Germany rejects third party access exemption for Nord Stream 2 gas pipe

LONDON (ICIS)–A pipeline which will double Russia’s direct gas export capacity to Germany as a first EU entry point will have to comply with EU rules on unbundling and third party access, after local regulator BNetzA rejected the project developer’s application for an exemption on Friday.

INELIGIBLE FOR EXEMPTION

Pipelines completed by 23 May 2019 are eligible for exemptions from EU rules, but Nord Stream 2 was only partly built then. BNetzA “understands the term completion in terms of construction and technology,” the agency said.

“The applicant, on the other hand, shows an economically functional understanding and builds on the investment decision well before May 23, 2019.”

All EU member states had the opportunity to examine the developer’s application.

PGNIG was included in the application process upon request. Poland has long been critical of the pipeline which it considers will increase the bloc’s reliance on Russian gas.

The developers can appeal and have the decision judicially reviewed, BNetzA said.

“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 told ICIS on Monday , when the intended decision was known.

RULES TO APPLY

The EU unbundling rule means the pipeline’s owner has to be a separate entity from the supplier of the gas flowing in the pipeline. In the case of Nord Stream 2, Russia’s state-owned gas producer Gazprom is the sole shareholder of the pipeline. It will also be the sole gas supplier as it has a monopoly on Russian gas pipeline exports.

Furthermore, as EU rules mandates third party access to pipeline capacity, Gazprom will only be able to use 50% of Nord Stream 2’s capacity.

Earlier this year, EU gas rules which initially only applied to the EU’s internal market were extended to pipelines connecting the bloc with third countries . But only the section of these pipelines located in a member state’s territory or territorial waters is subject to these EU rules.

In the case of Nord Stream 2, only the 22km section in German territorial waters will need to abide by the rules. But since the pipeline is direct between Russia and Germany, the rules will in fact likely apply all along the pipeline.

BACKGROUND

Once completed, Nord Stream 2 will double Russia’s direct pipeline export capacity to Germany as a first EU entry point to 110 billion cubic meters per year.

Its completion is expected at the end of 2020 or in the first quarter of 2021. In December, US sanctions stopped pipelay in the Danish exclusive economic zone, the last yet-to-be-built section of the pipeline. There remains 160km to build, the pipeline is 1,230km long and is composed of two parallel legs.

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