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Medvedev to Begin Nord Stream Work

ST. PETERSBURG — Senior European officials will join President Dmitry Medvedev in celebrating the start of construction on the Nord Stream pipeline on Friday in a show of support for the plan to deliver more Russian gas to Western Europe.

Medvedev and the new European Union energy commissioner, Günther Oettinger, will attend a ceremony marking the symbolic welding of the first pipes at Portovaya Bay on the Baltic Sea, where the 8.8 billion euro ($11.8 billion) pipeline will cross from land to water.

German Chancellor Angela Merkel will address the ceremony with a video message from Berlin, according to a schedule provided by Nord Stream AG, the Gazprom-led international consortium that is building the new route. French Secretary of State for Foreign Trade Anne-Marie Idrac will also travel to the site to represent an incoming French shareholder, GDF Suez, in which the country’s government holds the majority stake. Former German Chancellor Gerhard Schröder, who chairs the venture’s shareholder committee, will be there as well.

The other two foreign shareholders in the project, designed to carry 55 billion cubic meters of gas when its two phases come online, are Germany’s E.On and Netherlands’ Gasunie.

“It’s a connection between the world’s largest reserves of gas and a huge European market and energy network,” Nord Stream financial director Paul Corcoran said at a news conference Thursday.

He was tight-lipped about how much Gazprom would pay Nord Stream AG in transit fees, declining even to compare them with the payments that the world’s largest gas producer makes for shipping its gas through Ukraine and Belarus.

Gazprom said Tuesday that it had laid the first pipes — in Swedish waters, according to the construction plan — earlier that day, RIA-Novosti reported. Gazprom chief Alexei Miller telephoned President Medvedev to tell him the news, a Gazprom spokesperson said.

Nord Stream is proceeding after five years of studies and collecting construction permits, even though the market has changed dramatically since the project’s inception.

In one of the most remarkable developments, U.S. companies have improved the technology for producing shale gas to a degree that allowed the unconventional gas to be commercially produced on a large scale. The subsequent drop in U.S. gas imports caused suppliers to dump their output in Europe, creating a glut and prompting prices to plummet.

Corcoran said demand would eventually bounce back for pipeline gas because many producers had put on hold their plans to expand production of liquefied natural gas, or LNG, of which there is currently an oversupply on European markets. Qatar is one of the biggest suppliers of LNG to the continent.? 

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