Nord Stream: Not Just a Pipeline

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6 Bendik Solum Whist Switzerland, in November the same year with Gazprom as majority shareholder (51%), and the two German companies with a 24.5% stake each. North Transgas Oy was officially dissolved as soon as all information about the project had been transferred to the new firm (Nord Stream 2007a: 4). In November 2007, the Dutch gas company Gasunie bought a 9% stake in the Nord Stream project, whilst each of the two German companies ceded 4.5% of their share (leaving them with a 20% share each). Gazprom thus remains the majority shareholder with its 51% (Nord Stream 2007b). Former German Chancellor Schröder has, since 30 March 2006, been heading the shareholders’ committee of Nord Stream AG (Süddeutsche Zeitung 2006c). 2.2 Technical Features, Timeframe and Budget Nord Stream will have two parallel legs, each of which will have an annual capacity of 27.5 bcm of natural gas. According to the original schedule, construction of the first leg was set to start in January 2008 and finish by February 2010. The second leg is scheduled for construction between 2011 and 2013. Nord Stream AG estimates that full capacity, 55 bcm per year, will be reached in 2013. The gas transmission system will have an estimated lifetime of 50 years, after which it will be decommissioned (Nord Stream 2006a: 2-3). Originally, the pipeline plans included an offshore service platform, which would be placed northeast of the Swedish island of Gotland in the Swedish EEZ (see triangle in Figure 1). On 8 April 2008, however, Nord Stream AG announced that it had withdrawn its application to the Swedish government for the construction of the platform. The official statement concluded that ‘in view of the debate and concerns in Sweden regarding the platform, Nord Stream is pleased that technological advances obviate the need for a platform at the mid-point of the planned pipeline route’ (Nord Stream 2008c). Thus, the platform is no longer a part of the pipeline plan, but it is nevertheless crucial to include in this analysis, as it played a decisive role in shaping the Swedish Nord Stream debate. The cost of the Nord Stream project was initially (in 2005) estimated at €4 billion, but the projected cost has gradually risen and is now (spring 2008) set to €7.4 billion (Nord Stream 2008b; BarentObserver 2008a). According to a spokesperson for BASF/Wintershall, the company assumed as early as 2006 that the cost could rise to as much as €9 billion (Reuters 2007b). It should be noted that these estimates only cover construction costs. Operation-, maintenance- and decommissioning costs are not included, which means that the end total may become significantly higher (Larsson 2007: 34). Although the Schröder government, only weeks before the end of its term, granted Gazprom a €1 billion loan guarantee for the project (Süddeutsche Zeitung 2006d), the financial situation is still not settled. Financing can only be finalised when the final route of the pipeline is ready, which is subject to the consent of the coastal states involved. Nord Stream AG estimates that 30% of the costs will be taken by the shareholders, and 70% will be financed through loans and export credit agencies (Nord Stream 2008f).
2.3 Legal Framework Nord Stream: Not Just a Pipeline 7 According to the 1982 UN Convention on the Law of the Seas (UNCLOS) Article 79, ‘All States are entitled to lay submarine pipelines and cables on the continental shelf [of another state].’ The coastal state may not impede the laying of pipelines per se, but it may take ‘reasonable measures’ to preserve the environment and its natural resources, and the delineation of the pipeline ‘is subject to the consent of the coastal State’ (UN 1982). Regarding installations and structures in the Exclusive Economic Zone (EEZ), such as the planned service platform, UNCLOS Article 60 gives the coastal state ‘the exclusive right to construct and to authorise and regulate the construction, operation and use of’ such installations, as well as ‘exclusive jurisdiction’ over the structure once it has been built (UN 1982). In addition to UNCLOS, the Convention on Environmental Impact Assessment in a Transboundary Context, commonly known as the Espoo Convention or EIA Convention, sets out an obligation to prepare an Environmental Impact Assessment (EIA) of any project ‘that is likely to cause a significant adverse transboundary impact,’ including ‘largediameter oil and gas pipelines’ (UN 1991: 4, 12). The EIA, which in this case will be prepared by the Nord Stream consortium, must include ‘possible alternatives to the proposed activity, including a no-action alternative’ (UN 1991: 5). Sweden, Finland, Denmark and Germany are so-called Parties of Origin to the Espoo Convention, as the pipeline will pass through their EEZs. Russia would also have been a Party of Origin, had it ratified the Espoo Convention. Currently Russia is only a signatory power but still takes part in the EIA process. Construction permits are given by Parties of Origin when they have approved that the EIA is satisfactory. Affected Parties (such as Poland, Estonia, Latvia and Lithuania) have no legal say in the approval / licensing process, but they may take part in the EIA process and, hence, voice their opinion in the matter (DG Internal Policies 2007b: 4; Nord Stream 2008i). 2.4 Recent Developments and Current State of Affairs In September 2007, following a Finnish request that Nord Stream AG consider Estonian waters instead of the originally planned stretch through the Finnish EEZ, Estonia rejected the consortium’s application for a seabed survey in the Estonian EEZ. Finland wanted an alternative route because it was assumed that the Estonian seabed would be less rocky than the Finnish and would thus be better suited for the pipeline. Estonia’s official explanation for the rejection was that the application itself had legal contradictions and could therefore not be evaluated in its current state (Murd, interview). Although Nord Stream AG could have taken the case through the Estonian legal system, or even resubmitted the application, the consortium returned to its original plan and is therefore currently negotiating with the Finnish government regarding the pipeline stretch in the Gulf of Finland (Nord Stream 2007c; Spiegel 2007c). As of August 2008, construction of the offshore pipes has yet to start, as no construction permits have been granted. In accordance with the Espoo Convention, Nord Stream AG has prepared an EIA, which needs to be
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The Fridtjof Nansen Institute is a
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Nord Stream: Not Just a Pipeline

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