EU energy chief casts doubt on need for Nord Stream 2 pipeline

HANOVER (Reuters) - Europe may end up with more gas than it needs if the Nord Stream 2 pipeline, designed to double the amount of gas Russia pumps to Germany via the Baltic Sea, is built, the European Union’s most senior energy official said on Monday.

European Commission Vice President Maros Sefcovic addresses a news conference on European Aviation Strategy at the European Commission headquarters in Brussels, Belgium, in this file photo dated December 7, 2015. REUTERS/Francois Lenoir

Maros Sefcovic, European Vice President for Energy, said the pipeline plans raised a lot of questions, including over its business case in light of the EU’s own gas demand estimates.

“It would imply that we are going to build excessive capacity ... and which would make it economically very difficult to operate the Ukrainian transit route,” Sefcovic told Reuters.

Gazprom GAZP.MM and its European partners agreed the project last year but many eastern European countries and the United States have said the pipeline could limit supply routes and the energy security of the EU, which gets a third of its gas from Russia.

They also argued it would affect Ukraine’s efforts to reform its economy because Nord Stream 2 would sideline the country as a gas transit route, depriving it of billions of dollars in transit fees.

Gazprom’s gas routes to Europe have become increasingly politicised following Russia’s annexation of Crimea in 2014 and role in the Ukraine crisis.

Russia has long sought to bypass Ukraine as its main supply route to Europe partly because of pricing disputes. The EU, for its part, has been trying to reduce its reliance on Russian gas.

Sefcovic said the construction of Nord Stream 2 would raise doubts also over the long-term use of the existing Yamal pipeline, which delivers mainly Russian gas to Germany and Poland. Germany tried in January to reassure Poland the Yamal route was safe.

Facing down the critics, the Nord Stream-2 consortium, which includes E.ON EONGn.DE, Wintershall BASFn.DE, Shell RDSa.L, OMV OMVV.VI and Engie ENGIE.PA, has said the project is needed to plug a supply gap of around 140 billion cubic metres (bcm) by 2035 due to rising demand and falling domestic gas production in Europe.

The EU executive’s own estimates of how much gas it will need by 2030 - between 370 bcm to 450 bcm per year - have been criticised as too high by some analysts and environmental groups.

In response, Sefcovic said the European Commission was seeking additional expertise from the International Energy Agency and its own gas transmission operator, ENTSOG.

Sefcovic and other EU officials have also said they have yet to rule on whether the pipeline would run up against EU anti-trust rules.

Nord Stream 2 would double capacity along the existing Nord Stream 1 route under the Baltic Sea to 110 bcm per year.

Gazprom did not immediately respond to a Reuters’ request to comment. The company has always said its gas is highly competitive in Europe.

Writing by Alissa de Carbonnel, additional reporting by Vladimir Soldatkin. Editing by Jane Merriman