Gas Market Outlook

A New Pipeline for Europe’s Energy Future

 Nord Stream 2 – Gas Market Outlook

A Key Fuel in Europe’s Energy Mix

Growing share of natural gas and renewables in the EU’s energy mix Clean-burning, low-emission gas is a vital component in an economically
Primary energy mix in the EU by source sensible decarbonisation pathway for the EU. Nord Stream 2 will provide access
Source: IEA, World Energy Outlook 2016 to the quickest and most cost-effective way to reduce emissions – additional
natural gas to replace coal.
18 % 21.9 % 28 %
15 % Gas 14.6 % Gas 14 % Gas
Nuclear Nuclear Nuclear
Natural gas is the least emissions-intensive fossil fuel and can help achieve 1
climate goals if it is used in power generation. It also ensures a reliable power
8%
4.5 % supply as renewables are gradually integrated.
Coal Gas-fired power
1990 Renewables
2014 13.7 % 2035
plants produce about
Renewables Thanks in part to growing appreciation for natural gas as a clean-burning fuel 2
25 % 17.2 % 50 percent less CO2
Coal Coal for power generation, it currently has the second-largest share in the EU’s
than coal-fired power
energy mix – after oil, but clearly before coal, nuclear energy and renewables.
37.5 % 32.6 % 25 %
plants.
25 % The increase in renewable production in past years has mainly resulted in,
Oil Oil Oil Renewables
and made up for, a reduction in the use of coal. Gas is the fossil fuel with the
3
lowest greenhouse gas and particulate emissions. While it can replace other
fossil fuels in burner, internal combustion and turbine processes, including
those being used for power generation, renewables are predominantly being
used for power generation so far.
4
As long as full integration of renewables has not been achieved (and issues
such as the electricity storage issue remain open), renewables will need
Phasing out coal is the key factor in decarbonising the power sector
conventional power plants, fired for example by natural gas, to ensure reliable
Electricity mix 2014 EU by energy source Power sector emissions [mtCO2]
5
power supply and grid stability.
Source: IEA, World Energy Outlook 2016 Source: IEA, World Energy Outlook 2016

Natural gas offers a cost-effective and sustainable way to achieve emissions

3% reduction targets. Depending on the technology used, gas-fired power plants
Solar 6
produce about 50 percent less CO2 than coal-fired power plants. Thanks to its
6% versatility, natural gas is also used in heating and increasingly, road and marine
~80 %

Biomass and waste

transport.

8% 27 %
7

1.3 million
Wind Coal

865 mtCO2
natural gas vehicles
50 %
12 % Coal
Hydro in Europe in 2015 – up 8
9 percent from 2014 of German
14 % households use
Gas
gas-fired heating 9
216 mtCO2
28 % 2% Gas
Nuclear Oil
49 mtCO2
Oil
21 bunkering ports 10
for ship refuelling
with liquified gas in Europe
Belgium, Denmark, Estonia, Finland, France,
Germany, Netherlands, Spain, Sweden

4 5
 Nord Stream 2 – Gas Market Outlook

Towards a Competitive and

Europe’s Interconnected Gas Network Integrated Gas Market
The European gas sector and the EU have made significant improvements
to complete its infrastructure — closing bottlenecks and offering new supply

AY
W
options. The result is more liberalised, evolved markets where suppliers can

R
O
N

EN
compete on a level playing field to the benefit of consumers.

ED

IA
SW

N
TO
ES
D
N
LA
Nord Stream 2 will bring liquidity to the EU’s already well-interconnected

N
FI
gas market, further improving integration and supporting the bloc’s energy

IA
policy goals. The internal gas market has been designed to facilitate the 2

TV
The successful
K

LA
AR IA three main objectives of EU energy policies: security of supply, a competitive
M
AN efforts of the EU to
EN

U environment with affordable prices and sustainability of energy consumption.

D

A H foster the integration

SSI LIT
U
D

R of the internal gas

AN

The North West European region, where the majority of gas is consumed, 3
EL

market are reflected

IR

is already well-interlinked. The successful efforts of the EU to foster the

in the growing degree
integration of the internal gas market are reflected in the growing degree
of interconnector
O D
G ITE

of interconnector capacity in the market. This has led to a significantly

M

capacity.
IN N
D
U

improved energy security in 22 of 28 Member States, with more infrastructure 4

K

connections being fostered and financially supported by the European

S
D

D
N

Commission.
N
LA

LA
AN
ER

PO
M
H

ER
ET

As markets evolve, price differences recede and competitive gas is available

N

5
in more European markets. Between 2009 and 2015, the total capacity of EU
IA
H interconnectors increased by 27 percent from 774 to 984 bcm per year. As a
C

E
ZE

N
AI
M C result, the high level of market integration translates into narrow gas hub price

R
IU
D

K
N

U
EL differences for the aforementioned EU core markets. Gas hub prices in most
LA

