Nord Stream consortium awards pipeline contracts

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Jan. 27 -- The Nord Stream AG consortium said it will commission Sumitomo Group, Europipe GMBH, and United Metallurgical Co. (OMK) to supply 1 million tons of steel pipe for construction of the second pipeline of the Nord Stream project.

“The contract value is approximately €1 billion of which German Europipe will be awarded 65%, the Russian pipe company OMK 25%, and Japanese Sumitomo 10%,” said partners OAO Gazprom, BASF SE/Wintershall Holding AG, E.On Ruhrgas, and Gasunie.

They said the tender award for the second 1,220 km gas pipeline from Vyborg in Russia to Lubmin in Germany “will ensure timely delivery of the pipes in line with the logistic requirements of the Nord Stream project.”

The partners said the decision was made by the shareholder’s committee following “thorough evaluation” of bids from German, Japanese, and Russian companies.

“With €1 billion, the total volume of the contracts is below the price level of the first line reflecting the current market development of increased competition and more available capacity,” said Henning Kothe, project director at Nord Stream, who added, “Three times the amount of steel pipes required was quoted.”

The consortium partners said the tender for the second line was completely independent of the 2007 tender of the first line and procurement of steel pipe for the second line was “the last outstanding significant decision” regarding the requirements for the project as well as for the overall budget.

With the contracts for the second line, which are expected to be signed within weeks, Nord Stream said it has secured the pipe at the current price level. Delivery of the pipe for the second pipeline is scheduled to start in May.

First line construction
Meanwhile, the partners said construction of the first line of the Nord Stream Pipeline is scheduled to commence Apr. 1 and construction of the second line is planned to start in spring 2011.

The Nord Stream partners also said they received permits for the project from all of the states whose waters it crosses, including Russia, Finland, Sweden, Denmark, and Germany.

However, deputies of Poland's main opposition party—Law and Justice—this week called on the Donald Tusk government to appeal the decision of the German Federal Maritime and Hydrographic Agency (BSH) approving the Nord Stream gas pipeline.

According to the party, the pipeline will block big ships’ access to Polish ports in Swinoujscie and Szczecin.

At yearend 2009, BSH granted a permit to Nord Stream AG to construct the 31-km section of the natural gas pipeline in Germany's Exclusive Economic Zone.

"This means the launching of the construction," said Grazyna Gesicka, who heads the Law and Justice parliamentary caucus. "From Poland's point of view this means a failure of Poland's energy policy. Poland's diplomacy was unable to stop this investment."

Gesicka has called on Poland's government to appeal the decision and to ask Germany to present full technical documentation of the construction to Poland.

According to Law and Justice Member of the European Parliament Marek Grobarczyk, the Nord Stream pipeline will endanger deliveries to a LNG terminal in Swinoujscie and will block large vessels from accessing the ports in Swinoujscie and Szczecin.

Contact Eric Watkins at hippalus@yahoo.com.

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