NEW YORK (Dow Jones)--Former German Chancellor Gerhard Schroeder said Monday that a planned natural gas pipeline under the Baltic Sea would cost EUR8 billion ($11.77 billion.)
This cost estimate is higher than the original EUR5 billion price tag. Analysts have long maintained that it would be difficult to construct the 1,200-kilometer pipeline, set to run from Russia to Germany, at the proposed cost due to rampant inflation throughout the global energy industry.
Schroeder is the supervisory chief of the Nord Stream consortium, which comprises Russian state-owned gas monopoly OAO Gazprom (GAZP.RS), Dutch Gasunie, E.ON (EOA.XE) and BASF (BAS.XE).
"We're talking 8 billion euros worth of investment here," Schroeder told an audience while addressing the criticism from environmentalists the project has evoked. "That's obviously an effort made to support the environment."
He was speaking through an interpreter.
First gas is slated to flow at the end of 2010. Initial volumes will run at 27.5 billion cubic meters a year, and later they are expected to double.
However, the delays to construction are anticipated as Nord Stream runs into obstacles raised by other countries. In September, Estonia rejected the groups' application for survey work in its maritime economic zone.
Following his speech on Europe's relationship with Russia in the context of energy security, Schroeder declined to answer questions about the pipeline's progress.
Of the relationship, Schroeder said "We are witnessing the emergence of a common area of political, economic and, most importantly, energy cooperation. We must tie Russia to Europe as closely as possible."
Europe depends on Gazprom, the world's largest gas company by output and reserves, for about a third of its supplies. Russia, in turn, relies on taxes and other levies on the sale of gas for a large chunk of its budget receipts.
Recently, Russia's reputation as a reliable supplier has come under fire when Gazprom withheld shipments to neighboring countries during commercial price disputes. These countries stand to lose millions of dollars in transit fees and cheaply priced gas if volumes are routed through Nord Stream.
Schroeder reiterated his stance that the project complemented existing transit routes, adding that forecasts called for Europe's gas imports to substantially increase over the next several years.
"The pipeline is tremendously important for Europe," he said.