Industry Trend Analysis - Nord Stream II: The Laggard Of Russia's Gas Plan - FEB 2018

BMI View: Plans to increase spending on the Nord Stream II pipeline in 2018 are largely m oot, if Gazprom is unable to raise financing and clear necessary approvals. Success with the Power of Siberia and Turkstream pipelines is driving up political pressure on Nord Stream II, delaying its progress.

Gazprom is ramping up capital expenditure plans in 2018 and 2019, in order to achieve its targets of diversifying sales to China and circumventing pipeline transit via Ukraine. This involves the construction or completion of three major pipelines that will connect Russia directly with its largest demand markets: Power of Siberia (to China), TurkStream (to Turkey) and Nord Stream II (to Germany).

2018 and 2019 will be critical years for Russia's gas expansion ambitions, particularly with regard to the Nord Stream II pipeline. Pipe lay progress with the China link and Turkstream pipelines is moving ahead as planned, with the focus of capital moving gradually towards ensuring supply and takeaway capacity. Gazprom is increasing expenditure on the Chayandinskoye fields by more than 60.0% in 2018, in preparation for filling the pipeline and delivering gas to China from December 2019. Similarly, foundations have been put down for the Amur gas processing plant, which will deliver Russian gas into China. Investment into onshore transit links in Turkey is also planned in the 2018 budget, indicating the Turkstream pipeline could be linked in to the Turkish system by the end of 2018, and before the Trans-Anatolian pipeline (TANAP) from Azerbaijan is operational.

Nord Stream II Facing Most Challenges
NSII - Pipeline Route
Source: Gazprom, BMI

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