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    Denmark-Poland Agreement Explains NS 2 Third Route

Summary

Regulatory uncertainty means the choice now is between two lengthier routes for Nord Stream 2.

by: William Powell

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Denmark-Poland Agreement Explains NS 2 Third Route

The imminent final settlement of a decades-old territorial dispute between Denmark and Poland explains a Danish request to Nord Stream 2 (NS 2) that it investigate an alternative southern route, which NGW reported March 28

The Russian-led pipeline project must now study the potential environmental impact issues along the new route. Polish energy portal BiznesAlert.pl distributed what it says is an internal company letter sent by the president of Nord Stream AG Matthias Warnig that warns that the move could delay the project by "years". NS 2 said earlier this year it is on schedule to finish construction by the end of 2019.

The new route crosses the Danish exclusive economic zone (EEZ) in the waters south of Bornholm island, which sits between Poland and Denmark. The area was previously the subject of dispute between Poland and Denmark, and therefore not available for any project developer to lay pipes or cables.

However, the Danish Energy Agency (DEA) has told NS 2 that the area has become available, based on an agreement reached between the two countries. Ratified by Denmark, only one Polish signature is needed, sources say.

Given Poland's opposition to NS 2, it might have been expected to hold on to those waters, as it would thereby be able to better delay NS 2 or force it to take a longer route. However, the explanation might lie in another subsea pipeline project.

Poland and Denmark are jointly working on Baltic Pipe, which would cross those waters. Danish grid operator Energinet will build the onshore section from Norway's Europipe beach terminal to Denmark's southern coast. Polish grid operator Gaz-System will be responsible for the offshore section linking southern Denmark to Poland.

The pipeline is strategically important to Poland as it searches for new delivery routes for gas. Baltic Pipe did not comment to NGW on what had brought about the resolution extending Denmark's exclusive economic zone (EEZ), saying that was a matter between the two governments. 

NGW understands that Poland had earlier resisted Danish interpretations of the extent of the EEZ, arguing that it should start from the Danish mainland and not from Bornholm. In the latter case Denmark's EEZ reaches further south.

The Danish authorities will only approve one of the two routes proposed for NS 2. The southern route will be weighed against NS 2's previous Plan B, which heads north of Bornholm.

NS 2 told NGW March 29 that it will now carefully read the request from the DEA and then decide what steps should be taken next. "As a prudent developer of an important infrastructure project, we have considered various route alternatives. A route in this southern corridor was already developed in 2006 for the existing Nord Stream pipeline," a spokesman said.

In April 2017, NS 2 applied for a route based on the guidance received from Danish authorities during the successful planning and construction of the existing Nord Stream Pipeline – the so-called base case route that traverses territorial waters to the south of Bornholm - in accordance with the law in force at that time, the project company added. 

Denmark's amended Continental Shelf Act (1 January 2018) gives the foreign ministry the right to veto infrastructure projects running through territorial waters on grounds of foreign and security policy concerns, and the right to recommend, based on wide-ranging considerations, whether an application for infrastructure projects, such as gas transmission pipelines, shall or shall not be further handled by the DEA.

Since this recommendation has now been pending since January 2018, NS 2 decided to explore alternative routes outside Danish territorial waters, the company said. The result of this process was the August 2018 application for the so-called north-western route through the Danish EEZ.

Both permitting processes, which included consultations with the public and expert authorities both nationally and internationally (the so-called Espoo procedure), have shown that all technical and environmental prerequisites are fulfilled and a construction permit could be granted for either route, NS 2 added. 

NS 2 continued: "As a project developer, we depend on a predictable, stable and transparent regulatory framework. We represent a commitment to reinforce the EU's long-term energy security by providing reliable and competitive natural gas supplies and diversified transportation capacities via a short and direct link to the world’s largest gas reserves in Northern Russia. Gazprom as well as five major European companies from Austria, France, Germany and the Netherlands have committed to the project. Committed investments currently stand at almost all the project’s capital expenditure. Globally, more than 670 companies from 25 countries are involved." 

The DEA told NGW March 29: "The decision on the second application for a north-western route will await the clarification of the environmental impacts from a route south of Bornholm in the continental shelf area. After this clarification an assessment will be made as to which of the two continental routes are preferable seen from an environmental and safety (integrity) perspective.