1bn Nord Stream Pipe Contract Awarded

Three companies have been contracted to supply a million tons of steel pipes for the construction of the second pipeline of the Nord Stream project, the consortium has announced, confirming that work would begin in April this year.

The three companies are Europipe (Germany), OMK (Russia) and Sumitomo (Japan). The contract is worth approximately one billion euros.

Germany's Europipe will be awarded 65%, Russian pipe company OMK 25% and Japan's Sumitomo 10%, according to a press release from the Nord Stream consortium.

The decision was made by the Shareholder's Committee following thorough evaluation of bids from German, Japanese and Russian companies.

This is the second tender to be awarded for the project, and concerns a second 1,220-kilometre gas pipeline from Vyborg in Russia to Lubmin in Germany. This tender is completely separate from a 2007 tender for the first pipe. Delivery of the pipes for the second pipeline is scheduled to start in May 2010.

Paul Corcoran, the Nord Stream consortium's financial director, told EurActiv recently that the economic crisis had proven advantageous for the project, with steel prices falling substantially lower than the consortium had initially estimated.

"With one billion euros, the total volume of the contracts is below the price level of the first line reflecting the current market development of increased competition and more available capacity," said Henning Kothe, project director at Nord Stream.

The worldwide call for tender to supply pipes was made in February 2009. Six manufacturers from Japan, Russia and Germany had pre-qualified to participate and were invited to bid.

Pre-qualification is either by track record for experienced suppliers or by trial production. All potential suppliers had to show they were capable of supplying large-diameter, high-pressure-proof steel pipes for offshore use that met international quality standards.

Construction of the first line of Nord Stream is scheduled to commence on 1 April 2010, the consortium said.

Background: Nord Stream is a planned natural gas pipeline travelling 1,220 kilometres between Vyborg, Russia, and Greifswald, Germany, under the Baltic Sea. Nord Stream is designed to transport up to 55 billion cubic metres of gas per year, enough to supply more than 25 million households.

Nord Steam is a joint project by four major companies: Gazprom, BASF/Wintershall Holding AG, E.ON Ruhrgas AG and N.V. Nederlandse Gasunie. Gazprom leads the consortium with a 51% stake.

The pan-European nature of the pipeline is underscored by its status as a project under the EU's trans-European networks energy guidelines. This status was confirmed in 2006. The total budget of Nord Steam is 7.4 billion euros, which makes it one of the largest privately-financed infrastructure projects ever attempted.

On 20 October 2009 Denmark became the first country to grant a construction permit for the Nord Stream gas pipeline, followed by Sweden and Finland on 5 November. Russia granted its permission on 18 December, and on 28 December Germany agreed to allow a section of the pipeline to cross its economic zone.

The project is seen as controversial in several countries, including Sweden, Poland and the Baltic states.