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EU energy chief casts doubt on need for Nord Stream 2 pipeline

Mon, 25th Apr 2016 15:33

* EU energy official says project raises questions

* Backers say project needed to offset fall in EU gas output

* Critics say pipeline undercuts Ukraine, EU energy security

By Georgina Prodhan

HANOVER, April 25 (Reuters) - Europe may end up with moregas than it needs if the Nord Stream 2 pipeline, designed todouble the amount of gas Russia pumps to Germany via the BalticSea, is built, the European Union's most senior energy officialsaid on Monday.

Maros Sefcovic, European Vice President for Energy, said thepipeline plans raised a lot of questions, including over itsbusiness case in light of the EU's own gas demand estimates.

"It would imply that we are going to build excessivecapacity ... and which would make it economically very difficultto operate the Ukrainian transit route," Sefcovic told Reuters.

Gazprom and its European partners agreed theproject last year but many eastern European countries and theUnited States have said the pipeline could limit supply routesand the energy security of the EU, which gets a third of its gasfrom Russia.

They also argued it would affect Ukraine's efforts to reformits economy because Nord Stream 2 would sideline the country asa gas transit route, depriving it of billions of dollars intransit fees.

Gazprom's gas routes to Europe have become increasinglypoliticised following Russia's annexation of Crimea in 2014 androle in the Ukraine crisis.

Russia has long sought to bypass Ukraine as its main supplyroute to Europe partly because of pricing disputes. The EU, forits part, has been trying to reduce its reliance on Russian gas.

Sefcovic said the construction of Nord Stream 2 would raisedoubts also over the long-term use of the existing Yamalpipeline, which delivers mainly Russian gas to Germany andPoland. Germany tried in January to reassure Polandthe Yamal route was safe.

Facing down the critics, the Nord Stream-2 consortium, whichincludes E.ON, Wintershall, Shell, OMV and Engie, has said theproject is needed to plug a supply gap of around 140 billioncubic metres (bcm) by 2035 due to rising demand and fallingdomestic gas production in Europe.

The EU executive's own estimates of how much gas it willneed by 2030 - between 370 bcm to 450 bcm per year - have beencriticised as too high by some analysts and environmentalgroups.

In response, Sefcovic said the European Commission wasseeking additional expertise from the International EnergyAgency and its own gas transmission operator, ENTSOG.

Sefcovic and other EU officials have also said they have yetto rule on whether the pipeline would run up against EUanti-trust rules.

Nord Stream 2 would double capacity along the existing NordStream 1 route under the Baltic Sea to 110 bcm per year.

Gazprom did not immediately respond to a Reuters' request tocomment. The company has always said its gas is highlycompetitive in Europe. (Writing by Alissa de Carbonnel, additional reporting byVladimir Soldatkin. Editing by Jane Merriman)

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