6
R

B
IA
ZE

countries of the EU core market are now closely aligned with Europe’s most
R
IT

ST
SW

AU

IA
VA
K
liquid market, the Dutch TTF Hub.
O
SL

IA
Y
New infrastructure has been deployed to provide Eastern European countries
AR

VE
N 7
G
E

with increased access to Western European gas hubs that offer more liquidity.
N

O
Y
C

SL
AL
AN

H
IT

The well-supplied, integrated European market pool also supplies non-EU

FR
AL

countries like Switzerland and Ukraine, which can buy gas from the EU via
G

IA
U

AI
RT

AN West-to-East gas flows. Nord Stream 2 was designed to work in this market
SP

8
PO

M
O and will further improve the supply situation.
R
IA

IA
A
BI
AT

AR
R
O

LG
SE
R
C

BU

RK JAN

9
EY
TU AI
a B
IA
O

vi ER
E
BY
C

ER

AZ
C

EE
LI
G
RO

AL

R
O

G
M

10
 Existing connections   Planned connections   Country with LNG terminal

 Pipelines from the North Sea  Nord Stream 2 EU internal market

 Pipelines from Russia  Pipelines from the Caspian Sea
 Pipelines from North Africa  European pipeline grid
 

6 7
 Nord Stream 2 – Gas Market Outlook

Meeting Gas Demand

Gas demand in line with major market outlooks Europe’s gas demand is projected to remain mostly stable in the
Natural gas demand scenarios1 for EU and OECD Europe (indexed with 2015 = ENTSOG
100) Blue Transition (2016)
EU Ref (2016) next 20 years. Even in more optimistic energy projections it remains
Source: Prognos (2017) Statoil Reform (OECD, 2016) the backbone of Europe’s energy supply. Nord Stream 2, with its
Cedigaz (OECD, 2015) reliable, state-of-the-art technology, will offer safe, affordable and
Exxonmobil (OECD, 2016)
120 IHS (2016) environmentally sound natural gas supplies to help fill this demand.
ENTSOG European Green Revolution (2016)
100 EE30 (2014)
High RES (2011)
80 IEA WEO 450 (2016) Nord Stream 2 will supply part of the gas volumes that will continue to be
Greenpeace e. [r]evolution (OECD, 2015)
needed in the EU, where demand is projected to remain at or around current
60 Greenpeace advanced e. [r]evolution (OECD, 2015)
levels for the next two decades.
Gas demand is
40
projected to remain
There are many future projections for gas demand, depending on the
20 stable in the coming
underlying assumptions and targets to be met. These projections often hinge
decades.
upon how quickly and how economically sensible renewable technologies and
2015 2020 2025 2030 2035 2040 2045 2050
power storage solutions can be scaled up. Even in the most optimistic target 3
  E
 U Ref (2016)   Cedigaz (OECD, 2015)   ENTSOG European Green   IEA WEO 450 (2016) scenarios, which match their projection to meet a pre-defined outcome, gas
  ENTSOG Blue Transition   Exxonmobil (OECD, 2016) Revolution (2016)   Greenpeace e. [r]evolution demand is projected to remain around current levels until the mid-2030s
(2016)   IHS (2016)   EE30 (2014) (OECD, 2015) because it is the fuel-of-choice in bolstering an increase in renewables and
  Statoil Reform   High RES (2011)   Greenpeace advanced e.
the phase-out of coal. 4
(OECD, 2016) [r]evolution (OECD, 2015)

Europe’s future energy demand needs to be covered even if some form of

all-electric energy system does not materialise as quickly as some forecasts
Total demand project, or political plans for energy efficiency do not lead to lower gas 5
Transformation2)
consumption. As gas infrastructure developers, we aim to ensure that our
Primary consumption
Gas demand projected to remain stable pipeline can contribute to meeting this demand. A robust and modern gas
supply infrastructure is needed.
Development of EU natural gas demand until 2050 [bcm]
Source: Prognos (2017) 6
While natural gas used in primary energy consumption is projected to
Development
decline by 11 percent, natural gas consumed in transformation is projected
-2 %
2015–2050 to increase by 17 percent, such that the EU’s total demand remains mostly
500 477 477 485 486
474 467 466 stable. The well-connected EU gas market supplies member states as well as
457
7
Ukraine and Switzerland.
Transformation:
Transformation
+ 17 %

400 150 148 168 197 196 175

160 179 Thanks
Thanks to efficiency,
to its its efficiency,
gasgas gradually
gradually
increases
increases its its share
share in power generation The latter does not have any domestic gas extraction and therefore supplies
its entire gas demand via EU territory. In 2013 Ukraine started to cover an
300 8
increasing part of its demand from EU countries using pipelines from Slovakia,
Poland and Hungary. By 2015, all Ukrainian gas imports were bought from
200
Primary consumption:
Primary consumption Western suppliers at hubs in the EU and supplied from the West – around
- 11 %

327 326 309 297 288 288 290 291 Energy

Energy efficiency
efficiency measures
measures progressively
progressively 10 bcm in 2015. In the future, Ukraine is projected to receive as much as 16 bcm
drive
drive downdown overall
overall heating
heating demand
demand 9
100 from the EU market. Ukraine's supply from the West increases thus has to be
factored into the European demand pool.

