Oil Report

UPDATE 2-Nord Stream cleared to start construction in April

* Project won final approval by Finland

* First gas to flow in 2011

* Russia tightens its grip on European gas market

(Adds Russian PM comments on construction schedule, consortium comments)

HELSINKI/MOSCOW, Feb 12 (Reuters) - Finnish environmental authorities approved construction of the Nord Stream gas pipeline through Finland’s waters, clearing the last hurdle for Russia to start its biggest post-Soviet gas pipeline in April.

The Finnish government gave its blessing in November for the pipeline to be built in its waters, leaving just the decision from the environmental authorities.

“The Regional State Administrative Agency for Southern Finland granted permission to commence work before the decision is due to enter into force,” the Finnish environmental authorities said in a statement on Friday.

Russia’s differences with Ukraine, the main transit route for Russian gas, led Moscow to propose two pipelines, the Nord Stream and South Stream, running north and south of the EU bloc, which would bypass transit states entirely.

Nord Stream, a project involving Gazprom GAZP.MM, Germany's BASF BASF.F and E.ON EONGn.DE as well as Dutch firm Gasunie, plans to transport up to 55 billion cubic metres of gas per year from Russia to Germany when completed in 2012.

“The consortium plans to start construction in April 2010 as it has also already received all the permits required by the four other countries through whose territorial waters...the pipeline will pass,” Nord Stream consortium said in a statement.

For Nord Stream two parallel pipelines would together carry gas over 1,200 km (750 miles) from Vyborg in Russia to Greifswald in Germany under the Baltic Sea.

The first leg will carry 27.5 bcm starting from 2011. The link will cross the waters of Russia, Sweden, Denmark and Germany as well as Finland.

“This is the culmination of four years of intensive studies, consultations and dialogue with the authorities, experts, stakeholders and the public in Finland and other countries through the Baltic Sea region,” Nord Stream Managing Director Matthias Warnigwas quoted by the consortium as saying.

Warnig is a former German intelligence officer and an acquaintance of Russian Prime Minister Vladimir Putin.

On Friday Putin said the gas should start to flow from Nord Stream in September 2011.

“In May 2011, the (construction) works should be finished on sea and on territory of Germany and Russian Federation. As early as September, the gas will flow through it,” he was quoted as saying by Russian state news agency RIA Novosti.


The approval marks a major step forward for Russia’s plans to diversify its energy export routes to Europe, but some analysts say the pipeline is too expensive and could face delays due to the economic downturn and lower demand for the fuel.

Russia is also pushing forward with the South Stream project aimed at supplying gas to the south of Europe from the Caspian Sea region and bypassing transit states, such as Ukraine.

In January 2009, Russian gas supplies to Europe came to a halt for almost two weeks as Moscow and Kiev rowed over prices and transit terms. Most of Russian gas deliveries to Europe passes through Ukraine.

The Nord Stream approval came as a reprieve for Gazprom, which had to delay the start of its giant Arctic Shtokman gas field - one of the resource bases for the link - by three years to 2016 due to a slump in gas demand. [ID:nLDE6141ZH]

The Nord Stream consortium said on Monday its initial schedule for commissioning the pipeline remained intact despite the Shtokman delay.

A consortium spokeswoman said the gas for the link will be “supplied by the entire Russian gas system”. [ID:nLDE6171NK]

For a graphic of Europe imports of Russian gas, click on:


For a factbox on Nord Stream, click on [ID:nLDE61B06H]

Reporting by Brett Young and Terhi Kinnunen in Helsinki and Vladimir Soldatkin in Moscow; Editing by Michael Urquhart and Sue Thomas