Gazprom ready to complete Nord Stream 2 construction / News / News agency Inforos
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Gazprom ready to complete Nord Stream 2 construction

However, the unimpaired operation of the new transbaltic gas pipeline system is up in the air again

Gazprom ready to complete Nord Stream 2 construction

The situation with record low gas prices in Europe, the elapsed autumn and winter period, as well as the global energy niche oversupply combined with the so far unbridled coronavirus pandemic – all of these factors have significantly affected the relevance of new gas transport infrastructure projects.

However, this does not cancel Gazprom's strategic goal of completing the construction of the transbaltic Nord Stream 2 pipeline route planned to supply Russian gas to Europe. Bloomberg reported that Gazprom will soon make the Nord Stream 2 construction project enter the run-up phase.

The Akademik Cherskiy pipe-laying ship, which Russian Energy Minister Alexander Novak previously called the one to possibly finish Nord Stream 2, is currently anchored next to the port of Mukran in Northern Germany. This is evidenced by the data of ship movement tracking portals. This port hosts the logistics terminal of the gas pipeline project. And satellite images (revealed by Planet Labs on May 10) showed that the pipe sections were moved to a dock equipped with a crane to load them onto a ship. At that, Cherskiy is located next to this wharf. Thus, offshore works in the Baltic sea to complete the pipeline may start at the earliest possible juncture. The Baltic storm season is basically over, making it possible for the Gazprom-controlled pipe-layer to set about efficient operation.

As you know, the Nord Stream 2 project was in a high state of readiness when suspended (in December 2019) – about 93%, with the aggregate capacity of the two pipeline strings accounting for 55 billion cubic meters of gas per year. The interrupted pipe-laying process in the Baltic sea was brought about by US sanctions against the pipeline that forced the Swiss Allseas company to stop construction activities in late December 2019, removing the controllable marine pipe-laying barges from the route. Back then, Gazprom head Alexei Miller said the pipeline would be completed by efforts of Russia. Later, Russian President Vladimir Putin has repeatedly clarified that in the first quarter of 2021 or earlier, the work will be finalized to put the gas pipeline into operation.

However, functional limitations have been also added to the issue of launch rescheduling – Gazprom will now have to legally seek using the Nord Stream 2 system in a full utilization mode.

The Federal Network Agency of Germany (Bundesnetzagentur) turned down the Nord Stream 2 AG's request to withdraw the project from the scope of amendments to the EU Gas Directive. "On May 15, college number seven rejected the application of Nord Stream 2 AG to exempt part of Nord Stream 2, which runs in the territorial waters of Germany, from regulation," the regulator's published judgment notes. Its full text has not yet been released. The European Commission (EC) is also waiting for explanations. Its representative stated as follows: "The Commission takes note of the decision by the Bundesnetzagentur today (May 15), on the request submitted by Nord Stream 2 for a derogation from the rules of the Gas Directive applying to interconnectors with third countries completed by 23 May 2019.  In line with the Gas Directive, this decision was taken at national level, and the Commission was not involved in the decision-making procedure"

However, no detailed comments from the European Commission are expected until the full text of the Bundesnetzagentur's decision is received. In fact, the German Network Agency took the EC aback with its unexpected decision.

Nevertheless, Gazprom still has room for legal maneuver. As the EC specified, "under the norms of the 2009 Gas Directive, major new infrastructure projects, including pipelines, storage facilities for natural and liquefied natural gas (defined as accomplished after August 4, 2003) have the right to apply for exemptions to national regulators pursuant to Article 36 Gas Directive."

It is important for Gazprom and its pool of foreign investor partners in the Nord Stream 2 project to ensure the gas pipeline's swift payback and to seek accelerating the system's capacity utilization by 100%.  But, as you know, the European gas legislation in its current form prescribes reserving 50% of the pipeline's capacity for third-party gas suppliers. The May decision of the German regulator only tightened the pipeline use regime. Which is regarded as an obstacle in terms of the estimated payback period for Nord Stream 2 and project efficiency.

It is important that there are no strict prohibitions to continue building the pipe. Although for this the Nord Stream 2 AG operator may need to agree on an updated work schedule with the Danish Energy Agency (DEA). As early as in May, there is a reason to expect a resumption of laying of Nord Stream 2 pipes in the sea.

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