2015 2020 2025 2030 2035 2040 2045 2050

10
  Total demand   Transformation2   Primary Consumption

1 Scenarios depicted here represent relevant projections, but are not exhaustive.
2 Transformation includes power plants, heat plants and CHP (combined heat and power) plants.

8 9
 Nord Stream 2 – Gas Market Outlook

Declining Domestic Gas Production

EU total Italy
other countries Denmark
Romania United Kingdom
Germany Netherlands
Gas production in Domestic gas production Fields in Europe’s main production region around the North Sea are in
the EU 2016 [bcm] in the United Kingdom [bcm] decline. This means that around 25 bcm in the UK, 40 bcm in the Netherlands
Source: Prognos (2017), based on EC (2016) Source: Prognos (2017), based on DECC (2016)
and nearly all of Germany’s production must be compensated for.
150 141 100

118
While gas demand is projected to remain largely stable for the next two
120 80 decades, domestic production in the EU will drop dramatically over the same
100
period. Nord Stream 2 will supply gas to compensate for part of the supply.
The EU’s domestic gas
83
90 60 production levels are
72 The EU’s domestic gas production is concentrated in North-West Europe
68 66 expected to halve over
61 and has decreased drastically (-43 percent) in recent years, from 258 bcm
60 40 the next 20 years.
produced in 2000 to 141 bcm in 2015. Over the next two decades, production
levels are expected to halve again. This is drop is especially drastic in the
30 20 Netherlands, UK and Germany — which currently make up about 75 percent
of EU's domestic production.

2015 2020 2025 2030 2035 2040 2045 2050 2005 2010 2015 2020 2025 2030 2035 In the UK, current government assessments indicate that there will be
a 65 percent, or 25-bcm decrease between 2015 and 2035, down to
14 bcm per year. Forecasts for Germany, based on the country’s Gas
  EU total   Italy   Gas production forecast
4
  Other countries   Denmark Network Development Plan for 2016, point to a continuous decrease from
  Romania   United Kingdom approximately 8 bcm per year in 2015 to only 3 bcm in 2026.
  Germany   Netherlands
WEG forecast 2013 Sum gas production Netherlands
WEG forecast 2014 with limit for Groningen Dutch gas extraction projections are based on the planned volumes
WEG forecast 2015 Production limit Groningen field
according to the 2015 Network Development Plan, which includes a forecast
5
Natural gas extraction (June 2016)
(WEG annual reports 2006-2014) Other (smaller) fields until 2035. With the inclusion of the reduction of the Groningen field to ­
German gas production (areas of Gas production in
Groningen field 24 bcm, this results in a production decrease of about 40 bcm. In the
Elbe-Weser, Weser-Ems) [bcm] the Netherlands [bcm]
Source: Prognos (2017), based on FNB Gas (2016) Source: Prognos (2017), based on GTS (2015), Rijksoverheid (2016)
Groningen field, future production may be further curtailed by regulatory
intervention. 6
20 100

80
15 7

60

10

40
8

5
20

9
2006 2010 2014 2018 2022 2026 2005 2010 2015 2020 2025 2030 2035

  WEG forecast 2013   WEG forecast 2015   Total production with   Other (smaller) fields
  WEG forecast 2014   Natural gas production limit for Groningen   Groningen field 10
(WEG annual reports   Production limit
2006 – 2014) Groningen field
(June 2016)

10 11
 Nord Stream 2 – Gas Market Outlook

A Changing Gas Supply Portfolio

Natural gas production forecast for Norway [bcm] Europe benefits from its close proximity to natural gas suppliers including
Source: Prognos (2017) based on Norwegian Petroleum Directorate (2016)
Russia, Norway and the North African region, all within reach of pipeline
120
connections. There is also significant LNG terminal capacity, concentrated
on the Atlantic and Mediterranean coasts. However, tightening supply in
100
some neighbouring regions and in LNG mean that lower volumes will be
80 Yet to find
available for export to the EU.
  Yet to find Non-developed fields
60 Developed fields
  Non-developed fields
  Developed fields Neither Norway, Algeria nor the global LNG market are projected to be able
40
to fully compensate for the EU’s supply shortfall.
20 Norway and Northern
As of 2015, Norway had natural gas reserves of 1.8 tcm and produced about
Africa will not be able
121 bcm of natural gas, which was almost completely exported. However,
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 to maintain current
production from developed fields will decline significantly after 2020 and
supply levels, and LNG
needs to be replaced with production from non-developed or undiscovered
will shift to the higher-
Natural gas production forecast for Algeria [bcm] fields. Thus, despite large natural gas reserves, the sustainability of current
paying Asian markets.
Source: Adapted from Prognos (2017) based on OIES (2016) production levels there is questionable even in the medium term until 2030.

