Germany does not need Gazprom's Nord Stream pipeline

Germany refuses to build the third branch of the Nord Stream gas pipeline. The country plans to shut down its nuclear power plants and switch to alternative energy in addition to gas-powered electric power stations. Therefore, Germany would not need the third, the fourth and the fifth branches of Gazprom's pipeline, German Chancellor Angela Merkel said.

Russian PM Vladimir Putin stated last week that the second branch of the Nord Stream pipeline would be build along the bottom of the Baltic Sea. "The South Stream is next on the agenda. Another branch of Nord Stream is also possible," he said.

Putin's press secretary Dmitry Peskov specified that it could be possible only hypothetically. Gazprom, the world's second largest producer of natural gas, and Germany's RWE signed a memorandum on cooperation for the use of operating and the construction of new electric power plants in Germany, Britain, Belgium, the Netherlands and Luxembourg. RWE participates in the Nabucco project, which is a competitor of Nord Stream.

Nord Stream's first leg with the capacity of 27.5 billion cubic meters is to be launched in October of the current year. The construction of the second branch of the pipeline is slated to begin in the autumn of 2012. The capacity of two branches of Nord Stream will make up 55 billion cubic meters. Thus, the volume of Russian natural gas delivered to the European Union may exceed 220 billion cubic meters a year.

"These are very impressive numbers, but the question is whether the additional capacities for the third leg of Nord Stream are going to be in demand in Europe. I think that the potential capacity of 203 billion cubic meters will be more than enough for Europe for many years ahead if Gazprom's share in gas shipments to Europe remains the same (23 percent)," Grigory Birg, a senior analyst with Investcafe said.

However, German Chancellor Angela Merkel said that the country was not in need of excessive imports of gas. The German economy needs 80 GW of electric power. Nuclear power plants in the country give 20 GW, of which 8.5 GW have been cut out, Merkel said.

"About 11 GW is left. We want to cover a part of it with the help of renewable power sources, and we want to double their share. The volume that we have left does not require the third, the fourth or the fifth pipes of Nord Stream," Merkel said.

Analyst Grigory Bird also said that Nabucco, the competitor of Nord Stream, finds support in Europe. "This project will be able to deliver natural gas to Europe from Central Asia, so there is no need in the third branch of Nord Stream for Europe indeed," he said.

In the meantime, Turkey does not hurry to approve the construction of the South Stream project in its territorial waters. Turkey was supposed to give its agreement in December 2010. Now the Turkish government promises to make a decision by November 1. Russia is experiencing similar problems with Bulgaria, so the project can be delayed indefinitely.

Vladimir Shabanov.

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Author`s name Dmitry Sudakov