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EXCLUSIVE-Denmark's Nord Stream 2 route request could cause 8-month delay, cost 660 mln euros - operator

Thu 8th August, 2019 12:58pm
* Nord Stream 2 essential for Gazprom to bypass Ukraine
    * Project may be delayed from end-2019 due to Danish request
    * Delay seen at up to 8 months, costing 660 mln euros -
document 

    By Jacob Gronholt-Pedersen and Maria Grabar
    COPENHAGEN/MOSCOW, Aug 8 (Reuters) - A Russian-led gas
pipeline project across the Baltic Sea to Europe could be
delayed by up to eight months and cost an extra 660 million
euros ($740 million) due to hurdles in securing the necessary
permits from Denmark, the pipeline operator has said.
    The 1,230-km (765-mile) Nord Stream 2 pipeline, now under
construction, has come under fire from the United States and
several eastern European, Nordic and Baltic countries, which say
the conduit will increase Europe's reliance on Russian gas.
    The timeline of the project, led by state-owned Gazprom
 GAZP.MM , is key for the future of the gas transit contract
between Moscow and Kiev, as Ukraine is Russia's main gas route
for exports to Europe. 
    The transit contract, a large source of budget revenue for
Ukraine, expires at the end of this year. Nord Stream 2,
according to its initial schedule, should have been ready by
then. 
    Gazprom has completed more than 70% of Nord Stream 2 but
since April 2017 has had pending applications with Danish
authorities to lay between 147 and 175 km via Danish waters.
    Nord Stream 2, aimed at doubling the annual capacity of the
existing Nord Stream pipeline by adding 55 billion cubic metres,
is to run via the waters of Finland, Sweden, Denmark and
Germany. It has approvals from all countries whose waters it
crosses apart from Denmark.
    The Russian-led company submitted two route applications
with the Danish authorities, of which the first was proposed
more than two years ago. In March, the Danish Energy Agency
requested an environmental assessment of a third route option. 
    Nord Stream 2 labelled the third route request "a deliberate
attempt to delay the project's completion".  urn:newsml:reuters.com:*:nL8N21F2H7
    Nord Stream 2, in a complaint to the Danish authorities in
April, said costs related to the new request for a third route
had already totalled more than 100 million euros. 
    According to the letter, obtained by Reuters, the request
for a third route could result in a delay of up to eight months
and further costs of 560 million euros. The initial budget was
9.5 billion euros.  
    "Delaying the project will result in a significant financial
loss for Nord Stream 2," the letter said, asking the Danish
Energy Board of Appeal to nix the energy agency's request.
    Nord Stream 2 said in the letter that it had "repeatedly
asked for a status update ... without receiving any response".
    Aside from Gazprom, half of the funding for Nord Stream 2 is
being provided by Germany's Uniper  UN01.DE  and BASF's
 BASFn.DE  Wintershall unit, Anglo-Dutch company Shell  RDSa.L ,
Austria's OMV  OMVV.VI  and France's Engie  ENGIE.PA . 
    Reuters obtained the document from the Danish Energy Board
of Appeal under laws on freedom of information. The Danish
Energy Agency did not immediately reply to a Reuters request for
comment.  
    
    NO MORE VETO
    Nord Stream 2 told Reuters it had informed the Danish Energy
Agency about the potential impact of delays on costs and the
project schedule, but declined to confirm the figures contained
in the letter. 
    "A delay of several months will lead to additional costs of
several hundred million euros but we cannot fully quantify
because the final impacts depend on the timing of the permit
decision of the responsible authorities," it said.
    In June, Nord Stream 2 withdrew its initial 2017 application
for a route through Danish territorial waters south of the
Baltic island of Bornholm. 
    Denmark could have vetoed the initial route. The country
passed a law in 2017 that would allow it to ban the pipeline
from passing through its territorial waters on security grounds.
    However, no veto can be applied for the two remaining route
options as they would steer the pipeline through Denmark's
exclusive economic zone, not its territorial waters. 
    According to Reuters calculations based on Nord Stream 2
data and the speed of construction, Gazprom's pipe-layers will
reach the Danish exclusive economic zone between three and five
months from now. 
    Nord Stream 2 said in May the project may be launched in
2020 rather than the end of 2019 due to delays in obtaining
permits from Denmark. 
    Russian Energy Minister Alexander Novak said last month that
Moscow had offered Kiev a short-term gas transit deal to
substitute the current 10-year contract after it ends this year.
 urn:newsml:reuters.com:*:nL8N24R5AJ 

($1 = 0.8919 euros)

 (Additional reporting by Stine Jacobsen in COPENHAGEN and
Vladimir Soldatkin in MOSCOW
Writing by Jacob Gronholt-Pedersen and Katya Golubkova; Editing
by Dale Hudson)
 ((ekaterina.golubkova@thomsonreuters.com; +7 495 775 1242;))
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