FRANKFURT / BERLIN, October 15 (Reuters) – The Nord Stream 2 gas pipeline is complete and ready to pump Russian gas to Europe, but nothing is flowing yet as it is still awaiting approval from the German energy regulator.
Europe’s most controversial energy project, led by Russian gas giant Gazprom (GAZP.MM), has met resistance from the United States and Ukraine, among others.
A decision by the German regulator last week to ask the pipeline operator, Switzerland-based Nord Stream 2 AG, for assurances that it will not break competition rules suggests that it could be several months before that the 1,200 km pipeline be given the green light. Read more
WHAT IS THE HOLD-UP?
Germany’s Federal Network Agency – which regulates the country’s electricity, gas, telecommunications, postal and rail sectors – has until early January to make a recommendation on whether or not the pipeline should be certified. connecting Russia to Germany under the Baltic Sea.
Although the technical requirements have been met, the main sticking point is whether Gazprom will comply with European unbundling rules which require the owners of gas pipelines to be different from the gas suppliers running through them to ensure fair competition.
Operator Nord Stream 2 claims the rules are aimed at torpedoing the pipeline and last week won a partial victory when an adviser to the EU’s highest court recommended Gazprom could challenge EU rules . Read more
The project’s twin pipeline, of identical size, Nord Stream 1, has been exempt from unbundling rules since its opening in 2011 because it was treated as an interconnector rather than a direct supplier.
WHAT HAPPENS AFTER THE RECOMMENDATION?
Once an independent steering committee of three members of the network agency has made its recommendation, it is forwarded to the European Commission, which has two more months to respond.
If the two agencies agree that the pipeline meets all regulatory requirements, certification can be issued relatively quickly, but if not, the process could be further delayed.
Certification can only be issued if the two have settled any differences, which means it could be until spring 2022 before the pipeline is certified and can officially start operating.
CAN THE AGENCY REALLY BLOCK THE PIPELINE?
Indeed, no. Even though certification is a requirement, the network agency is quite limited in how it can prevent Gazprom from just starting to pump gas right away.
Its toughest tool is a one-time fine of 1 million euros ($ 1.2 million) imposed on the operator if he starts operating without certification.
As a regulator, he can also launch an investigation, but any legal proceedings should be lengthy and will not lead to short-term prevention of gas flows.
Gazprom, meanwhile, said in August that it expects Nord Stream 2 to deliver 5.6 billion cubic meters of m3, or about a tenth of the pipeline’s annual capacity, already in 2021 if supplies start in October.
WHAT HAPPENS BEHIND THE SCENES?
In recent months, German Chancellor Angela Merkel has made it clear to Russian President Vladimir Putin that following the rules is essential to ensure continued political support for the pipeline, two government sources familiar with the matter said.
Merkel has openly stated that the political basis for the operation of Nord Stream 2 is Russia’s commitment to continue using Ukraine as a gas transit route in the future as well.
“Putin is smart enough to know that German politicians’ sentiment about the project will become rather problematic, so he shouldn’t provide any reason to endanger operations,” one of the sources said.
IS THE NETWORK AGENCY POLITICALLY INDEPENDENT?
No. For its own recommendation, the agency needs a binding security of supply assessment by the German Ministry of Economy and Energy, of which it is a part.
“Certification can only be granted if the Federal Ministry of Economic Affairs and Energy determines that the granting of the certification will not jeopardize the security of gas supply to the Federal Republic of Germany and to the European Union, “said a spokesperson for the agency.
The Economy Ministry said it is currently working on this assessment, but has not given a timeline for its completion. If it determines that the operation of Nord Stream 2 will jeopardize the gas supply, the agency will not be able to certify it.
DOES THE ELECTION IN GERMANY HAVE AN IMPACT?
Until a new government is in place, the German Economy Ministry is headed by Peter Altmaier, a member of Merkel’s Conservative Party, who backed the pipeline.
Under Merkel, who still rules the country until a new coalition is formed, Germany recently struck a deal with Washington to allow the controversial pipeline to move forward. Read more
As a result, the threshold for the next government to overturn the deal is very high, even in the likely event that the Greens – who have fiercely opposed the project – are part of the next ruling coalition, said two people familiar with the matter. .
In addition, Olaf Scholz, who led the Social Democrats to victory in last month’s election and has a good chance of succeeding Merkel as Chancellor, spoke in favor of the pipeline.
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Reporting by Christoph Steitz and Vera Eckert in Frankfurt, Tom Kaeckenhoff in DÃ¼sseldorf and Andreas Rinke in Berlin Editing by Susan Fenton
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