Gazprom can deliver first gas via Nord Stream 2 before year-end

Gazprom CEO Alexei Miller said Sept. 2 that first gas flows via the almost-complete Nord Stream 2 gas pipeline from Russia to Germany could start before year-end, with all preparations made on the Russian side.

In a speech to mark Russian oil and gas industry workers day, Miller said all the necessary capacity was available and ready for use on the Russian side.
The availability of Nord Stream 2 is a key factor currently impacting the European gas market, with benchmark day-ahead prices now having broken through the Eur50/MWh mark on continued supply concerns.

“Before the end of this year, during this heating season, we can deliver the first gas through the Nord Stream 2 gas pipeline to the European market,” Miller said.

“On the Russian side, all the necessary capacities have been created: production capacities in Yamal and gas transmission capacities in the Northern Gas Transportation Corridor,” he said.

One 27.5 Bcm/year string of the 55 Bcm/year pipeline was completed in June and is undergoing pre-commissioning work, while the second 27.5 Bcm/year string is nearing completion.

It remains unclear when commercial flows through the pipeline will begin, though Gazprom officials said Aug. 31 that “maximum effort” was being made to ensure Nord Stream 2 would be ready for commercial operations in the “very near future.”

Gazprom on Aug. 19 said it could still supply 5.6 Bcm of gas via Nord Stream 2 in 2021, but company officials on Aug. 31 said flows via the pipeline would not have a “major” impact on overall supplies to Europe for the year as a whole.

German certification
The operator of Nord Stream 2 — the Switzerland-based, Gazprom-owned Nord Stream 2 AG — also faces a number of other regulatory obstacles to overcome given that the pipeline must comply with the amended EU Gas Directive.

A German court ruled late last month that the pipeline would be subjected to EU rules on ownership unbundling, third-party access and transparent tariffs after it dismissed an appeal from Nord Stream 2 AG over compliance with the directive.

In June, Nord Stream 2 AG said it had applied for “precautionary” certification with the German regulator, the Bundesnetzagentur (BNetzA), in order to meet the requirements on ownership unbundling.

A spokesperson for BNetzA told S&P Global Platts this week that the documents submitted for the unbundling certification procedure were still being reviewed.

“Whether or which documents will be requested subsequently is open. Once the application documents are complete, the Bundesnetzagentur has four months to prepare a draft decision,” the spokesperson said.

Should the pipeline begin operations while the case is pending, the operator could be subjected to penalties, the spokesperson said.

Under German law, there is “no possibility of temporary certification,” the spokesperson added.

Once BNetzA publishes its draft decision, it then passes to the European Commission to give its opinion before being returned to the German regulator for a final decision, a process that could also take up to four months.

However, according to Katja Yafimava from the Oxford Institute for Energy Studies, it is possible that flows could start early if BNetzA indicates as such in its draft certification. This, she said, would be “subject to conditions to be fulfilled later” and provided there was a justification for doing so.

The BNetzA spokesperson added that ultimately it was the authorities in the northeast state of Mecklenburg-Vorpommern — where Nord Stream 2 makes landfall — that would be responsible for approving the start of operations.

Before then, the pipeline must also be technically certified as complete, a task made more difficult by the withdrawal from the project of certification company DNV due to the threat of US sanctions.

Export monopoly
Under the amended EU directive, third parties will also have to be given access to Nord Stream 2 capacity.

On Sept. 2, Russian deputy prime minister Alexander Novak said that the Russian government would discuss a proposal by Rosneft to allow the company to export gas via Nord Stream 2, the Prime news agency reported.

Currently Gazprom holds a monopoly on exports of Russian pipeline gas.

“Such a request was made, it is with the Russian government. At the moment we are waiting for ministries to give their opinions […] and then it will be discussed by the government,” Novak said.

On Aug. 27, Russian daily Kommersant reported that Rosneft CEO Igor Sechin had asked Russian President Vladimir Putin to allow the company to export 10 Bcm/year of gas via an agency agreement with Gazprom.

Rosneft does not currently have significant spare volumes of gas, but plans to significantly increase output in 2022.

It is not the first time that Rosneft has requested a mechanism to export pipeline gas, while in 2017 the company also signed a memorandum with BP on potentially supplying 10 Bcm of gas/year to Europe.
Source: Platts