Russia to Continue Building Nord Stream 2 Pipeline Despite EU Gas Directive

Russia’s state-owned gas giant Gazprom will continue the construction of the Nord Stream 2 pipeline despite the EU Council approving a European gas directive this week that is expected to delay the project’s commissioning – and potentially leave it half empty, RBC Ukraine reports.

Gazprom is the sole shareholder for Nord Stream 2. However, five major European energy companies as financial investors from Austria, France, Germany, and the Netherlands back the project. More than 1,000 kilometers, approximately the distance from Copenhagen to Paris, of the two lines have been laid.

By extending EU rules to non-EU pipelines — particularly those outside EU territory —  the directive will force Gazprom to “unbundle” or hand over the operation of the line to a company independent of Russia’s state gas producer. However, Gazprom maintains a jealously guarded monopoly over gas exports from Russia and will be very reluctant to share the right to export with anyone. Currently, the only other entity allowed to export gas is privately owned Novatek, which is limited to exporting liquefied natural gas (LNG).

Potentially more seriously, half of the pipeline has to be reserved for third companies. Given Gazprom’s gas export monopoly, this could leave half of the pipe empty until Russia creates a separate gas exporter, and will almost certainly create delays for the pipeline.

Nord Stream 2 is due to come online at the end of this year and construction is progressing well, with 800 kilometers of the 1,200-kilometer pipeline already built, according to recent reports.

Ukraine is against the pipeline as the extra 55 billion cubic meters (bcm) capacity will allow Russia to completely bypass the country, depriving it of a badly needed $3 billion a year in gas transit revenues.