Nord Stream 2 pipeline could add €5 billion in economic benefits to EU

06 November 2017 Consultancy.uk

The EU’s domestic gas production is in rapid decline. To meet demand, the EU needs reliable, affordable and sustainable new gas supplies. The Nord Stream 2 Pipeline is the proposed solution to this conundrum, transporting gas from the world’s largest reserves in Russia to the EU internal market. Although according to new figures, beyond simply bolstering Europe’s energy giants, the plan could see the EU receive an extra €5 billion in economic benefits.

Gas demand is projected to outstrip coal by 2035. However, the EU’s ability to keep up with demand is already flagging. In order to bolster European energy production, the proposed Nord Stream 2 pipeline route crosses a small section of about 3.7km of the southern part of the Kurgalsky nature reserve in Russia, sending natural gas to the European Union to enhance security of supply, support climate goals and strengthen the internal energy market. The Nord Stream 2 project was initially drawn up in 2012 following the completion of two similar pipelines in the region.

The first Nord Stream pipeline has been in operation since 2011/12. Since then, the pipeline has shipped in a total of 183bcm to Europe, with utilisation steadily increasing in line with normal build-up. In 2016, average utilisation of the pipe was 80% of design capacity, suggesting it would near its maximum output in the near future. Nord Stream’s twin pipelines have been operating safely without incidents or major interruptions, and while safety concerns regarding the delivery of gas through the existing infrastructure to Western Europe initially contributed to the rationale behind a third and fourth pipeline, the need to shore up diminishing supplies from traditional sources were the main basis for the concept.

The Nord Stream 2 pipeline project

Now, a report by consulting firm Arthur D. Little, which was commissioned by Nord Stream 2 AG, has concluded that the project could add as much as €5 billion in economic benefits to the EU. Arthur D. Little drew their conclusions based in part on materials and information provided by Nord Stream 2 AG and others.

The objective of the study was to understand the direct, indirect and induced effects of Nord Stream 2, a major natural gas infrastructure project that aims to build a pipeline system with 55bcm per year of transport capacity on the European economy, as well as on countries where actual investments in the pipeline have been or are being made.

Total impact of the Nord Stream

Analysing the economic effects (job creation and GDP) of the ongoing project to build two new gas pipelines from Russia to Germany, the researchers found that the total economic benefit to the European Union (EU) represents €5.15 billion for building the pipelines. Furthermore, the investment until July 2017 will create 31,000 full-time job equivalents in the EU over a five-year period, adding €2.25 billion in GDP in various industrial sectors.

Predictably, meanwhile, countries physically at either end of the pipeline can expect to reap most of the rewards. Including direct, indirect and induced effects, Russia could bring home an additional €2.2 billion each year, closely followed by Germany, with €2.1 billion. However, thanks to their strong associations with the offshore gas and oil industries, the UK could potentially benefit to the tune of €200 million in the best case scenario, while the Netherlands could see a €1.4 billion windfall come its way. The Netherlands/UK energy giant Shell was ranked the UK’s most valuable brand earlier this year, demonstrating the size and importance of offshore fuels to the British economy.

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