From Poland to Russia: the power games
The construction of "vertical pipes", travelling from north to south, has long been considered. One of these is the Baltic Pipe, which could transport Norwegian gas to Poland. The other is North Stream 2, from Russia to Germany, feared by Poland and Ukraine due to the increase in Russia's influence on the continent

For various reasons, there is plenty of gas in Europe, even though its deposits are about to run out. Europe is already surrounded by Russia and the gas pipelines travelling from east to west. Of course, the construction of "vertical pipes" in the Old Continent that instead run from north to south has been considered for some time, but with the possibility of changing the direction of flows (reverse flow). In recent years, since the start of the millennium, we have seen the rise of many gas pipeline projects, but also many that have failed: from Nabucco to South Stream, which were modified or completely abandoned. However, these projects were "horizontal", and would have transported gas from Russia or Azerbaijan, such as the revived TAP pipeline.

"Vertical" gas pipelines: Baltic Pipe and Nord Stream 2

In April, Poland’s PGNiG made changes to its 2014-2022 strategic plan, focusing on the LNG terminal and on the Baltic Pipe gas pipeline, therefore giving a second life to the project, which was founded in 2001. It involves a 230 km-long gas pipeline, which could connect Denmark and Poland via sea, with a capacity of 5 billion cubic meters of gas per year, which would transport Norwegian gas to Poland. This project has already been stopped a few times due to doubts regarding its profitability (economic feasibility), and has now again been called into question. However, the following question still remains: is this a real project or just a move against the progress of the Nord Stream 2 gas pipeline? Nord Stream 2 involves the construction of 2 pipelines with a total capacity of 55 billion cubic meters (Bcm) of gas per year, from the Russian coast to Germany via the Baltic Sea. Gazprom is expected to hold 50% of the project, while BASF, E.ON, Engie, OMV and Shell will own 10% each. The project was making good progress following the slowdown of the South direction, with the termination of South Stream, the introduction, in its place, of the Turkish Stream, and the standstill of the latter following the Russian-Turkish conflict caused by the downing of a Russian fighter jet over Syrian territory by Turkey. Now, Société Générale, UniCredit and Russian Bank for Project Finance have been chosen by the consortium as financial advisors to attract funding, which is expected to amount to approximately €10 billion. However, several countries, including Poland and Ukraine, have expressed their concern about the project, which discriminates against their position and increases Russia’s influence on the continent. Even Matteo Renzi criticized the project last December, complaining about the ambivalence of the EU, which buried the South Stream project (in which Eni took part and Saipem won the multimillion-dollar commission to lay the pipes under the Black Sea) but has approved the doubling of the North Stream, as desired by Germany, without protest. Obviously Italy’s position would change if a major involvement could be guaranteed for Italian companies, especially Saipem, to compensate for the damage to the company due to the cancelled project. Subsequently, Brussels started to place various obstacles: recently, Energy Union Commissioner Maroš Šefčovič explicitly stated that the doubling of the gas pipeline via the Baltic " is worrying," since "it could alter the market landscape of EU gas, preventing access to new sources of supply or new suppliers, and further increasing the excess capacity from Russia to Europe."

Concerns of Ukraine's Naftogaz

Andrej Kobolev, CEO of Ukraine’s Naftogaz, is also very concerned about the progress of the project, because if completed, Ukraine, as a transit country for Russian gas to Europe, would become obsolete. In a recent interview with Focus magazine, Kobolev said: "the construction of the second Nord Stream line could be completed by 2019: then our problems would become larger by far. Apart from the loss of transit, it will be harder for us to buy gas in Europe". In Eastern Europe there will be a gas deficit. If all of the gas flows into Nord Stream, the transit capacity of European gas transmission systems will not be enough to pump the required gas flow to Eastern and Southern Europe. It is not entirely ruled out that Gazprom’s main goal is precisely managing to create "a narrowing in this market, to then sell gas to us and to our neighbors at higher prices". However, the Russians say that their gas has competitive prices and is within the European average, and is much cheaper than the United States’ elusive shale gas and, moreover, that all the arguments against the project are only political attacks. Therefore, is the revival of the new Baltic Pipe project only a strategic move or a real necessity? According to Piotr Woźniak, CEO of PGNiG, it is a necessity, as well as an opportunity to diversify suppliers. If built, Poland would have an extra lever to deal with Gazprom and would rely less on Germany. However, Norway’s Statoil is in no hurry to enter the consortium for the construction of the gas pipeline; on the contrary, it is said that Statoil considers “the Polish market interesting‘ and the "possibility of using that infrastructure if it will be cost effective", but that it does not want to invest in the construction of this gas pipeline. Without Statoil, it would be difficult to progress quickly.