The Economics of the Nord Stream Pipeline System
AbstractWe calculate the total cost of building Nord Stream and compare its levelised unit transportation cost with the existing options to transport Russian gas to western Europe. We find that the unit cost of shipping through Nord Stream is clearly lower than using the Ukrainian route and is only slightly above shipping through the Yamal-Europe pipeline. Using a large-scale gas simulation model we find a positive economic value for Nord Stream under various scenarios of demand for Russian gas in Europe. We disaggregate the value of Nord Stream into project economics (cost advantage), strategic value (impact on Ukraine’s transit fee) and security of supply value (insurance against disruption of the Ukrainian transit corridor). The economic fundamentals account for the bulk of Nord Stream’s positive value in all our scenarios.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1051.
Date of creation: 01 Oct 2010
Date of revision:
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Web page: http://www.econ.cam.ac.uk/index.htm
Nord Stream; Russia; Europe; Ukraine; Natural gas; Pipeline; Gazprom;
Find related papers by JEL classification:
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-CIS-2010-10-16 (Confederation of Independent States)
- NEP-CMP-2010-10-16 (Computational Economics)
- NEP-ENE-2010-10-16 (Energy Economics)
- NEP-EUR-2010-10-16 (Microeconomic European Issues)
- NEP-TRA-2010-10-16 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
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