Gazprom Facing Difficulties with Nord Stream 2 Taking Too Long to Construct

Gazprom was faced with a real risk of spreading the Third Energy Package to Nord Stream-2, which could prevent the company from fully utilizing the gas pipeline’s capacity in the future, Kommersant reported.

According to the German newspaper Handelsblatt, the German Federal Grid Agency intends to refuse the Russian project to not extend European regulation to it, since the project will not be completed by the end of May. The German regulator did not agree with Gazprom’s argument that investments in the project were made even before the adoption of new European legislation.

The Federal Network Agency of Germany (BNA) previously rejected the application of Nord Stream 2 AG to exempt the Nord Stream-2 project from the requirements of the EU gas directive. However, a decision has not yet been made, the regulator continues to collect stakeholder comments until May 8, after which it will make an “operational” decision, the Handelsblatt newspaper reported May 1, citing a draft decision of the agency.

In mid-January, BNA accepted applications from Nord Stream 1 AG and Nord Stream 2 AG operators, claiming to exempt the Nord Stream and Nord Stream-2 gas pipelines from the requirements of the EU gas directive. Recent amendments to this directive require offshore pipelines coming to the EU to comply with the requirements for the separation of activities for the supply and transportation of gas, as well as for access by third parties. Nord Stream 2 AG is 100% owned by Gazprom, so the requirements of the gas directive may lead to the fact that the pipeline can only be loaded in half.

The reason for the refusal of the Nord Stream 2 application, according to the publication, was that the construction of the gas pipeline would be completed later than May 2019.

If the project was built before the deadline, it could have avoided the requirements of the directive. Nord Stream 2, in turn, insisted that the decision on non-proliferation of requirements should not come from the “construction and technical” meaning of this requirement, but taking into account the fact that billions of investments had already been made by the time new directives of the domestic gas market came into force.

The BNA did not agree with this, writes Handelsblatt, believing that in deciding the issue, one should still rely on the “construction and technical” understanding of the term “completion of the project” and not on the “economic and functional”.

The fact is that the German parliament at the end of 2019 urgently adopted a law that postponed the deadline for the launch of the Nord Stream-2 project until May 24, 2020. At that time, it seemed that this would allow Gazprom to comfortably complete the construction, but then US sanctions against companies that provided gas pipeline laying services followed. The Swiss Allseas pipelayers had to abandon laying the last – 160 km – section of the pipeline. Now the vessel Akademik Chersky is supposedly going to the Baltic to complete these works, but it is obvious that by May 24 it will not have time to complete the pipeline.

The project operator Nord Stream 2 AG has already stated that they are familiar with the preliminary decision of the regulator, do not agree with it and intend to protect their rights. According to Handelsblatt, Nord Stream 2 AG may appeal the decision of the regulator in the Düsseldorf High Land Court.