Germany’s regulator, the Bundesnetzagentur, needs to be satisfied that operator Nord Stream 2 AG meets European Union regulations requiring the separation of gas transport from production and sales, known as unbundling.
The country has until early January to make a draft decision on certification, which it must send to the European Commission for review. The EU then has two months to act, a timeframe that can be extended by another two months, potentially taking the process as far as May.
Europe’s gas crunch has brought the region’s reliance on Russia, its biggest supplier, sharply into focus. Gazprom has capped flows to the continent as it replenishes its own stockpiles for winter, sparking criticism that it’s withholding supplies to force faster approval of Nord Stream 2. The company says it’s meeting all contractual obligations.
On Wednesday, President Vladimir Putin eased soaring gas prices by saying Russia could help stabilize the situation, and potentially export record volumes to Europe this year. Quick certification of Nord Stream 2 would be one way to achieve this, Deputy Prime Minister Alexander Novak said.
With prices still eye-wateringly high and Europe facing winter with the lowest gas-storage levels in more than a decade, there’s concern in the European Parliament that Nord Stream 2 may decide to start flows without the necessary approvals. Senior lawmakers on Tuesday called on the European Commission to exercise all its powers to ensure compliance with EU law.
The project does not yet meet unbundling criteria, they said, urging a “clear and robust Commission opinion in the certification procedure.”
On Wednesday, Nord Stream 2 made progress in its fight against EU legislation that sets out unbundling requirements. An adviser to the EU Court of Justice recommended that the operator be allowed to challenge the law. That could lead to formal confirmation in the coming months, permitting an appeal.
Read more: Nord Stream 2 Wins Court Boost Over EU Gas-Pipeline Rules
Politicians have also had to weigh up the EU’s need for energy security versus its accelerating shift away from fossil fuels. And with Germany’s Green Party expected to play a key role in coalition talks following the country’s recent election, further political setbacks to the project can’t be ruled out.
In their letter to EU Energy Commissioner Kadri Simson, the lawmakers said the EU’s executive arm should be prepared to use “interim measures” if Nord Stream 2 starts shipping gas to Germany before receiving the necessary approvals.
After the pipe’s operator said it had started filling one of the lines with gas, Germany’s regulator also sought assurance that it won’t start flows before getting the required consents.
“According to the information available to the Bundesnetzagentur, it cannot be ruled out that Nord Stream 2 AG will put the interconnector into operation in the near future,” it said Oct. 4, requesting “evidence that all regulatory requirements” are met for third-party access.
Any early flows on the pipeline would likely be detected swiftly, with all parties involved liable for penalties. Whether the operator would be willing to risk a fine, citing Europe’s desperate need for fuel, is unclear. Nord Stream 2 has said several times it will follow all necessary procedures before starting the line.
2021 Still In Play
Some industry watchers, from Bank of America Corp. to ICIS, still see potential for Nord Stream 2 to start this year, especially if Europe’s energy crisis speeds up regulatory approvals.
“It is still plausible Nord Stream 2 could run in some capacity during 2021,” said Tom Marzec-Manser, an analyst at ICIS. “Just because a regulator has a maximum of four months to approve an application, does not necessarily mean it will take four months.”
But many others see the startup pushed to next year. Energy Aspects has estimated flows will begin in February, saying the risks are “biased to it being later than that rather than earlier.” VTB Capital sees operations beginning “from mid-2022.”
Even if the pipe does start soon, it’s unclear whether Russia would have enough spare output capacity to increase exports to Europe fast, especially given surging demand at home. Opponents of Nord Stream 2 insist Gazprom already has sufficient delivery routes through other countries, and analysts have said that the lack of supply is more an issue of production capability.
As such, it’s likely that Nord Stream 2 would only help to alleviate, not eliminate, the region’s severe gas deficit. The impact on near-term prices would therefore be limited, with Europe dependent on a number of supply and demand factors to ease the crisis.