Germany to reject derogation for Russia’s Nord Stream 2 natural gas pipeline

Author: Diane Pallardy

2020/05/11

LONDON (ICIS)--Germany’s regulator BNetzA intends to reject a derogation request that would allow Russian Gazprom full access to Nord Stream 2 - an offshore pipeline that will double Russia’s direct pipeline capacity to Germany to 110 billion cubic meters (bcm) per year.

The German regulator could not share the content of its intended decision as of 4 May, but comments from project developers indicate the regulator’s intention.

“We are aware of the information shared by the German authority, BNetzA, with the participants in the procedure. We do not agree with this conclusion. We will wait for the formal decision of the authority and of course evaluate it and further actions to preserve our rights,” the developers of Nord Stream 2 told ICIS on Monday.

Interested parties had until 8 May to comment. A final decision has to be made by 24 May.

NEW EU RULES

A derogation would exempt the project from EU rules were extended in late February to pipelines connecting the bloc with non-member states, known as third countries. The rules ensure third party access to capacity, separation of pipeline owner and supplier, and tariff transparency.

Only the section of pipe in EU member state territory has to comply with these rules. Nord Stream 2 is a 1,230km subsea pipeline, 22km of which sit the German waters, that will connect Russia’s Yamal reserves of 26.5 trillion cubic meters to the European market.

Pipelines completed before 23 May 2019 can apply for a derogation - granted by the regulator of the first member state the pipeline meets.

Future pipelines for which investment would only be secured if an exemption was granted can also apply.

In the case of Nord Stream 2, its construction was underway and final investment decision made before the directive was changed. Russia’s state-owned producer Gazprom owns both the pipeline and the gas that will flow through it.

REMAINING CONSTRUCTION WORKS

There remains around 160 km of Nord Stream 2 pipes to lay in the Danish exclusive economic zone.

The Russian pipelaying ships Akademik Chersky and Fortuna could complete this work.  Project developers have yet to provide plans to the Danish Energy Agency (DEA) though, the agency told ICIS on 11 May.

The Akademik Chersky left the Russian Far East in February and arrived in the Baltic Sea at the start of May. It moved to the German port of Mukran, where Fortuna has been stationed since October, over the weekend.

“We are actively looking for solutions and will inform about it in due time,” project developers said on 4 May. Other works were progressing as planned, they added.

ONGOING LEGAL DISPUTES

In April 2019, developers of Nord Stream 2 asked the European Commission to consider the pipeline completed and eligible for a derogation.

After no consideration came, in late July they asked the EU general court to cancel changes to EU gas rules which they considered discriminatory.

In late September, the developers launched a second legal dispute on the basis of the Energy Charter Treaty (ECT). They argued the amendments to the EU gas rules are in breach of the ECT’s investment protection provisions.