September 13, 2016 / 12:38 PM / 2 years ago

Russian Nord Stream-2 on track with pipes expected soon

MOSCOW (Reuters) - Pipes to build Moscow’s Nord Stream-2 are expected to start being supplied in December or January, in a sign the gas project is going ahead, Ivan Shabalov, owner of Pipe Innovation Technologies (PIT), told the Reuters Russia Investment Summit.

Ivan Shabalov, CEO and owner of Pipe Innovation Technologies, attends an interview at the Reuters Russia Investment summit in Moscow, Russia, September 12, 2016. REUTERS/Grigory Dukor

The plan, designed to double the capacity of the existing pipeline on the bed of the Baltic Sea from Russia to Germany, has irked the European Union, which is trying to cut the bloc’s dependency on energy supplies from Moscow.

Russian natural gas supplies to Europe, where Kremlin-controlled Gazprom (GAZP.MM) owns a 31 percent share of the market, have become increasingly politicized since 2014 when Moscow annexed Ukraine’s Crimea region.

Although Shabalov’s firm does not supply pipes for Nord Stream-2, one of his companies plans to provide cement coating for some of the pipes which are being used in the project and Gazprom is its customer.

Shabalov, who founded his firm in 2006 and also heads the Russian pipemakers association, said he expected construction of Nord Stream-2, which was due to start in 2018, to go ahead as planned as production of the pipes had already begun.

“Supplies are seen starting in December-January,” he told the Reuters Investment Summit at the Reuters office in Moscow.

Some 2.2 million tonnes of steel pipes will be supplied by Europipe [AGD.UL] GmbH, a consortium which includes Salzgitter (SZGG.DE), with 40 percent of the contract and Russian companies OMK (33 percent) and Chelpipe (CHEP.MM) (27 percent).

Last year Gazprom and its European partners, including E.ON (EONGn.DE), Wintershall (BASFn.DE), Shell (RDSa.L), OMV (OMVV.VI) and Engie (ENGIE.PA), agreed on Nord Stream 2, which will double the 55 billion cubic metres per year of the existing pipeline.

Demand from Gazprom’s domestic projects will fall to 1.2-1.3 million tonnes of large-diameter pipes (LDP) this year - valuing them at $1.8 billion - from a peak of more than 2 million tonnes in 2015, Shabalov said.

Gazprom is seeking to bypass Ukraine, a key transit route for Russian gas to the EU and is also pushing on with the plans to build a gas pipeline to Turkey and beyond to Southern Europe.

The company also plans to complete the Power of Siberia pipeline to China in 2019-2020, part of Moscow’s push for closer ties with Asia despite many analysts questioning its economics.

“When we built a pipeline to Germany in (the) 1970s, it was not profitable in some respects, this was pure political,” Shabalov said.

“The return of projects like this is the beyond the 20 year horizon... The infrastructure project stands out as only the state can venture to build it.”

Follow Reuters Summits on Twitter @Reuters_Summits

Additional reporting by Polina Devitt, Katya Golubkova, Christian Lowe, Jack Stubbs, Denis Pinchuk, Nastya Lyrchikova and Oksana Kobzeva; Writing by Vladimir Soldatkin; Editing by Alexander Smith

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