100 Northern African exporters Libya and Algeria are not projected to sustainably
increase their production. Both countries are expected to export smaller
80 amounts of natural gas to the EU internal gas market. Algeria faces increasing
domestic demand and even if constant domestic production is assumed,
Domestic production
60   Domestic production
Domestic demand volumes of natural gas available for exports are decreasing by 23 percent 5
  Domestic demand(LNG and pipelines)
Total exports between 2015 and 2020. In absolute terms, this means a decrease from
  Total exports
40 30 bcm to 24 bcm.
(LNG and pipelines)

20 The LNG market is cyclical. It varies between a buyers’ market (supply is 6

higher than demand and prices are low) as is expected until the early 2020s,
and a sellers’ market (demand is larger than supply and prices are high), which
2000 2005 2010 2015 2020 2025 2030
is expected thereafter. Due to low global LNG prices, there have been no
recent investments for liquefaction plants. Once global demand, especially in 7
Historical and projected global LNG supply and demand [bcm] 3 Asia, picks up, it will outpace the build-up of new facilities and absorb available
Source: Cheniere (2016), IGU (2016) LNG in the market. While it is theoretically possible to outcompete Asian LNG
buyers to fill a supply gap in a tight market, Europe cannot rely on winning that
600 competition and would have to pay a premium that would drive up the import
Supply gap 8
bill. Sufficient import pipeline capacity can mitigate this risk.
500
LNG demand
400   LNG demand US supply
  US supply Other supply
Australian supply
  Other supply
9
300
Qatari supply
  Australian supply
Other supply
  Qatari supply
200
  Other supply

100 10

2010 2012 2014 2016 2018 2020 2022 2024

3 Conversion rate 1 mtpa = 1.4 bcm; 85 % utilisation of nameplate capacity, in line with average global liquefaction capacity of about 83 % in 2016
according to 2016; due to a lead time of about 6 years, additional liquefaction capacity from FIDs not taken yet will be available after 2023 the earliest.
12 13
 + 82.3 %

Nord Stream 2–%

+ 138.2 Gas Market Outlook 1,433
1,136
804 705 832
660
441 509
208 312
131 143

Current 2020
Africa
2030 2040 Current 2020 2030
Middle East
2040 Current 2020 2030
Asia & Oceania
2040
Competing with Global Markets
+ 103.3 %
Securing European gas supply in competition with global markets With global demand rising by over 25 percent (more than 1,000 bcm)
Natural+gas
18.3 demand in other in the coming two decades and its own gas resources depleting, the EU
% + 82.3 % regions [bcm]
Source: IEA (2016) will have to secure gas resources in the long term to ensure global industrial
+ 10.4 %
+ 138.2 % 1,433 competitiveness. Starting from the mid-2020s, the global gas market will
1,136
804
+ 63.6 % 832 undergo significant shifts as LNG capacities are absorbed by Asian markets.
660 705
994 1,113 509
1,038 441
941 312
131 143 208 657 655 678 725
270 2020
Current 2020 2030 2040 Current 2020 2030
165 + 103.3198
2040
164 %Current 2030 2040
Europe benefits from its strategically important proximity to vast gas reserves
Africa
Current 2020 2030 2040
MiddleCurrent
East 2020 2030
Asia & Oceania
2040 Current 2020 2030 2040
readily available in Northern Russia – pipeline-connected fields which are not
North America South America Eastern Europe & Eurasia
+ 82.3 % + 103.3 % + 103.3 % subject to resource competition with other regions.
Gas trade flows will
+ 18.3 % shift to the Asia-
+ 138.2 % 1,433 The International Energy Agency (IEA) predicts that over the next decades,
1,136 + 82.3 % + 82.3 % Pacific region, which
+ 10.4 % natural gas will take on an increasingly important role in global energy due to
804 705 832 will absorb currently
660
312
441 509 growing demand in power, industrial use, buildings and transport. Developing
143 208 + 138.2 %
+ 63.6 % + 138.2 % 1,433 1,433 developed LNG
1,038 1,113 1,136 1,136 countries will see particularly rapid growth as their energy needs rise. Aside
2020 2030 941
2040
994
Current 2020 2030 2040 Current 2020 2030 2040 804 832804 832 capacities.
509
657 660655 678 725 705660
509
705 from developing domestic resources, additional requirements will be met by
Africa Middle East 312
Asia &441
Oceania 312
441
270
131 165
143 208
164 198
131 143 208 rising imports. Over the next 20 years, China will become the fastest-growing
Current 2020 2030 Current Current
2040 2020 Current
2020 2030 2040 2020
2030 2040 20302020
Current Current 2020 Current
20402030 2030 2020
2040 20302020
Current
2040 20402030 Current
2040 2020 2030 2040 + 103.3 % gas market with an additional demand of 420 bcm, placing it behind only the
North America Africa
South America Africa Middle East
Eastern Middle East
Europe & Eurasia Asia & Oceania Asia & Oceania United States and the Middle East in terms of overall consumption. Markets in
+ 18.3 %
India, Africa and Latin America are also on a rapid expansion course.
+ 82.3 %
+ 10.4 %
+ 18.3 % + 18.3 %
Industry, in particular, will account for the bulk of this growth with an
+ 63.6 % + 138.2 % 1,433
994 1,038 1,113 + 10.4 % + 10.4 % 1,136 additional 625 bcm, or nearly 40 percent of the global gas demand increase.
725 804 832
657 655 678
441 509
660 705 The power sector will make up 34 percent of the projected growth despite
270 312
165 164 198 + 63.6 % 131 + 63.6 208
143 % facing competition from coal, especially in Asian markets. The transport
994 1,038 1,113 994 1,038 1,113
2020 2030 2040 Current 20209412030 2040 941
Current 2020 2030 2040 Current 2020 2030 2040 Current 2020 2030 2040 Current 2020 2030 2040 sector will also see significantly higher demand, growing by 160 bcm up to
657 655 678 725
657 655 678 725
orth America South America Eastern Europe & Eurasia Africa Middle East Asia & Oceania 280 bcm by 2040.
165 164 198 270
165 164 198 270
6
Current 2020 2030 Current
2040 2020 20302020
Current 20402030 Current
2040 2020 20302020
Current 20402030 Current
2040 2020 2030 2040
North America North America
South America SouthEastern
AmericaEurope & Eurasia
Eastern Europe & Eurasia The increase in demand means that gas trade between regions is also set
+ 18.3 %
to increase by 70 percent by 2040, which amounts to a volume of about
Russia has the world’s largest gas reserves 460 bcm. In parallel, Asian import demand will also increase significantly. With
+ 10.4 % 7
few pipeline connections to Asia finding financial and political support, the
Natural gas reserves 2015 [bcm]
Source: BGR Energiestudie 2016
+ 63.6 % region’s markets will largely rely on LNG imports both from existing suppliers
994 1,038 1,113
941
657 655 678 725 and from growing sources like Australia. Exporters will thus look to the
270 highest-paying markets, further gearing the trade flows towards the Asia-
165 164 198
8
Current 2020 2030 2040 Current 2020 2030 2040 Current 2020 2030 2040
Pacific region.
North America South America Eastern Europe & Eurasia

