Nord Stream, an $11 billion pipeline that would pump natural gas from Russia to Germany and bypass Ukraine, cleared its last major regulatory hurdles on Thursday when Sweden and Finland both gave the green light to a project that could redraw Europe's energy map.
The two countries' governments said they had granted consent for the pipeline to pass through their exclusive economic zones in the Baltic Sea. Denmark approved the project last month. That leaves only Russia and Germany, whose consent is seen as a formality.
Once up and running, Nord Stream could spell the demise of Ukraine's status as a big gas-transit country. The European Union gets 80% of its Russian natural-gas supplies via Ukraine, but the long-term viability of the route has been called into question, especially after a pricing dispute between Moscow and Kiev in January led to a cutoff of Russian gas to hundreds of thousands of Europeans in the middle of winter.
Russian Prime Minister Vladimir Putin warned last month of possible new supply disruptions, amid signs that a cash-strapped Ukraine was struggling to pay its bill for the gas it imports from Russia. On Thursday, European Commission President Jose Manuel Barroso urged Ukraine's President Viktor Yushchenko to prevent delays in payments to Russia.
For years, Russia has been seeking to reduce its dependence on Ukraine and come up with alternative export routes. Nord Stream, backed by a consortium that is led by Kremlin-controlled gas giant OAO Gazprom, was one. Another was South Stream, a pipeline that would run under the Black Sea into Eastern Europe.
Some analysts have questioned whether the huge investments required to build such infrastructure will pay off, amid creeping doubts about long-term demand for gas. The projects were conceived at a time when the EU was forecasting big increases in its demand for the clean-burning fuel and worrying about energy security.
In recent months, however, a deepening oversupply of gas and predictions that climate-change policies to limit carbon-dioxide emissions could damp demand for all fossil fuels, including gas, has led many to scale back forecasts.
"Nord Stream will be completed by 2012, a time when Europe won't need the additional gas because of the supply glut," said Mikhail Korchemkin, head of consultancy East European Gas Analysis and a critic of the project.
That is disputed by Nord Stream AG, the Swiss-based joint venture that will build and operate the pipeline. It says that by 2025, as domestic production declines, 81% of the gas the EU consumes will be imported, compared with 58% in 2005. That means the bloc will have to import nearly 200 billion cubic meters of gas a year more than it does now, and so will need not only Nord Stream but also several other new import routes to ensure adequate supply.
"Even if the demand for additional imports doesn't grow as quickly as predicted, the import gap will still be significant and much bigger than Nord Stream's capacity," said Sebastian Sass, head of Nord Stream's EU representation.
As well as doubts about future demand, Nord Stream also had to deal with objections from Baltic Sea nations, which feared the possible negative impact that construction of the pipeline might have on local fisheries, shipping traffic and the marine environment.
The joint venture, in which Gazprom has a 51% stake, Germany's BASF/Wintershall AG and E.On Ruhrgas AG 20% each, and NV Nederlandse Gasunie of the Netherlands 9%, will start building the first of two 760 mile long parallel pipelines next year. The first is to be operational in 2011 and the second a year later.
The project would for the first time directly link Russia's vast gas fields in Siberia to the country's largest European customer, Germany. The pipelines would have a capacity of 55 billion cubic meters a year -- enough to supply more than 26 million households.