How often do you receive calls from Mr. Putin?
How much money have you actually put resisting this proposal?
Joining me today in the studio is Paul Corcoran for Nord Stream 2.
Thank you Paul for joining us for this show Under Pressure.
There's already a pipeline bringing Russian gas directly to Germany via the Baltic sea
so why build a second pipeline using exactly the same route?
The answer is very straightforward.
Repeat the success.
Nord Stream 1 is a very successful project.
It was implemented on time and within budget.
It ramped up since 2011 to virtually its full capacity.
Last year it operated at 93%.
First quarter of this years it's around 100%.
It's a tremendous success.
That is actually being disputed.
I'm citing figures here about the capacity usage of Nord Stream 1, its 70% rate or it was 70%
in 2016 according to S&P Platts and it's being used around 50% of the capacity according
to figures cited kind of unofficially by the European commission.
Those figures of 50% by the European Commission are flatly wrong.
They're just inaccurate.
The figure you reported for 2016 is correct.
That's part of the ramp up.
2017 was 93% and first quarter of 2018 it's running at full capacity.
Now let me ask an awkward question.
How often do you reciveve calls from Mr. Putin?
*Laughs* Me personally or-?
I've- Or maybe some of your collegues?
I've never met Mr. Putin, I've never recieved a call from Mr. Putin.
Mr. Putin has visited the Nord Stream 1 project during its implementation.
I think at least twice.
But that's the extent of the involvement.
Mrs. Merkel visited the Nord Stream 1 project.
Mark Rutte from Holland visited the Nord Stream 1 project.
It's not unusual for such major infrastructure projects as ours.
But there are direct links via gas to the Russian state so that means probably the
foreign ministry or maybe other ministries which are able to give instructions to this
company which is based in Switzerland.
Correct?
Not correct, no.
We are subsidiary of Gazprom and Gazprom is a listed company.
So there are many listed companies.
Also in Europe.
Whose shareholding is also partially owned by the state.
So Fortum in Finland, Engie.
There are all across Europe, companies- And the states regularly gets involved.
Not to my knowledge.
Ny understanding is that if you're a listed company you have an obligation to all shareholders,
not just state shareholders.
So those obligations are very clearly laid down in law.
You probably know as well that diversification of supply is one of the main objectives of
the energy union.
Nord Stream obviously runs counter to this objective.
So that doesn't really help does it?
I think the objective is diversification of sources, supplies and routes.
Nord Stream is an additional route. It is -
It's hardly an additional route its using the exact same route as Nord Stream 1.
It's another route.
It's another pipeline bringing gas into Europe.
Thats's a good thing.
Nobody is forced to buy the gas.
But if the possibility is there , like with LBG, nobody complains that we have 75% of
our LNG capacity that's not utilised.
It's not necessary you should close it all down. No.
It's a good thing because it gives supply security, it gives optionality around supply
security and the same is true for additional pipelines.
Europe should welcome additional pipelines.
Tap, Medgaz, Nord Stream 2.
They should all be welcomed because it's optionality for European consumers.
Is your objective to kill competition on the gas market in Europe?
We're a pipeline company.
We don't sell gas.
And in that sense we can't possibly have that objective.
But gas prom may have an objective like that?
Why should they?
And they're your main shareholder?
Why should they have that objective?
And how would that be possible?
Well they sell more gas, they make more money, they cull competition and they have a dominant
position even greater than that they enjoy currently.
But again to misunderstand the market rules.They can only sell more gas if they price it to
attract customers.
Thats competition, that's good for the market.
And there's nothing wrong with that.
So you're actually denying that Gazprom has a dominant market position at the moment in
Europe as the main supplier of natural gas.
I think it has a large market position, but that is in by no means dominant.
That market position is dependant on it's reliability and its price.
Turning to some legal issues now, the commissions said Nord Stream cannot be exclusively operated
according to Russian law.
Do you agree with that principal?
Nord Stream is not operated exclusively according to Russian law.
So the statement is again simply incorrect.