9
Russia Middle East Iran Far East CIS Africa North Central & South Europe
(ex. Iran) (ex. Russia)
47,768 33,500 16,277 14,365 America America 3,395
45,225 15,545 12,752 7,724
10

Total reserves
197,841
14 15
 Nord Stream 2 – Gas Market Outlook

Additional Imports Are Needed

Total demand EU 28, Switzerland and Ukraine West import
As domestic production decreases, more imports are needed
EU 28 import The European gas market supplies its 28 Member States as well as
Evolution of gas import demand [bcm]
EU 28 production, Switzerland and Ukraine West import neighbouring countries. But because production in the EU and some
Source: Prognos (2017) based on European Commission (2016), Eurostat (2016), GTS Netherlands (2015), Rijksoverheid (2016), pipeline suppliers such as Norway and Algeria is decreasing, new
FNB Gas 2016), DECC UK (2016), Ukrstat Statistical Dashboard (2016), Naftogaz (2016)
imports are needed. Only the global LNG market and Russia have
sufficient developed resources to close the supply gap.
497 506 508
491 494 489 487
500 477

As an efficient, reliable, modern offshore transportation system,

400 Nord Stream 2 will offer a competitive option for bringing natural gas
to major demand centres within the EU gas market.
350 376
  Total demand EU, Both pipeline gas from
300 397 439 442
394 417 427 Switzerland and Russia and LNG will
Ukraine West import Nord Stream 2 can ensure the security of supply in the early 2020s, when
  EU import play a role in closing
200 considerable, supply and demand risks are projected. The most critical risk
  EU production Europe’s future supply
factors are uncertainties of the long-term technical feasibility and commercial
gap – the share will
viability of transit through Ukraine and low LNG supply due to a tightening
100
141
ultimately be set by
118 100 global market.
83 72 68 66 61 the market.

2015 2020 2025 2030 2035 2040 2045 2050 Additionally, higher demand or supply-side risks, such as a complete stop
of production from the Groningen field in the Netherlands or a halt of exports
from North Africa, could endanger the EU’s security of gas supply.

