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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
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    References listed on IDEAS

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    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.
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    Cited by:

    1. 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).
    2. 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.
    3. 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.
    4. 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.

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    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

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