IDEAS home Printed from https://ideas.repec.org/p/enp/wpaper/eprg1026.html
   My bibliography  Save this paper

The Economics of the Nord Stream Pipeline System

Author

Listed:
  • Chi Kong Chyong

    (Electricity Policy Research Group (EPRG), Judge Business School, University of Cambridge)

  • Pierre No?l

    (EPRG, Judge Business School, University of Cambridge)

  • David M. Reiner

    (EPRG, Judge Business School, University of Cambridge)

Abstract

We 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chi Kong Chyong & Pierre No?l & David M. Reiner, 2010. "The Economics of the Nord Stream Pipeline System," Working Papers EPRG 1026, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1026
    as

    Download full text from publisher

    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp1026.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Csaba Weiner, 2013. "Central and Eastern Europe’s dependence on Russian gas, western CIS transit states and the quest for diversification through the Southern Corridor," IWE Working Papers 201, Institute for World Economics - Centre for Economic and Regional Studies.
    2. Nagayama, Daisuke & Horita, Masahide, 2014. "A network game analysis of strategic interactions in the international trade of Russian natural gas through Ukraine and Belarus," Energy Economics, Elsevier, vol. 43(C), pages 89-101.
    3. Gillessen, B. & Heinrichs, H. & Hake, J.-F. & Allelein, H.-J., 2019. "Natural gas as a bridge to sustainability: Infrastructure expansion regarding energy security and system transition," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    4. Wood, Steve & Henke, Otto, 2021. "Denmark and Nord Stream 2: A small state's role in global energy politics," Energy Policy, Elsevier, vol. 148(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Franziska Holz & Christian von Hirschhausen & Claudia Kemfert, 2009. "Perspectives of the European Natural Gas Markets Until 2025," The Energy Journal, , vol. 30(1_suppl), pages 137-150, June.
    2. Egging, Ruud & Pichler, Alois & Kalvø, Øyvind Iversen & Walle–Hansen, Thomas Meyer, 2017. "Risk aversion in imperfect natural gas markets," European Journal of Operational Research, Elsevier, vol. 259(1), pages 367-383.
    3. Franz Hubert & Onur Cobanli, 2012. "Pipeline Power," FIW Working Paper series 093, FIW.
    4. Csercsik, Dávid & Hubert, Franz & Sziklai, Balázs R. & Kóczy, László Á., 2019. "Modeling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks," Energy Economics, Elsevier, vol. 80(C), pages 355-365.
    5. Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, vol. 34(17), pages 2762-2778, November.
    6. Mel Devine & James Gleeson & John Kinsella & David Ramsey, 2014. "A Rolling Optimisation Model of the UK Natural Gas Market," Networks and Spatial Economics, Springer, vol. 14(2), pages 209-244, June.
    7. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    8. Gijsbert T.J. Zwart, 2009. "European Natural Gas Markets: Resource Constraints and Market Power," The Energy Journal, , vol. 30(1_suppl), pages 151-166, June.
    9. Arnold, Lutz G. & Arnold, Volker, 2024. "Energy imports and manufacturing exports with successive oligopolies and storage," Energy Economics, Elsevier, vol. 133(C).
    10. Hubert, Franz & Orlova, Ekaterina, 2018. "Network access and market power," Energy Economics, Elsevier, vol. 76(C), pages 170-185.
    11. Daniel Huppmann and Franziska Holz, 2012. "Crude Oil Market Power—A Shift in Recent Years?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    12. Lise, Wietze & Linderhof, Vincent & Kuik, Onno & Kemfert, Claudia & Ostling, Robert & Heinzow, Thomas, 2006. "A game theoretic model of the Northwestern European electricity market--market power and the environment," Energy Policy, Elsevier, vol. 34(15), pages 2123-2136, October.
    13. Ibrahim Abada, 2012. "A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets with a fuel substitution demand function: The S-GaMMES model," Working Papers 1202, Chaire Economie du climat.
    14. Orlov, Anton, 2015. "An assessment of optimal gas pricing in Russia: A CGE approach," Energy Economics, Elsevier, vol. 49(C), pages 492-506.
    15. Adrienn Selei & Borbála Tóth & Gustav Resch & László Szabó & Lukas Liebmann & Péter Kaderják, 2017. "How far is mitigation of Russian gas dependency possible through energy efficiency and renewable policies assuming different gas market structures?," Energy & Environment, , vol. 28(1-2), pages 54-69, March.
    16. Möst, Dominik & Perlwitz, Holger, 2009. "Prospects of gas supply until 2020 in Europe and its relevance for the power sector in the context of emission trading," Energy, Elsevier, vol. 34(10), pages 1510-1522.
    17. Schulte, Simon & Weiser, Florian, 2017. "Natural Gas Transits and Market Power - The Case of Turkey," EWI Working Papers 2017-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 15 Aug 2017.
    18. Selei, Adrienn & Takácsné Tóth, Borbála, 2022. "A modelling-based assessment of EU supported natural gas projects of common interest," Energy Policy, Elsevier, vol. 166(C).
    19. Lise, Wietze & Hobbs, Benjamin F., 2008. "Future evolution of the liberalised European gas market: Simulation results with a dynamic model," Energy, Elsevier, vol. 33(7), pages 989-1004.
    20. Veronika Grimm & Lars Schewe & Martin Schmidt & Gregor Zöttl, 2019. "A multilevel model of the European entry-exit gas market," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 89(2), pages 223-255, April.

    More about this item

    Keywords

    Nord Stream; Russia; Europe; Ukraine; Natural gas; Pipeline; Gazprom;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:enp:wpaper:eprg1026. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ruth Newman (email available below). General contact details of provider: https://edirc.repec.org/data/jicamuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.