Friday, December 17, 2021

Nord Stream 2: operator ramps up pressure, fills pipeline with gas

 Despite the fact that the controversial pipeline still doesn't have the necessary operating licence, the pipeline is being flooded with gas "to establish the necessary line pressure", as the operating company puts it, writes WELT:

The operating company of the controversial Baltic Sea pipeline Nord Stream 2 started filling the second line on Friday. According to the company, this is intended to build up the technical line pressure required for the gas flow.

“The pre-commissioning work on the second line was successfully completed to ensure the integrity of the pipeline,” explained the Swiss-based subsidiary of the Russian state monopoly Gazprom. The pipeline was "built in accordance with applicable technical and industrial standards and independently certified".

The early filling of the pipelines at a time of extremely high gas prices is surprising, as the operating license for the pipeline will still be months away. The Federal Network Agency (BNetzA) had suspended the approval process for pipeline operation for the time being because Gazprom had not yet implemented the formal conditions of the European gas directive.

According to the European competition rules, the owner and user of a line monopoly must not be identical. Gazprom must therefore set up an operating company that is formally and personally independent in accordance with the German legal form in order to meet this requirement. Only then can the certification of the gas pipe be completed.

Gazprom is working on the implementation. But decisions will probably "not be made in the first half of the year", said the President of the Federal Network Agency, Jochen Homann, with a view to 2022. The process will continue as soon as the necessary documents are submitted in such a way that "they can be checked" - but that alone has Nord Stream 2 AG in hand.

The BNetzA is under political pressure from various sides. Opponents of the project, including the USA, are demanding that the federal government not allow the line to go into operation for geopolitical reasons. Several EU countries are also calling on Germany to use the pipeline in the Ukraine conflict as a means of pressure against Russia.

Supporters of the pipeline project therefore suspect that the approval process of the Federal Network Agency could drag on longer than is actually necessary due to this political pressure. Some want to see the formulation of the BNetzA president as an indication that time leeway should be used to the maximum. Homann had pointed out that after the examination by the BNetzA, the whole thing would still go to the European Commission. This has "a lot of time to deal with it again".

If Gazprom is already filling the pipeline between St. Petersburg and Greifswald with gas, that could - intentionally or only as a welcome side effect - exert counter pressure on the licensing authority. Because gas prices in Germany and Europe are currently at a record level. In addition, a physical shortage of gas cannot be ruled out for industrial companies and power plant operators.

Operators of gas power plants in Germany are already warning of the increased risk of business interruptions due to a lack of gas deliveries this winter. The industry association “Trading Hub Europe” (THE), which is responsible for the gas supply, is also trying to organize additional gas volumes especially for Bavaria for February by means of a “special tender”.

If there were physical supply bottlenecks in Germany in the event of an extremely cold and long winter, politicians could come under pressure to justify why gas volumes from Nord Stream 2 are not used that are already physically available at the landing point Greifsland on German territory.

How sensitive the gas market is with regard to the politically sensitive supply situation was shown recently by reactions to a statement by the Federal Foreign Minister. Annalena Baerbock (Greens) had pointed out that "as things stand, this pipeline cannot be approved because it does not meet the requirements of European energy law." Market participants and media representatives misinterpreted as a political declaration of intent.

As a result, gas prices in European wholesale rose significantly over several days. Chancellor Olaf Scholz (SPD) only pointed out at the end of this week that Baerbock's statements had been misunderstood: The commissioning of the pipeline was not a political question, Scholz made clear: For commissioning, compliance with European law was only required in one sub-aspect clear up. "An authority in Germany decides on this quite apolitically."

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