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Germany suspends Nord Stream 2 certification delaying commissioning well into 2022

NORD STREAM 2 AG

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Germany’s Federal Network Agency (BnetzA) suspended its certification of the Nord Stream 2 natural gas pipeline from Russia to Germany on November 16 which will delay the start date into the first quarter or possibly the second quarter of 2022.

A spokesman for Nord Stream 2 AG told NE Global on November 16 the German regulator BNetzA has publicly informed about a temporary suspension of the certification procedure due to the foundation of a Nord Stream 2 subsidiary company. “Our company undertakes this step to ensure compliance with applicable rules and regulations. We are not in the position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations,” the Nord Stream 2 spokesperson said.

Chris Weafer, co-founder of Macro-Advisory in Moscow, told NE Global on November 17 the speed at which they will pursue the review may depend either on the position taken by the new German government – pro or anti the project – and the weather. “Utilities say they have enough gas to work through a ‘normal’ winter but not if it is very cold and demand rises. If the latter, then pressure will grow to approve Nord Stream 2 sooner,” Weafer said.

“The leader of the Greens is opposed to the project, but the dominant political party is in favor, as is most of German industry,” he said, arguing that “the fact that the work is now fully complete and will be less environmentally damaging than ship borne (liquified natural gas) LNG should also ease the objections to the Green party leadership”.

Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told NE Global on November 17 BNetzA will eventually certify the Nord Stream 2 operator but the decision to suspend certification until a German-registered subsidiary is established suggests there will be a delay. She explained that BNetzA is expected to re-start the certification process once the subsidiary is established and to issue a draft certification decision within the remainder of the 4-month period available to it under law (this period is counted from September 8 up to the suspension date of November 16, and then from whatever date when the certification process is restarted), so the original deadline of January 8 may slip, potentially up to a couple of months that would be needed for establishing the German subsidiary. “Importantly, the German ministry of economy and energy has already concluded that Nord Stream 2 certification will not pose danger to security of supplies, and no new assessment by the ministry is required,” Yafimava said.

She added that the European Commission will still have 2 months extendable by further 2 months for issuing an opinion, and BNetzA would still have another 2 months for issuing a final certification decision. “This suggests that the certification process will only be fully completed by/in summer,” she said.

Explaining the reasons of the suspension, Yafimava said it is not entirely clear why BNetzA has accepted a Swiss-registered Nord Stream 2 AG application for certification in the first place, if it holds the view that only a German-registered company can be certified as an operator. But BNetzA has has accepted it and also confirmed that all the necessary documents were received on 8 September.

“My explanation of this is as follows. Its press release seems to suggests that BNetzA may have expected that Nord Stream 2 AG will change its legal form and re-register as a German company to operate the entire Nord Stream 2 pipeline. But as neither the EU nor the German law extend beyond the German territory, Nord Stream 2 AG appears to have rejected this variant and decided to establish a new German-registered subsidiary to own and operate the German section of Nord Stream 2 only. This would be strictly in line with the amended gas directive, whose requirements on unbundling, TPA, tariffs, do not extend beyond the German section,” Yafimava explained.

BnetzA’s action to suspend its certification of Nord Stream 2 comes against the backdrop of tensions between Russia and Europe over Belarus and Ukraine.

On November 15, BNetzA formally accepted Ukraine’s National Joint Stock Company Naftogaz’s application to be included in the certification process of Nord Stream 2 AG.

Weafer said the timing is undoubtedly political. “To approve the project, and then send it to the EU for sign off, against such a charged political backdrop, would risk a dangerous backlash,” he said. “Much more sensible to wait until the current controversies in Belarus, on the Ukraine border and in Space, to either ease or, hopefully, be resolved and then to approve the project. If, in the meantime, there is a very cold winter and prices again spike, which would remind industry and consumers why they need the extra pipeline, then so much the better from the viewpoint ot Nord Stream,” Weafer argued.

For her part, Yafimava said the BNetzA’s decision to suspend certification doesn’t have anything to do with the situation in Belarus. “If anything, uncertainty over reliability of transit via Belarus and a potential loss of Yamal’s transit capacity should have made Germany wary of further delaying the start of supplies via Nord Stream 2. I also don’t think the BNetzA’s decision has anything to do with its acceptance of Naftogaz and GTSOU (Transmission System Operator of Ukraine) in the certification process. BNetzA has accepted them, just as it has accepted (Polish oil and gas company) PGNiG earlier, so that in the event of any future legal action they would not be able to allege that their views have not been taken into account – and they don’t have a veto right anyway,” she said.

Yafimava pointed out that by accepting the Swiss-registered Nord Stream 2 AG application, BNetzA has effectively created for itself an option of being able to suspend the certification process at any time of its own convenience on the essentially procedural grounds. She argued that it cannot be completely ruled out that the timing of BNetzA’s suspension decision might be political, both domestically due to the formation of the new German government and internationally due to tensions between the EU and Russia and a threat of US sanctions.

Unless BNetzA allows Nord Stream 2 to flow gas while certification is pending, there will be no additional Russian gas sent to Europe beyond what Russian gas monopoly Gazprom can send by using its booked or available for booking firm capacity on the existing export corridors, including Nord Stream 2, Yamal, Ukraine, Turkish Stream, thus suggesting the whole winter of high gas prices, Yafimava said, adding, “But it still remains a valid proposition that if the winter is very cold and storages are very low BNetzA may allow flows via Nord Stream 2 while certification is pending”.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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