You're saying the commission has made incorrect statements about the legal aspects of Nord Stream.
Yes.
I think the commission has said that there is a legal void.
Or there is a conflict of laws between Russia and the EU and those are both statements which
I've heard from the commission.
Those are simply wrong.
There is no legal void.
There's a very clear legal framework.
The Nord Stream 1 pipeline was permitted and built on that basis, within that legal framework.
And the Nord Stream 2 pipeline has made applications to the member states based upon the relevant
legal framework.
Which is a combination of national law and international law.
For example UNCLOS and EU directives as implemented into national law.
So the framework is absolutely clear.
And Nord Stream is a commercial company operating within the EU and in that sense has to follow
the legislative framework. There's no other choice.
Do you agree with the objective of ownership and bundling which states that essentially
you cannot be a producer of energy on the one hand and also own the pipelines through
which the energy actually runs?
Are you ready to accept those rules for Nord Stream 2?
That is an absolute clear principle that is applicable within the internal market.
And the commission itself wrote in a letter to the parliament in 2017 that the third energy
package, that the internal market, are not applicable to pipelines supplying the European
internal market.
So in that sense, the legal position for the commission is clear and the third energy package
and the rules for the third energy package which include ownership unbundling, etc...
are not applicable to pipelines bringing gas in.
So that's quite convenient because it allows Gazprom to be owner of the infrastructure
and also owner of the energy that goes through it.
Now lets imagine- But when that gas lands in Europe, that gas
is absolutely subject to the rules of the third energy package.
And its transmission to customers and its sale to customers is absolutely conform to
the market rules.
And gazprom has to live by those market rules.
As Mrs. Vestager has proven.
You know there's a competition inquiry going on?
Has been going on actually for a number of years at the European Commission so they do
seem to believe that there is an issue there.
I think commissioner Vestager is a very independent commissioner and I think she's
made some landmark decisions in the recent past.
At least what I've seen from the press seems to be that she has achieved one or two concessions
from Gazprom.
And that she has looked into all of those issues.
And at least what I see from the press, they are close to coming to a decision.
So we'll see what Mrs. Vestager comes up with in the next weeks or months.
There's a special directive that was written by the European Commission,
especially for Nord Stream 2 in fact.
So once that goes through, the ownership structure of Nord Stream 2 will have to change.
I think we have to see how that proposal develops.
I think this is a law proposal which came at the very last moment, it was proposed in
November of last year.
It was attempted to be rushed through as a minor technical change.
In an accelerated procedure.
Without proper governance.
In the mean time, it's been recognised that, by the council's own legal service at least,
amongst others, that actually this proposal is very far reaching.
It conflicts with international law for example, it clashes with the UNCLOS.
There's a very clear industry assessment of what this means and how negative it is for
legal certainty.
And how its a deterrent for investment and how actually a threat to energy security.
What does that mean for those existing investments?
What does it mean for new investments like Nord Stream 2 but also, like, for example
Medgaz or GALSI.
It means complete uncertainty.
How can you invest in a project which will contribute to Europe's energy security
when you don't know what the legal framework will be.
How much effort have you actually been putting into resisting this proposal?
How much money have you spent here in Brussels, and maybe elsewhere, at trying to lobby people,
politicians to block this proposal?
We cannot resist this proposal.
The member states and the MEPs and the lawmakers have to decide this proposal.
And they will.
All that we can do is try to put our arguments forward and try to make the process a transparent one.
Unfortunately, the commission made it, or tried to make it, an in-transparent one.
They tried to rush it through on this accelerated procedure.
This is not a technical adjustment to the wording.
This is a major change to the legislative framework.
You didn't really answer my question.
How much money have you actually put resisting this proposal?
I can't give you any kind of figure.
Ball park?
I have no clue to a figure. We have -
But you have spent quite a bit of money trying to influence lawmakers in the European Parliament and
also in the member states.
No, we have a communications team whose job is to make facts about the project known to the public.
