Ambitious Energy Project in the Pipeline

Hurricane Katrina not only was a disaster to millions of Americans and their property, but has created calamity for oil-dependent countries around the world. Oil markets reacted with immediate violence to news that US oil platforms and refineries had suffered major damage. Futures, already up thanks to speculators and rising demand, broke all-time highs in the aftermath of Katrina.

In an article with the Berliner Zeitung, Germany's Klaus Töpfer, who heads the United Nations Environmental Program (UNEP) said "there will not be a significant drop in oil prices in the future."

Germany's economy, the largest in Europe, with its large automobile and chemical industries, however, is dependent on oil. Nuclear energy, a clean but dangerous source of power, is being phased out by the center-left coalition which has made much of promoting alternative energies such as solar and wind power. Even conservative chancellor candidate Angela Merkel said in the recent televised debate that the country must not rely too much on one energy source.

And in keeping with such statements, a new and unusual natural gas pipeline project is the making as a measure to help reduce Germany's dependence on oil from abroad.

Almost 1,200 kilometers under water

The Yuzhno-Russkoye field lies in western Siberia and is estimated to hold 1 trillion cubic meters of natural gas. The easiest, most direct way to connect the virgin field with Central and Western Europe would be to extend current pipelines that run over ground, but the pipeline operators, BASF Wintershall (a BASF subsidiary), E.on Ruhrgas and Gazprom, have decided to construct an underwater pipeline in the Baltic Sea. It will measure nearly 1,200 kilometer (744 miles) and stretch from the Russian port of Wyborg to Greifswald in northeastern Germany.

"The reasons for building an underwater pipeline are to avoid having a line go through third countries," said Roland Götz, Russian expert at the German Institute for International and Security Affairs (SWP) in Berlin. "They don't want to go through Belarus and Poland or Ukraine and Slovakia. They want to make a direct connection between producer and recipient, Russian and Germany, so that they can save transit fees and to avoid the theoretical possibility that a third country could cut off service."

The total cost of the venture is estimated at 2.4 billion euros ($3 bill.), which is twice as much as if current pipelines were extended, but that is not enough to put the involved parties off.

"The companies involved are hoping to gain some kind of advantage out of the deal that isn't so obvious," noted Götz. "The German companies would like to do business with Gazprom. Gazprom might be trying to use this as a threat against countries like Belarus and Ukraine."

Warsaw unhappy but project moving on

One of the odd men out in the pipeline deal, Poland, feels as if it is being given the runaround. Based on the sensitive past between Poland, Russia and Germany, Warsaw is angry but Götz believes this anger is not based on fact, pointing out that the pipeline won't change the current energy business between Russia and Europe.

On two separate occassions, German Chancellor Gerhard Schröder, Russian President Vladimir Putin and the companies involved have joined in presenting the pipeline plans to the public. A third meeting has been moved forward to September 8 so that Putin can visit Schröder for what might be the last time during his leadership. It's a bit of campaign stop but with constrction schedule for completion in 2010, Angela Merkel and Germany also stand to benefit from the plans.