Report: Gazprom-led consortium tenders over $1 bln pipe-laying deal

MOSCOW, Jun 8 (PRIME) -- The Nord Stream-2 natural-gas pipeline consortium has issued the first major tender for its controversial U.S. $11 billion project, which could double supplies of Russian pipeline gas across the Baltic Sea to Western Europe, according to people familiar with the project, the Wall Street Journal reported Wednesday

The tender for the pipe-laying contract – estimated to worth over $1 billion – has been sent to interested contractors. Bids will be evaluated by the consortium, which is led by Russia’s state-owned Gazprom, on June 13.

“The schedule is very tight on this job, so I think it could be opened up to include more than one contractor,” a person familiar with the matter said. “You might even see three (pipe-laying) vessels working in parallel, but no one will know for sure until the contractors are called in for clarification meetings.”

The consortium plans to build two natural gas pipelines with a combined capacity of 55 billion cubic meters a year of gas that will run some 1,200 kilometers from Russia across the Baltic Sea to Germany. They will be laid alongside the existing Nord Stream-1 pipelines, but will originate from different locations in Russia and terminate at different points in Germany.

The usual time frame for two pipelines of such size and complexity would usually take one pipe-laying vessel about 24 months to complete the work. However, the schedule could be fast-tracked as two vessels would take 15 months and three could complete the job in less than 12 months, according to the person familiar with the matter.

The existing Nord Stream pipeline, opened in 2011, has been criticized because it allows Russian to circumvent transit countries, such as Ukraine and Poland. Clashes between Ukraine and Russia have in recent years twice led to cuts in gas deliveries to Europe.

The European Union has already expressed skepticism about the new project on antitrust grounds because Gazprom will own all the gas to be transported through the infrastructure. The latest development—particularly the consortium’s plan to fast-track the project—is sure to cause consternation among E.U. member-states in Eastern Europe which oppose the deal.

The Nord Stream-1 pipeline is running at around 80% capacity because of limits imposed by the EU competition agency. In June 2015, the E.U. said no new pipelines from Russia were needed.

The Nord Stream -2 project is being built by New European Pipeline AG, a joint venture that is 51% owned by Russia’s Gazprom. Germany’s E. ON, Royal Dutch Shell, Austria’s OMV and Germany’s BASF SE/Wintershall Holding GmbH each own 10%, while France’s ENGIE owns a 9% stake.

New European Pipeline hasn’t yet identified the exact landing points for the two new pipelines, the spokesman said. They will be different from Nord Stream 1, which begins in Vyborg, in Russia, and ends in Lubmin, in Germany. A decision is expected shortly.

A Nord Stream-2 spokesperson confirmed that bids for the pipe-laying would be submitted this month, with a contract to be awarded by the end of 2016. The first pipes are scheduled to be placed on May 18, 2018.

International contractors to be included in the bidding for the pipe-laying contract are the Swiss-headquartered Allseas Group and Italy’s Saipem, but Dutch Royal IHC and France’s Technip might also be considered.

“Allseas and Saipem have got the vessels needed for this job so they will be the favorites going into this,” an executive from an international offshore contractor said. He added that the budget should be slightly higher than $1 billion, depending on what strategy is agreed.

Spokespeople for Allseas and Saipem confirmed that the companies would submit a bid by the June 13 deadline. No one at Technip and Royal IHC was unavailable for comment.

A large proportion of pipes for the project will be supplied by Austria’s Voestalpine. The company said in April that it would produce “several hundred thousand tons” of pipes for Nord Stream-2. The pipe-supply contract is the largest offered within the project and involves 2.2 million tons of 48-inch pipes that will run to a total of 2,500 kilometers in length. This deal alone is worth over $4 billion, but will be split between pipe producers in the EU and Russia.

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