Nord Stream 2: Does Europe Need This Pipeline?

Nord Stream 2 should now go into operation soon. This means that twice as much Russian gas can flow through the Baltic Sea to Germany than before. But was the controversial building really necessary?

Despite the summer temperatures and lower consumption, natural gas prices have recently reached a 13-year high. Experts explain this by the fact that the Russian monopoly Gazprom reduced its deliveries to Europe by a fifth, while demand rose in the first quarter. This imbalance has contributed to the price of natural gas in Europe climbing to their highest level since 2008.

However, anyone who believes that Gazprom’s prospect of the Nord Stream 2 gas pipeline going into operation at the end of the year will ease the situation quickly could be wrong. After all, the completion of the tube under criticism will only improve the infrastructure, but not increase the actual output.

Sufficient capacities are available

This is the opinion of the government-affiliated Berlin Foundation for Science and Politics (SWP). In an analysis published in the spring it says: “Viewed soberly, Nord Stream 2 doubles the transportcapacity through the Baltic Sea by 55 to 110 billion cubic meters annually. It connects the newly developed deposits on the Yamal Peninsula with the major gas markets in Europe on an approximately 1000 kilometers shorter, more modern and more efficient route than through the Ukraine.

Claudia Kemfert, energy expert from the German Institute for Economic Research (DIW), has long been emphasizing that the construction of a second pipeline through the Baltic Sea would not have been necessary from an energy point of view. There are already sufficient pipeline capacities, additionally built liquid gas terminals and transport routes that are sufficient for the future decreasing demand for fossil natural gas, according to Kemfert recently in the Deutschlandfunk.

In fact, the EU as well as the rest of Europe and Turkey can easily be supplied via the existing pipeline network. The old system through Ukraine has a nominal capacity of 146 billion cubic meters per year. In the years 2017 to 2019, however, only between 81 and 88 billion cubic meters of natural gas were passed through this system every year, according to DIW estimates.

Russia is by far the most important gas supplier

In addition, there is the Yamal-Europe pipeline through Poland and Belarus with 33 billion capacity and Nord Stream 1, i.e. the already existing pipeline through the Baltic Sea, with 55 billion cubic meters of gas. Even without the additional 55 billion cubic meters of Nord Stream 2, there would probably be no line bottlenecks. Especially since gas production in the EU fell by more than half between 2009 and 2019 to 76.2 billion cubic meters per year. This trend is likely to continue, and even accelerate, when the large Dutch gas field in Groningen completely ceases production in 2022.

In return, Russia has grown in importance as Germany’s most important gas supplier by far. According to the latest figures published by BP’s “Statistic Review of World Energy” at the beginning of July, Germany obtained a good half of its natural gas imports from Russia in 2020. After that, 56.3 of the total imports of 102 billion cubic meters of natural gas came from the country. That is a good 55 percent of all gas imports, after 51 percent in the previous year. As a result, the dependency on Russian natural gas has increased further. In view of the declining production in the EU, the share of natural gas from Russia could increase even further. The shares of the other main suppliers Norway and the Netherlands are likely to decline accordingly.

Moscow’s prestigious project

Nevertheless, experts say that it did not have to build a second pipeline. According to a study published by DIW in January, there is currently “no shortfall in natural gas supply” in Europe and Germany. This is unlikely to change in the future either. “The demand for natural gas in Europe has been stable or declining slightly for years. The corona pandemic and the increase in winter temperatures driven by climate change are reinforcing the downward trend in natural gas demand,” said the experts at DIW.

The experts therefore agree that the second Baltic Sea pipeline is primarily a political prestige project in Moscow. This also explains the recent shortage of supply by Gazprom. The group wanted to put pressure on Germany and the EU, said Tom Marzec-Manser, industry observer at the British research provider ICIS, the “Financial Times”. Gazprom is proceeding according to the motto: “Give us the green light for Nord Stream 2 and we will send you all the gas you need”.