Nord Stream 2 startup waiting on German regulatory approval

Dina Khrennikova and Olga Tanas December 29, 2021

MOSCOW (Bloomberg) --Gazprom PJSC has finished preparing the controversial Nord Stream 2 pipeline for natural gas exports to Europe, yet actual deliveries depend on how quickly regulators grant the project approval amid souring relations between Russia and Western nations.

“Nord Stream 2 is ready for operations,” Russian President Vladimir Putin said Wednesday at a meeting with energy officials broadcast on Rossiya 24 TV. “Now everything depends on our partners, consumers in Europe, in Germany,” he said.

The pipeline can start delivering “large additional volumes of Russian gas” to the continent as soon as European regulators certify the project operator, Putin said. It’s designed to carry as much as 55 billion cubic meters per year from Russia to Germany across the Baltic Sea.

Europe is facing a supply crunch that has pushed fuel and power prices to record levels this year, with inventories abnormally low and insufficient inflows to the continent. While shipments of liquefied natural gas have provided some recent relief, benchmark gas prices are up about 400% this year and could remain elevated into early 2023.

Putin’s statement came just hours after Gazprom completed filling the second line of the twin link with so-called technical gas in order to build up pressure required for pumping fuel along the line. The procedure, which was completed on the first line in October, is the final technical step for Nord Stream 2, with certification the only remaining hurdle before actual gas deliveries can begin.

The pipeline has been a source of tensions between Russia and Western nations over the past five years. Officials from the U.S. and a number of countries in eastern Europe, including Poland and Ukraine, have protested that it would give Gazprom additional leverage over the European market. The timeframe of Nord Stream 2’s start became a critical issue for the continent after Europe’s energy deficit became severe several months ago.

While Gazprom, the single-largest supplier of gas to Europe, has been fully meeting its supply obligations under long-term contracts, it hasn’t offered spot gas with deliveries in late 2021 or early 2022 to European clients for several months, exacerbating the shortage.

The German regulator Bundesnetzagentur earlier this month said it doesn’t expect to certify the Nord Stream 2 operator in the first half of 2022. The delay comes as the company needs to set up a German subsidiary to comply with European Union legislation. This signaled to the energy-hungry European market that the Russian pipeline may only start operating once stockpiling for next winter is already well under way.

Nord Stream 2 was initially expected to begin operating by the end of 2019, but it has faced multiple hurdles, including U.S. sanctions targeting the project’s insurers and pipe-laying ships. Its construction was finally completed in September. However, Germany and the U.S. have indicated the start of the link could be at risk if Russia, which earlier this year escalated its troop presence near the border with Ukraine, were to attack its neighbor. 

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