Once it starts operation in 2020, the state-of-the-art Nord Stream 2

transport system will help cover the European market’s projected import
As exporters to the EU are constricted, gap, while making the EU’s gas supply more robust, economically beneficial
the growing import gap must be covered and sustainable. The privately funded 8 billion-euro infrastructure project
European gas balance [bcm] Import requirement
will enhance the ability of the EU to acquire gas, a clean and low carbon
Source: Adapted from Prognos (2017) based on European Commission (2016), Eurostat (2016), GTS Netherlands (2015), Import gap fuel necessary to meet its ambitious environmental and decarbonisation
Rijksoverheid (2016), FNB Gas (2016), DECC UK (2016), Ukrstat Statistical Dashboard (2016), Naftogaz (2016) Statistical difference
objectives.
Ukraine West import 2015
LNG
500
Russia pipeline1)
439 442 Caspian Sea (TAP/TANAP)
427
397 394
417 Algeria (incl. LNG) & Libya 7
400 376 Norway (incl. LNG)
350
12 32 76 122 149 155
90 142   Import requirement
10
35   Import gap
300
  Statistical difference 8
  Ukraine West import
133   LNG
200   Russia pipeline
10   Caspian Sea (TAP / TANAP)
10
41 35
26
10 10 10 10 10
  Algeria (incl. LNG) & Libya 9
  Norway (incl. LNG)
100
17 8 5 5 4
119 115 101 94 94 92 89 87

2015 2020 2025 2030 2035 2040 2045 2050 10

16 17
 Nord Stream 2 – Gas Market Outlook

Natural Gas and Renewables:

Supporting the transition to renewable power Strong Partners for the Future
Total electricity generation [TWh]
Source: Based on IEA World Energy Outlook, New Policies Scenario (2016) Gas-fired generation will play an important role in supporting renewable
energy. Natural gas offers versatile applications. In power generation, it emits
50 percent less CO2 when compared to coal. As part of an economically sound
Total power generation: 3,155 TWh reinforcement of Europe’s gas market, Nord Stream 2 will enable this climate-
2014 coal natural gas hydro + renewables nuclear friendly energy transition under sensible economic conditions.

+ 53 % + 83 %
As a replacement for coal, gas from Nord Stream 2 could save about
2035 coal natural gas hydro + renewables nuclear 160 million tonnes of CO2 – or 14 percent of total EU emissions from power
Total power generation: 3,416 TWh generation.
In the next 10 years,
gas is projected to
>> Natural gas will be a strong partner to the growth of renewable power In combination with power from renewables, natural gas has a number of
overtake coal in the
advantages over other fossil fuels, making it the first choice as an additional
generation – allowing an economically sensible phase-out of coal and a EU’s power generation
energy source in an enhanced low-carbon energy strategy. In the EU, gas is
fallback option in case the further development of nuclear power in Europe mix.
expanding its share in the power generation mix and is projected to overtake
does not play out. A combination of renewables and natural gas will
coal in about 10 years.
provide for a 50 percent reduction in emission.

Natural gas creates significantly lower specific CO2 emissions in power

generation compared to all other fossil fuels. In the UK, for instance,
emissions from power generation decreased by 29 percent despite an
11 percent increase in energy consumption between 1990 and 2013 –
Cutting residential heating emissions in half a result attributed to the fuel switch from coal to gas.
CO2 emissions of home heating technologies [kgCO2 / a]
Source:
RedusingEurogas,
CO based on Uniper datawith gas
emissions Another positive aspect of natural gas is the already existing infrastructure for
2
transport and storage within the EU, which facilitates the security of energy
supply at relatively low costs.

14,000
The gas infrastructure could even be used as back-up transmission and
12,000
storage technology in case the expansion of power grids lags further behind
10,000 – power storage, in particular, still requires substantial technological progress.
8,000 Natural gas will also have to play an important role in power generation to
6,000
replace phased-out nuclear power plants and coal or lignite plants in the
transition to renewable energy. 8
4,000

2,000

Traditional oil-fired Traditional gas-fired Modern gas Modern gas Solar thermal + gas
condensing condensing + solar 9
   
thermal / heating
support 518 gCO2 / kWh 859 gCO2 / kWh
>> With modern gas heating, especially in combination with renewable
Natural gas Oil
systems, home heating emissions can be cut by 55 percent. 10

 
931 gCO2 / kWh
Coal  
1,175 gCO2  / kWh
Lignite
18 19
 Nord Stream 2 – Gas Market Outlook

The Best Option for Europe’s Gas Supply

Nadym Pur Taz fields
Nord Stream 2, based on proven, safe and sustainable technology, needs less
Yamal fields
energy than other existing options. Taking a short route via the Baltic Sea, the
transport system will be the most competitive option for the region.

Direct connection to Nord Stream 2 compares favourably to both LNG and to onshore pipelines
the new Yamal peninsula fields – the latter requiring significant land usage, longer construction times and
burning more gas for interim compression.
Compared to the
central corridor,
Much like the existing Nord Stream Pipeline, the Nord Stream 2 corridor is
Nord Stream 2 will
substantially shorter than the Central corridor – thus requiring fewer compressor
transport gas at
stations along its route. Greenhouse gas (GHG) emissions are 61 percent lower
20 percent lower
than those of the central corridor pipeline routes used to transport Russian gas
tariffs – and 61 percent
to Europe.
lower emissions.