We do that in all of our permitting countries. We make information available in public sources,
we also make information available about issues of legality that would affect the pipeline.
So, in the sense that there's some specific activity, that somehow, you know, I infer
from your question that you think we may have spent millions and millions trying to influence
lawmakers. No, that's not the case.
Let's turn to transit issues now, and Ukraine in particular.
Now one of the key impacts of Nord Stream 1 has been to reduce Russian exports going
through Ukraine which went down to around 50% or less in 2015 down from 80% in 2009.
Now, how much lower do you expect this gas transit through Ukraine will be after Nord
Stream 2 is built?
This is an intersting question and an interesting assumption.
Again, the blame for reduction of Ukrainian transit is somehow placed at the door of Nord Stream.
Nord Stream 1 or Nord Stream 2.
Well that was clearly the intention of Nord Stream 1.
No.
Is to prevent the supply disruptions that happened in 2006, 2009.
No, no, absolutely not.
What you have to remember at Nord Stream 1 is the decision to invest in Nord Stream 1 was
taken in an environment which was very different from the environment that we've seen in
the last 6, 8 years.
It was pre-financial crash and the forecast for gas market growth were enormous.
The invest in Nord Stream 1 was very much in the environment of additional volumes coming
to Europe.
What happened, however, unfortunately, is the world economic crash and saw also gas
utilisation in Europe collapse.
So, in the end the trends have been very different.
However, the reality is, what we see now, is a growth again of the European economy, the
last 3 years have seen significant growth in the gas market, significant growth in the European economy.
The future is also fairly clear, domestic production is going to half in the next two decades.
And that means there's a need for more imports.
From 2014 to 2017, Nord Stream 1 capacity went from 34 Bcm to 51 Bcm.
And that's about a third of an increase.
In the same time, 2014 to 2017 the Ukrainian transit went from 64 Bcm to 93 Bcm.
Which is about 50% increase.
So to make any kind of direct correlation between Nord Stream replacing Ukrainan transit is
simply not correct.
Even though demand has been picking up in recent years, everybody seems to accept that
demand for gas, generally in Europe after 2025 or 2030, will have to decline significantly
because of the Paris Climate targets.
So that means you've got a pretty short window of opportunity there to make money out of
Nord Stream 2.
Across the world, energy companies are strengthing their position in gas.
And this is true for the Exxon, Chevron, it's true for Europeans, BP, Shell, Total.
And the reason for that is because the COP 21 goals mean that we will use less fossil
fuel, thats less coal and less oil.
Gas has got 50% of the CO2 output of other fossil fuels.
So as a fossil fuel, even though in the long term its not desirable, in the medium term
it's much better than coal or oil.
So I think gas has a longer future than other fossil fuels.
But in the end the market will decide what that future is.
The market will decide is indeed 2030 or is it 2050.
So basically, you're saying fossil fuels have a future, you're pretty happy polluting the planet?
It's not a question of being happy or not being happy.
Theres a fundamental need for energy and what's clear is that at the moment renewables are
not going to fill that need fast enough.
And the need for energy is growing.
So there will be a role for some fossil fuels for some period into the future.
And if that is the case, then gas is by far the most environmentally friendly option.
Gazprom's chairman or deputy chairman Alexander Medvedev said and I quote him:
"Under no circumstances would the contract with Ukraine be extended,
not even if the sun and moon trade places."
And then what do we have?
Contract expires with Ukraine as a gas transit country and all of a sudden Oh!
Nord Stream comes up.
Ukraine transited 93 Bcm.
It did. But it won't in the future, potentially.
How is Gazprom going to get that gas to the customer?
Well it's gonna get it via Nord Stream.
Nafta gas also said, not 93 Bcm, Nord Stream 2 is 55 Bcm, there's a big gap.
Nafta gas has also said that they are going to more than double the price of transit for
Gazprom after 2019.
So, there is a negotiation to be had between those two companies, we hear from the press
that also the European commission is interested to support that negotiation.
And let's see.
Paul Cocoran, thanks for joining us and a good day to you.