Gazprom can deliver its first gas via Nord Stream 2 before the end of the year

Gazprom boss Alexei Miller said on September 2 that the first gas flows via the almost completed Nord Stream 2 gas pipeline from Russia to Germany could begin before the end of the year, with all preparations being made on the Russian side.

In a speech on Workers’ Day in Russia’s Oil and Gas Industry, Miller said that all the necessary capacities are available and ready for action on the Russian side.
The availability of Nord Stream 2 is a key factor that is currently affecting the European gas market as benchmark day-ahead prices have now broken the EUR 50 / MWh mark due to ongoing delivery concerns.

“This year, during this heating season, we can deliver the first gas to the European market via the Nord Stream 2 gas pipeline,” said Miller.

“On the Russian side, all the necessary capacities have been created: production capacities in Yamal and gas transport capacities in the northern gas transport corridor,” he said.

One string with 27.5 billion m³ / year of the 55 billion m³ / year pipeline was completed in June and is currently being worked on before commissioning, while the second string with 27.5 billion m³ / year is about to be completed.

It remains unclear when commercial flows through the pipeline will begin, although Gazprom officials said on Aug. 31 that “maximum effort” has been made to ensure Nord Stream 2 is ready for commercial operation in the “very near future” is.

Gazprom said on August 19 that it could still deliver 5.6 billion cubic meters of gas through Nord Stream 2 in 2021, but on August 31, company officials said the flows through the pipeline would not have a “large” impact on total deliveries to Europe would have had a whole year there.

German certification
The operator of Nord Stream 2 – the Switzerland-based, Gazprom-owned Nord Stream 2 AG – is also facing a number of other regulatory obstacles that need to be overcome as the pipeline has to comply with the amended EU gas directive.

A German court ruled late last month that the pipeline is subject to EU rules on ownership unbundling, third party access and transparent tariffs after dismissing an appeal by Nord Stream 2 AG for compliance with the directive.

In June, Nord Stream 2 AG announced that it had applied for a “precautionary†certification from the German Federal Network Agency (BNetzA) in order to meet the requirements for ownership unbundling.

A spokesman for the BNetzA told S&P Global Platts this week that the documents submitted for the unbundling certification process were still being examined.

“Whether or which documents will be requested is open. After the application documents have been completed, the Federal Network Agency has four months to prepare a draft decision, â€said the spokesman.

Should the pipeline go into operation while the case is pending, penalties could be imposed on the operator, the spokesman said.

According to German law, there is “no possibility of a temporary certificationâ€, the spokesman continued.

As soon as the BNetzA has published its draft decision, it is forwarded to the European Commission to give its opinion before it is sent back to the German regulatory authority for a final decision, a process that can also take up to four months.

However, according to Katja Yafimava from the Oxford Institute for Energy Studies, it is possible that the flows will start prematurely if the BNetzA states this in its certification draft. This applies, she said, “with the proviso that conditions later fulfilled are met” and there is a justification for this.

The BNetzA spokesman added that ultimately the authorities of the northeastern state of Mecklenburg-Western Pomerania – where Nord Stream 2 comes ashore – are responsible for approving the start of operations.

Before that, the pipeline must also be technically certified as completed, which is made more difficult by the withdrawal of the certification company DNV from the project due to the threat of US sanctions.

Export monopoly
According to the amended EU directive, third parties must also have access to Nord Stream 2 capacity.

On September 2, Russian Deputy Prime Minister Alexander Novak said the Russian government would discuss a proposal by Rosneft to allow the company to export gas via Nord Stream 2, Prime news agency reported.

Gazprom currently has a monopoly on the export of Russian pipeline gas.

“Such a request has been made to the Russian government. At the moment we are waiting for the ministries to give their opinion […] and then it will be discussed by the government, â€said Novak.

On August 27, the Russian daily Kommersant reported that Rosneft boss Igor Sechin had asked Russian President Vladimir Putin to allow the company to export 10 billion cubic meters of gas per year as part of a trade agreement with Gazprom.

Rosneft currently has no significant reserves of gas, but plans to increase production significantly in 2022.

It is not the first time Rosneft has requested a mechanism to export pipeline gas, while in 2017 the company also signed a memorandum with BP on the potential of delivering 10 billion cubic meters of gas to Europe annually.
Source: Platts