Germany’s energy regulator has suspended the permitting process for a major new pipeline bringing Russian gas to Europe, creating a new hurdle for the controversial project and driving up regional gas prices.
The regulator said on Tuesday (November 16) it had temporarily halted the certification process because the Switzerland-based consortium behind Nord Stream 2 first had to set up a German subsidiary under German law in order to obtain an operating license.
European prices rose 9% on news of the delay, with the Dutch front month contract briefly trading at EUR89.00/MWh.
“This pushes back the expected deadlines quite a bit,” Energy Aspects analyst Trevor Sikorski said, adding it was unclear how long the process of starting a new company and reapplying for certification would take.
First flows through the pipeline are very unlikely in the first half of 2022, he added.
Nord Stream 2 has met stiff opposition from the United States and some European states, who say it will make Europe overly dependent on Russian gas. But other European governments say the link is vital to securing energy supplies, as gas prices have risen sharply in recent weeks and there is a risk of blackouts this winter.
Nord Stream 2 said it was informed of the certification decision by the regulator. “We are not in a position to comment on the details of the proceeding, its possible duration and the impact on when pipeline operations will commence,” he added.
The Kremlin could not immediately be reached for comment.
“Any delays in pipeline certification, especially on the eve of winter, are not in the interest of the European Union, there is no question about that,” Konstantin Kozachev, deputy speaker of the upper house of the Russian parliament, told TASS.
The regulator, the Bundesnetzagentur, said it would only consider an application after a transfer of major assets and staff budgets to a German subsidiary.
“Certification for the operation of Nord Stream 2 can only be considered if the operator is organized in a legal form that complies with German law,” it said.
As soon as these requirements are met, the submission can be further examined during the remaining four-month application period. Prior to the suspension, that period was supposed to run through early January.
Ukraine is a country bitterly opposed to the pipeline, which has fueled greater tensions between Kiev and Moscow at a time when the United States has accused Russia of building troops near Ukraine in preparation for a possible attack, a Allegation that the Kremlin denied.
Russia annexed Ukraine’s Crimea peninsula in 2014, and in the same year Moscow-backed separatists seized control of the Donbass region of eastern Ukraine.
The head of Ukraine’s energy company Naftogaz told Reuters he welcomed the decision by Germany’s energy regulator.
“Good,” said Yuri Vitrenko. “This is an important point indicating that the German regulator shares our position that the certification should not only apply to the pipeline in Germany, but should apply to the entire pipeline from the territory of the Russian Federation to the territory of Germany.”
Kiev will lose revenue if gas from Russia bypasses it, and it accuses Moscow of using energy as a weapon to threaten Europe’s security.
Moscow has denied this, saying Nord Stream 2 is a purely commercial venture that complies with European energy regulations.
Ukraine has successfully applied to participate in the pipeline certification consultation process.
In a written comment to EURACTIV, Olga Bielkova, Director of Government and International Affairs at GTSOU, Ukraine’s gas TSO, expressed her satisfaction with this development.
“The recent decision by the German regulator to carefully review the NS2AG application, review the legal contradictions and suspend the certification process is important. But until the final decision is made, we will continue to defend the interests of Ukraine and challenge the certification of NS2AG as an independent operator,” Bielkova stated.
Moscow has already used a route under the Baltic Sea for Nord Stream 1 – the predecessor of Nord Stream 2 – that has a capacity of 55 billion cubic meters (bcm), which is half of Germany’s annual gas consumption.
Nord Stream 2 will double that, making Germany a central arrival hub for European gas volumes for onward distribution.
The German regulator said the Berlin Ministry of Economic Affairs and the European Commission had been made aware of its notification to Nord Stream 2.
After the decision of the German regulatory authority, the Commission has two months to review the application.
“Under the current circumstances, there are further disadvantages for the timing of the commissioning of Nord Stream 2, because although Germany is more friendly towards this project than the EU, the official certification of the pipeline could face even more hurdles during the review phase of the EU Commission. said Carlos Torres Diaz, head of gas and power markets at Rystad Energy.