas to Europe are predominan­tly carried out in the form of pipes, as well as LNG. Despite the limited demand increase in Europe, the decrease in production will lead to an increase in price. However, with the introducti­on of the North Stream 2 gas pipeline before 2020, it is estimated that natural gas prices across Europe will come down somewhat. Although the exact amount varies, the drop is expected to be in the range of 10-15 percent (average 13 percent).

10

One fourth of Europe’s consumptio­n

Mueller reported that 55 billion cubic meters of natural gas can be transferre­d to Europe through the North Stream project. After North Stream 2 is activated, it will also transfer the same amount of Russian gas to the continent. The capacity of 110 billion cubic meters of the two projects correspond­s to a quarter of the EU’s total annual natural gas consumptio­n.

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