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Energy

UPDATE 1-Nord Stream may announce higher pipeline costs in March

(Updates with additional comments, background)

STOCKHOLM, Jan 7 (Reuters) - Nord Stream, the firm charged with building a subsea gas pipeline from Russia to Western Europe, reiterated on Monday project costs would exceed 5 billion euros ($7.35 billion), and said it would release new cost figures in the coming months.

Nord Stream director Dirk von Ameln restated the plans still called for gas shipments to start at the beginning of 2011.

“It is quite clear that the cost will be higher than earlier calculated,” he told a news conference. “We will come up with new figures in, let’s say, March.”

Switzerland-based Nord Stream, majority owned by Russian gas export monopoly Gazprom GAZP.MM, plans to build a 1,200 km (750 mile) pipeline under the Baltic Sea from Russia to Germany.

Work is due to begin in 2009 and to be completed in 2010.

“We would like to start construction in the summer 2009. We will have that project technically ready, the construction ready by end 2010,” Ameln said.

After that, Nord Stream will conduct tests before starting deliveries in early 2011, he said.

Nord Stream applied for Swedish permission for the project in December and is optimistic it will be approved. “We don’t think the Swedish government will say no,” Ameln said, adding the firm had not heard anything since the application but there was no hurry.

Poland, Latvia, Lithuania, Estonia and Sweden have raised ecological and other concerns about the project, which will deepen Europe’s already heavy dependence on Russian gas.

The Nord Stream consortium, apart form Gazprom, which owns 51 percent, involves German firms BASF BASF.DE and E.ON EONG.DE, with 20 pecent each, and Dutch Gasunie with 9 percent.

Two lines are to be built of which the one planned to come on stream in 2011 will have a capacity of 27.5 billion cubic metres. The second one, of the same size, is planned to be operational in 2012.

Nord Stream is expected to be able to cover more than a quarter of Europe’s incremental gas demand.

The consortium’s supervisory board chairman, Gerhard Schroeder, has been quoted as saying costs may balloon to 8 billion euros. Analysts have said project costs may soar by at least 60 percent.

Analysts have questioned whether there have been enough investment in Russia in bringing on gas supply, but Ameln dismissed such worries.

“There are a couple of companies investing in that project that are all listed on the stock exchange. They have checked the reserves so there is more than enough gas,” he said.

“The fields that are serving Europe right now, some of them are declining. But there are other fields to be developed.” (Reporting by Anna Ringstrom; editing by James Jukwey)

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