The Nord Stream 2 link can ship 5.6 billion cubic meters of gas in 2021, the Russian gas giant said in a statement on the eve of a meeting between President Vladimir Putin and German Chancellor Angela Merkel in Moscow. The new pipeline will help ease a supply crunch in the European market, with the news sending benchmark futures in the Netherlands down as much as 12%.
The controversial twin link — which will double the capacity of the existing undersea route from Russian gas fields to Europe — has been a major source of friction in trans-Atlantic relations for several years, with the U.S. claiming it could give Russia new leverage over Europe and introducing sanctions targeting the project. Joe Biden‘s administration softened its stance, reaching a deal with Germany last month to end a longstanding rift over the pipeline.
Europe is facing a gas crunch as Russia has been limiting flows at a time when cargoes of liquefied fuel are being redirected to Asia to meet soaring demand from countries including China, Japan and Korea. With inventories at their lowest level in more than a decade for this time of year, prices had been breaking records day after day even though it’s summer, when demand is usually low.
Before carrying the first gas flows to Europe, the link needs to obtain insurance and certification, a task made difficult by U.S. sanctions that restrict providing these services to the project. Some traders had argued Russia was capping flows to Europe this year as a way to keep pressure to get Nord Stream 2 over the finish line.
“I read this to say: ‘there is a supply problem in Europe this winter; we can deliver at least some gas to help this; if you certify the pipeline and be reasonable about the regulation of its capacity, this will be a win-win solution,’” said Jonathan Stern, a distinguished research fellow at the Oxford Institute for Energy Studies.
Gazprom and the project operator, Switzerland-based Nord Stream 2 AG, declined to comment on when the pipeline may be launched.
“More than 99% of the pipeline has been completed and we will inform about the completion of pipelay in due time,” the operator’s press office said in a statement Wednesday, adding that pipelayer vessel Fortuna is working on the remaining part of Nord Stream 2.
The construction of the gas link may be completed this month, Chief Executive Officer Matthias Warnig told Handelsblatt in July. If the launch schedule for the original Nord Stream pipeline is any guidance, commissioning works necessary for actual gas supplies via Nord Stream 2 may take another six to seven weeks.
Speculation about the start of the Nord Stream 2 pipeline sent European gas markets haywire on Wednesday. Prices plunged 9.5% after the German gas grid posted data on its website suggesting physical gas moving through the link. Futures then pared losses after Gascade said the information was wrong and removed it from its website.