Big energy bridge
Finland is the only EU country that shares a border with Russia. Russia, in turn, has a third of the planet's gas reserves: 48,100 billion cubic metres. If the entire Baltic Sea were emptied of water, not even half of Russia's gas would fit into the space left.
This incomprehensible volume of environmentally-friendly energy is just waiting for a road to be opened to take it to the vast European market, and the most direct route from the northern fields happens to run through Finland. Finland's Fortum Group (former Neste Oy) has the know-how and technology to build large gas pipelines. In spring 1997 Gazprom, which owns enormous gas reserves, and Fortum set up the joint-venture North TransGas to examine alternative routes that a pipeline through Finland could follow. The aim is to have a really big tap ready to be turned on in the year 2005.
Gas is easy on the environment
"The European Union is a net energy importer; it consumes more that it produces," Fortum's corporate communications director Matti Saarinen points out. "On the whole, energy policy is a hot issue. Nuclear power generates a lot of electricity in countries like France, and also in Finland. In many countries, however, this alternative is politically awkward. Burning coal pollutes the atmosphere most and the Rio environmental conventions limit the scale on which this alternative can be used. Hydroelectric power is a good solution in many ways, but there is not much more of it available. Solar and wind energy will not meet our primary needs. Against that background, interest in gas has been constantly growing. It is abundantly available and a much better alternative for the environment than coal-fired power stations. For example: if a 1,000-megawatt coal-fired power station (of which there is one in Finland) were replaced by a gas-fired one, carbon dioxide emissions would be reduced by the same amount as cutting out half the country's vehicular traffic would achieve."
Most of Gazprom's gas reserves are located in the region stretching north-east from Finland into northern Siberia and on to the shores of the Arctic Ocean and the Barents Sea. The industrial region of Central Europe lies to the south-west of Finland. The most interesting question now is when and how supply and demand can be brought together. Geography and mathematics speak such a clear language that the answer is beginning to emerge in the shape of a major new energy arrangement. A decision to go ahead with its construction will become possible when a feasibility study is completed in late 1998. The cost of building a pipeline through Finland and onwards either through Sweden or across the floor of the Baltic is estimated at $5 - 6 billion. The goal is to have the gas flowing from Russia to Europe in 2005.
The idea of exporting gas from Russia to the West is actually an old one. What is new is that the centre of gravity of Russia's energy reserves is shifting northwards from the restless Caucasus region to Siberia. Even in the days of the Soviet Union, a pipeline was laid all the way to West Germany. "Now those pipelines are running through a so-called grey zone - new states that do not belong to any of the international trade systems. Those countries have many economic, financial, technological and environmental problem. Existing pipelines do not always function satisfactorily, and even when they do they are not able to keep up with rapidly growing demand. Countries along the way can even take gas that has been sold to Germany and use it themselves, without having the slightest intention of paying for it. It is hardly surprising that the Russians want an arrangement under which the gas will be under their control all the way to the EU border. And Finland is on that border," says Saarinen, map in hand.
Non-stop gas flow one of Russia's wonders
Although the great-power configuration has changed, prejudices live on. Can Western Europe afford to depend on Russia for a decisive share of its energy supply? What if the political climate changed and the gas was cut off?
"That is very improbable if only because Russia would not get any money for its gas in that event," replies Saarinen. "Naturally, the days when the Soviet Union was declaring that capitalism would be crushed have not been forgotten in the EU countries. But even during the Cold War the gas flowed to West Germany. That may seem downright odd. And also when the tanks were on the streets of Moscow and the parliament building was being shelled - the gas flowed uninterruptedly. The collapse of the Soviet Union and the complete transformation of the system did not affect deliveries at all. Technical faults were repaired immediately. It is such important trade that nothing must be allowed to interrupt it. The lights will not go out in Europe because of a shortage of gas. To prepare for any contingency, there are large stockpiles and other alternatives."
Saarinen points out that the EU would be a great deal less enthusiastic about Russian gas if there was the slightest doubt about the supplier's willingness and ability to keep it flowing. The EU Commission has launched an official infrastructure programme called Trans European Networks (TEN), which encompasses also other important channels, such as Europe's surface transport routes. The advantage of the projects included in the programme is that a channel running from one country to another through a third can not be cut.
The EU has good reason to be interested in the development of the formerly socialist countries of Eastern Europe and energy compares favourably with other projects. "The Union has pumped billions into a variety of development projects in the hope that strengthening economic stability would bring political stability in its wake. Highly-paid consultants travel around advising and negotiating. Some of them even ponder questions such as how a former tank factory can make refrigerators capable of competing on world markets. Questions like that take a lot of time to sort out. Selling a sure product, energy, is a completely different matter. Energy projects can be implemented in a relatively short time, and energy is always a very liquid commodity," Saarinen explains.
Up to 40 billion cubic metres through Finland to Europe
Gazprom's plans for the future are ambitious, and important also from Fortum's perspective. Saarinen can rattle off numbers straight out of his head, because his visitors nowadays include a lot of people with an interest in European energy arrangements. "In 1996 Finland used 3.5 billion cubic metres of gas, which is only slightly more than a half of one per cent of Gazprom's output. A major new pipeline would enable 30 - 40 billion cubic metres to flow through Finland, and not just through, because consumption is growing strongly also in this country. Sweden does not use much gas, because the only pipeline is a short one bringing supplies from Denmark to industrial users along the west coast. Denmark has its own gas fields, but reserves are estimated to be only enough for ten years or so. For the Nordic countries, building up their own gas network would be a good energy alternative, but the really big markets are in Central Europe."
Gas now meets an average of 20 per cent of the EU countries' energy needs. The intention is to increase that to 40 per cent. The Northern Energy Bridge is a vision of the future that Fortum shares, and one that is becoming increasingly concrete every day. After all, deals of its potential size are rarely left undone.