Germany Suspends Nord Stream 2 Certification

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Schwesig and the Russian ambassador at Nord Stream 2
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Germany suspended the certification process for Gazprom's Nord Stream 2 pipeline on Tuesday, driving European gas prices higher amid concerns that the region could face gas shortages this winter.

German networks regulator Bnetza said it had put the process on hold because it cannot certify the Russian gas giant's Swiss subsidiary Nord Stream 2 AG as the operator of the German section of the pipeline.

The agency said a new German subsidiary will have to be created instead, adding to the multiple delays that the politically fraught project has already incurred.

The December Dutch TTF gas futures contract — Europe's de facto benchmark — traded above €94 per megawatt hour ($31 per million Btu) on Tuesday up from around €80/MWh on Monday and €76/MWh ($25/MMBtu) on Friday.

Using Energy as a Weapon?

Europe is heavily dependent on Russian gas and Gazprom has recently limited its exports to Europe via other pipelines that run through Poland and Ukraine.

That has led to accusations that Russia is using its gas as a political weapon to speed up certification of Nord Stream 2, which runs beneath the Baltic Sea from Russia to Germany, avoiding the two overland transit routes.

The US, Poland and Ukraine opposed construction of Nord Stream 2, arguing that it would make Europe even more dependent on Russian gas and deny the two Eastern European countries revenues from gas transit fees.

Tensions have also been amplified by a migrant crisis on the border between Poland and Belarus, which some European politicians believe to be orchestrated by Moscow.

Furthermore, Nato Secretary-General Jens Stoltenberg expressed concern this week about a buildup of Russian troops near the border with Ukraine.

US Influence?

Some have suggested that the suspension of certification reflects pressure from the US, which reached an agreement with Germany this year allowing Nord Stream 2 to be completed, but warning Russia not to weaponize energy for political purposes.

US Energy Security Adviser Amos Hochstein recently urged Germany to slow-walk the certification process for Nord Stream 2, so as to force Gazprom to ship more gas to Europe via Ukraine this winter.

The Germany regulatory agency had four months — from Sep. 8 to Jan. 8 — to issue a draft decision on certification of the operator.

It said on Tuesday that it will stop the clock as it waits for a new German subsidiary to be set up to comply with the requirements of German law.

A Nord Stream 2 spokeswoman told Energy Intelligence on Tuesday that the company planned to take this additional step but declined to comment on how long it would take and when the certification may be completed.

EU Review

Once Germany has taken a decision on certifying the operator of the new pipeline, the European Commission has an additional two months to review the decision.

The German regulator has said it will accept input from Ukraine and Poland as part of its decision-making process but that entities from those two countries will not be able to veto certification.

Yuri Vitrenko, CEO of Ukraine's Naftogaz, has estimated that the country could lose transit revenues of $2 billion a year as a result of the Nord Stream 2 pipeline.

The new pipeline has a capacity of 55 billion cubic meters per year. That equals the capacity of the original Nord Stream pipeline, which follows a similar route and has been delivering gas to Germany for the last 10 years.

Russian President Vladimir Putin has said that Nord Stream 2 is ready to start delivering gas to Europe as soon as certification is completed.

Gas Supply, Gas Pipelines, Gas Prices, Policy and Regulation, Security Risk
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