IA
Nord Stream 2’s GHG footprint will be more than two times lower than that of

0k

SS
10

~ 6,400 km
U
3, major LNG exporters. The liquefaction and shipping of LNG creates about one-

R
~

third more emissions than piped gas. By comparison, the Nord Stream 2 Pipeline
is fed by an efficient, new onshore system and will need only one compressor
station to propel the gas across the Baltic Sea.
D
N
LA

Modern pipeline systems in the Northern corridor allow for significantly higher
N
FI

pressures require less fuel gas. The more efficient system leads to lower
IA

transport costs for the shipper – gas transit rates via Nord Stream 2 will be
N
TO

20 percent lower than current tariffs via Ukraine.

ES

IA
TV

S
LA

U
AR
EL
B
IA
AN

Regasification
Higher efficiency, lower emissions than LNG alternatives
U

Transportation as LNG via tanker

TH

Liquefaction
Carbon footprint of natural gas imports to Central Europe [gCO2 eq. / MJ]
LI
~ 1,230 km

Purification
E

Source: Thinkstep (2017)

N

Pipeline transport
AI
R

Production and processing

IA

K
U
SS

28.7
U

0.3
R
EN

0.3 23.6
ED

10.0
SW

3.7 20.0
0.3
D
N

+ 351 %
LA

16.9 Regasification
PO

0.3
IA

4.8 Transportation as
AN

7.5 1.4 0.3 14.9

5.7 LNG via tanker
99
M
O

+ 136 %
3.0 Liquefaction
R

4.9 3.7
Purification
IA

3.2 1.1
K

0.6 Pipeline transport

VA

5.6
Greifswald 2.9
O

5.9 Production and processing

SL

6.3
K

AR

1.2
AR

10
IA

10.7
G
M

3.2
N
H

8.8
EN

0.6 4.8
U
C

2.9
6.2
H

0.2
ZE
D

IA

2.8 1.9 1.5

B
R

Baumgarten
SE

Queensland, US North Algeria Qatar Nord Stream

Y

Australia West Shelf, corridor, Russia

AN

Waidhaus
IA

O ND
M

Australia
A
A
R
ER

N
I

G A
ST

AT

VI
G

ZE IA
AU

ER SN
R
C

H BO

20 21
 Nord Stream 2 – Gas Market Outlook

A Major Economic Stimulus

Investment in European industry and services Nord Stream 2 will be an integral part of ensuring that the European
energy system remains competitive – to the benefit of industries and
Logistics
households. At the same time, the privately funded investment for
1   Port of Mukran 4  Port of Hanko
2  Port of HaminaKotka 5   Nord Stream 2 HQ in Zug the new pipeline will provide a major economic stimulus for many sectors
3  Port of Karlshamn
Finland of the region’s economy.
Russia
Pipes & materials 2
4 2 4
1  EUROPIPE 6  MMK Norway
2  OMK 7  Dillinger Hütte 3 Sweden 3 5 Together with other suppliers and transport options, such as LNG,
3  Chelpipe 8  Impalloy 6 6 gas from Nord Stream 2 will ensure a competitive supply. Russia’s gas
5
4  PetrolValves 9   Wasco Coatings 2
production costs remain the lowest in the world, making it an ideal source for
5  Voestalpine 3 3 Access to affordable
UK Denmark supplying the European market.
1 energy is crucial for
Engeneering & Surveys
8
Netherlands 1 the competitiveness
1  Saipem Fano 4  Next 6 2 9 A lack of pipeline capacities for competitive supplies from Russia supply
2  Fugro Survey 5  MMT
1 of EU industries.
Germany would increasingly subject Europe to a reliance on the global LNG market,
3  Geo 6  N-Sea 1
7 which is characterised by its focus on higher Asian prices. Should Europe
7 have to outcompete Asia to get additional gas during a cold spell or to
Offshore Pipelay
1  Allseas 5 compensate for supply shortfalls, the premium Asian buyers pay on their
Switzerland 5 Austria
LNG imports would increase Europe’s import bill.
Environmental Studies, Quality Management & Safety
1  Rambøll 5  Business Trend 1
2  IfaÖ 6   Delta Energy Services 4 The result would be a risk of higher gas prices – and a risk to European
3  DNV GL 7  Intertek competitiveness across industries such as steel, bricks and tiles, or refineries,
4 Italy
4  Svarog chemicals or fertilizers. Depending on the sector, natural gas prices can have
a weight of almost 20 percent on total production costs. Additional capacities
built to connect import infrastructure with ever more markets in Europe allow
for more flexibility and competitiveness. EU households and industries will
benefit from the new infrastructure.

Moreover, Nord Stream 2 will constitute a multi-billion dollar investment in

European industry and service, benefiting over 200 companies from 17 countries.
By early 2017, the project had awarded tenders for the production of steel,
engineering services, construction vessels for pipe-laying, logistics operations,
Supply chain from steel to pipe concrete weight-coating and extensive environmental surveys.

