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Russian Ship’s Move Shows Option to Finish Sanctioned Pipeline

Russian Ship’s Move Shows Option to Finish Sanctioned Pipeline

(Bloomberg) -- A Russian pipe-laying vessel is on the move in the Far East, feeding speculation that Gazprom PJSC will work out a way to circumvent U.S. sanctions and complete a controversial natural gas link.

The ship, Akademik Cherskiy, on Sunday left the port where it had been stationed in Nakhodka on Russia’s Pacific coast. At the end of last year, Energy Minister Alexander Novak mentioned that vessel as an option to complete the Nord Stream 2 pipeline in Denmark’s waters.

Russian Ship’s Move Shows Option to Finish Sanctioned Pipeline

U.S. sanctions against the pipeline forced the Swiss company Allseas Group SA to abandon work on the pipeline at the end of December. The line would feed gas from fields in Siberia directly into Germany, circumventing the current main transport corridor through Ukraine. President Donald Trump says Europe should cut its reliance on Russia for gas and instead buy cargoes of the fuel in its liquid form from the U.S.

Gazprom has said it’s looking at options to complete Nord Stream 2, though it hasn’t given any details on where it will find the ship to do the work. It isn’t clear whether the Akademik Cherskiy is part of the solution. One of the pipeline’s financial backers is anticipating progress will be made.

“My understanding is they are looking for a ship, and it’s my bet I think they will find the ship,” said Rainer Seele, chief executive officer of OMV AG. “How long it will take them and how they are going to continue the pipe-laying, I don’t know.”

Russian Ship’s Move Shows Option to Finish Sanctioned Pipeline

The Austrian oil and gas company helped fund the project that’s owned by Gazprom PJSC, Russia’s main gas export company. Seele said he’s not involved with talks on operational issues for Nord Stream 2, serving only as a financial backer.

The vessel is now expected to arrive in Singapore on Feb. 22, according to ship-tracking data on Bloomberg.

The pipeline was just weeks away from completion, with 94% already constructed, when U.S. sanctions stopped work. There’s a small section in Denmark’s waters that needs to be finished. Before the halt, Nord Stream 2 hoped to finish by the end of 2019 or in the first few months of this year. That would allow gas deliveries in time to supply Europe by winter 2020-2021.

“Pipe-laying, especially in the section of shallow waters, it isn’t a super-duper technology that you need,” Seele said in an interview in Bloomberg’s European headquarters in London on Friday. “It’s just the question of whether or not the setup of the ship fits for the pipe-laying activities. Maybe it’s a different ship than the ship that everyone is observing. I don’t know. I have no idea.”

The Russian gas exporter has to find ways to complete the project on its own. Gazprom has been tight-lipped as to what means it has at its disposal, only saying that its Nord Stream 2 AG unit, the project operator, is drafting options and that the pipe will be finished by the end of this year.

Besides OMV, Nord Stream 2’s other European backers are Royal Dutch Shell Plc, Uniper SE, Engie SA and Wintershall AG.

Europe needs additional gas because declines in domestic production are “enormous” and there may be more room for gas in Germany’s power generation as the nation shuts down dirtier-burning coal plants, Seele said.

--With assistance from Olga Tanas and Dina Khrennikova.

To contact the reporter on this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Andrew Reierson

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