* Russia seeks to increase market share in Europe
* Route via Germany, bypasses Ukraine
* Gazprom upbeat on gas demand, ups '10 output forecast
By Denis Pinchuk
VYBORG, Russia, April 9 Russian President Dmitry
Medvedev on Friday launched the construction of a major gas
pipeline aimed at winning market share in Europe while bypassing
Ukraine, where strained relations have caused supply disruptions
in the past.
Nord Stream, a project involving Gazprom (GAZP.MM),
Germany's BASF BASF.F and E.ON (EONGn.DE) as well as Dutch
firm Gasunie, is expected to help Russia increase its share of
EU gas markets from the current 25 percent to about a third.
"The demand for the 'blue fuel' -- we are all sure of this
-- will continue to grow in Europe," Medvdev said at the launch.
Germany's Chancellor Angela Merkel joined by video link.
The pipeline -- which will cost 8.8 billion euros ($11.77
billion) -- plans to transport up to 55 billion cubic metres of
gas per year from 2012. Gazprom said that contracts have already
been signed for most of the volumes.
One possible fly in the ointment is the increasing
popularity of alternative fuels, such as shale or liquefied gas.
But Nord Stream officials have said this should not undermine
Russia's leading role in the European market. [ID:nLDE6371ZD]
Nord Stream, Russia's biggest post-Soviet gas pipeline, will
ship gas under the Baltic Sea to Germany and onward to other
That will allow more Russian gas exports to bypass Ukraine,
through which 80 percent are currently routed. Differences with
Kiev also encouraged Moscow to speed up the project, as well as
South Stream, running north and south of the EU bloc.
In January 2009, Russian gas supplies to Europe came to a
halt for almost two weeks as Moscow and Kiev rowed over prices
and transit terms.
Gazprom CEO Alexei Miller said Nord Stream will "ensure the
highest reliability of supply".
Gazprom saw a big slump in demand in Europe last year due to
the economic crisis and as clients preferred to buy cheaper
liquefied and spot pipeline gas.
It had to delay the start of its giant Arctic Shtokman gas
field -- one of the resource bases for Nord Stream -- by three
years to 2016 due to a slump in gas demand. [ID:nLDE6141ZH]
However the company is upbeat about prospects this year.
"The pace of the market recovery is very, very great,"
Miller said, adding that "based on the results of the first
quarter" Gazprom would likely produce 529 billion cubic metres
of gas, up from a previous plan of 521 bcm.
Under the Nord Stream network, two parallel pipelines would
together carry gas over 1,200 km (750 miles) from Vyborg in
Russia to Greifswald in Germany under the Baltic Sea.
The first leg will carry 27.5 bcm starting from 2011, the
second link is expected to be completed in 2012. The link will
cross the waters of Russia, Sweden, Denmark and Germany as well
For a graphic of Europe imports of Russian gas, click on:
For a factbox on Nord Stream, click on [ID:nLDE61B06H]
(Writing by Toni Vorobyova)