10

 
2.4 Mt 1.5 Mt    
450 kt 450 kt   43 kt 
Steel Iron ore Aggregate Cement Wire

22 23
 Nord Stream 2 – Gas Market Outlook
The pipeline will be
approximately
Nord Stream 2 in Numbers
1,230 km
long, and will run from the Russian
coast through the Baltic Sea,
reaching landfall in Germany.
The pipelines will have a
constant internal diameter of
1,153 millimetres (48 inches)
and a wall thickness of up to
41 millimetres.
up to
About
120 bcm
of additional imports need to be
secured for the EU in the next two
55 bcm
decades, owing to decreasing
production and lower output Utilisation of the existing
from other exporters to Europe. Nord Stream Pipeline
has increased every year since it
opened in 2011. It is now close
to delivering its full capacity of
55 bcm per year.
Generating electricity from
natural gas produces up to
50 percent
less CO2
than from coal.
Russian natural gas
makes up about
6 percent
of the EU’s total
energy consumption.
24
Nord Stream 2 will have
capacity to transport 55 bcm
of natural gas per year, enough
to supply some
26 million
European
households.
Each pipe
joint will be 12 metres
long and weigh 24 tonnes
with concrete coating.
More than
55,000
line kilometres
were sailed by research
vessels to conduct surveys
and underwater investigations
to determine a safe and
environmentally friendly route.
200,000
Nord Stream 2 will require
around 200,000 coated steel
pipes laid on the seabed.
Each pipeline is carefully
tested for safety ands quality.
Basic project profile
Nord Stream 2 is a new pipeline through the
Baltic Sea planned to deliver natural gas from
vast reserves in Russia directly to the European
Union (EU) gas market. The pipeline system will
contribute to the EU's security of supply by filling
the growing gas import gap.
The twin 1,230-kilometre Nord Stream 2 subsea
pipelines will have the capacity to supply about
55 billion cubic metres of gas per year in an
economic, environmentally safe and reliable way.
Nord Stream 2 transports gas supplied via the new
northern gas corridor in Russia from the fields on
the Yamal peninsula, in particular the supergiant
field of Bovanenkovo. The production capacity
Russia has some
47,800 bcm
NORWAY
of natural gas reserves –
the largest natural gas
reserves in the world.
9 
Baltic Sea region
countries
are involved
in consultations about
the pipeline. It will will run
through the exclusive economic zones
or territorial waters of five countries
– Russia, Finland, Sweden, Denmark and
Germany.
of the Yamal peninsula fields are in the build-up
phase, while producing fields from the previously
developed Urengoy area that feed into the central
gas corridor have reached or passed their plateau
production.
The northern corridor and Nord Stream 2 are
efficient, modern state-of-the-art systems, with
an operating pressure of 120 bar onshore and an
inlet pressure of 220 bar to the offshore system.
The privately funded 8 billion-euro infrastructure
project will enhance the ability of the EU to acquire
gas, a clean and low carbon fuel necessary to meet
its ambitious environmental and decarbonisation
objectives.
25
 Nord Stream 2 – Gas Market Outlook

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outlook-for-energy.pdf
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nsf/0/1720D8F507F13FA8C2257F3F004156A8?OpenDocument&Expand=1&
Norwegian Petroleum Directorate (2016). Expected volumes of sales gas from
Norwegian fields, 2016–2035. Retrieved from http://www.norskpetroleum.no/en/ Abbreviations
production-and-exports/exportsof-oil-and-gas
bcm = billion cubic metres
Prognos (2017). Current Status and Perspectives of the European Gas Balance – CAPEX = capital expenditure
Analysis of EU and Switzerland. CO 2 = carbon dioxide
Rijksoverheid (2016). Maatregelen gaswinning Groningen. Retrieved from https:// CO 2 eq. = carbon dioxide equivalent
www.rijksoverheid.nl/onderwerpen/aardbevingeningroningen/inhoud/ EEZ = Exclusive Economic Zone
kabinetsbeleid-gaswinning-groningen kt = thousand tonnes
kWh = kilowatt-hour
Statoil (2016). Energy perspectives 2016: long-term macro and market outlook.
LNG = liquefied natural gas
Retrieved from http://www.statoil.com/no/NewsAndMedia/News/2016/Downloads/
Mt = million tonnes
Energy%20Perspectives%202016.pdf Image Credits
MWh = megawatt-hour
Thinkstep (2017). GHG Intensity of Natural Gas Transport Comparison of t = tonne Shutterstock:
Additional Natural Gas Imports to Europe by Nord Stream 2 Pipeline and tcm = trillion cubic metres Cover
LNG Import Alternatives. TTF = Title Transfer Facility (virtual mc-quadrat OHG:
Ukrstat (2016). Retrieved from http://www.ukrstat.gov.ua/ trading point in the Netherlands) Design, maps and illustrations

26
 April 2018
Nord Stream 2 AG
Baarerstrasse 52 Find us on social media:
6300 Zug, Switzerland
Phone: +41 41 414 54 54
Fax: +41 41 414 54 55
info@nord-stream2.com www.nord-stream2.com