The price for restoring Nord Stream has been announced: why the calculation was needed

Expert Pikin: “The chances that the exploded gas pipelines will be repaired are zero”

Restoring the Nord Stream gas pipeline, destroyed as a result of sabotage in September 2022, will cost €1.2–1.35 billion. This is a preliminary estimate made by the project operator Nord Stream AG. It is important to understand: the company prepared it exclusively as part of a lawsuit with Western insurers who refuse to make payments. And not at all with the goal of demonstrating a desire to revive, to pull out of oblivion the expensive gas pipeline that supplied Europe with energy for many years.

What, purely theoretically, could these serious funds, exceeding a billion euros, be used for? We are talking about the potential costs of removing seawater from the pipes, stabilizing them, repairing them, and replacing lost gas. This follows from materials sent by Nord Stream AG to the High Court of London. The Financial Times recently reviewed them. Earlier, in February, the Nord Stream operator filed a claim for €400 million against insurance companies Lloyd’s of London and Arch Insurance, claiming that they did not cover damage from the explosions and were not going to.

The topic of the possible restoration of both lines of Nord Stream and the first line of Nord Stream 2 (which also suffered serious damage at that time) arose a year and a half ago. Since then, it has been exaggerated with varying degrees of intensity, with a tendency to fade. “Such accidents have never happened before,” Deputy Prime Minister Alexander Novak said in October 2022. “Of course, there are technical capabilities to restore the infrastructure; this requires time and appropriate funds.”

At least two questions arise: how feasible is the idea from a purely technical point of view, and most importantly, how economically feasible is it?

“The answer is simple: the repair is quite feasible, moreover, experts have already calculated the potential costs,” says Artem Deev, head of the analytical department at AMarkets. – Since the construction of Nord Streams cost Gazprom and European partners approximately €17 billion, restoring the infrastructure with a total capacity of up to 110 billion cubic meters per year seems to be an economically feasible task. True, for this, Europe must renew long-term contracts for the purchase of Russian gas. But how likely this is is a question for European leaders.”

It is difficult to assess the adequacy of the figures presented by Nord Stream AG, believes Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation. The fact is that the calculations also concern the price of gas lost as a result of explosions (filling the pipes), which clearly exceeds the cost of all repair and commissioning work. Moreover, it is not clear what we are talking about – either the price in 2022, when gas on the European market was trading at several thousand dollars per thousand cubic meters, or the current quotes of 250-300 dollars.

“Is it possible to bring Nord Stream back to life? “It’s more likely no than yes,” says MK’s interlocutor. – According to experts, it is impossible to predict how quickly the process of degradation occurs in pipes filled with salty sea water and subject to constant corrosion. If the underwater, linear part of the gas pipelines becomes completely unusable (and sooner or later this will happen), it will have to be rebuilt again. And most importantly, no one will now dare to restore Nord Stream 1, since there are no guarantees that official Brussels will allow its use.”

The money will almost certainly go down the drain: you will invest a conditional billion euros in repair work, and European officials will impose sanctions on the gas pipeline. In addition, Yushkov summarizes, they declare Europe’s complete refusal of Russian gas by 2027.

“I assess the chances that Nord Stream will be restored in the foreseeable future as zero. At least, this is absolutely impossible in the current geopolitical realities,” says Sergei Pikin, director of the Energy Development Fund. – The cost assessment made by the project operator Nord Stream AG is necessary for the payment of insurance compensation. But only! Nobody now seriously considers the very possibility of repair: it is, rather, from the realm of fantasy, from another life. In addition, Europe has set a course for a complete and irrevocable rejection of Russian pipeline gas. Next year, there will be only one route left – through Turkey, since the transit contract with Ukraine, which expires in 2024, will not be renewed. It looks like after some time Russian LNG supplies to Europe will also stop.”