Nord Stream 2 loses bid for EU rules waiver: update
(updates with comment from Nord Stream 2 company)
The Nord Stream 2 gas pipeline will have to comply with EU competition law after a German court ruled on August 25 that the project should not be exempt from the rules.
An EU gas directive amendment that came into force in May last year applied the bloc's Third Energy Package legislation to pipelines going to and from third countries like Nord Stream 2. This means that the owners of the pipelines have to be different from the suppliers of the gas that runs through them, and that operators should offer their capacity in auctions to third parties.
German regulator BNA decided not to give Nord Stream 2 an exemption from the rules, and Gazprom's challenge to the decision was rejected by the Dusseldorf Higher Regional Court last year. An appeals court in Dusseldorf has now rejected Gazprom's appeal.
Gazprom is the only company allowed to export gas via pipeline under Russian law, which means it may limit its use of Nord Stream 2's 55bn m3/year capacity. That is unless Moscow liberalises gas exports, which has resisting doing in the past.
"Nord Stream 2 AG has taken note of the court decision and will evaluate it. We will inform about next steps in due time," the Nord Stream 2 operating company told NGW. "Nord Stream 2 AG maintains that the company is being unlawfully discriminated, considering that all other import pipelines who had invested before the new rules entered into force are eligible for such a derogation under the amended gas directive."
The May 2019 gas directive amendment only applies to pipelines that were not complete by that point. While construction of Nord Stream 2 was far from complete at that stage, Nord Stream 2 AG argues that the project should have been treated as complete as investments were committed and billions of euros spent. The pipeline operator is also challenging the amendment at the Court of Justice of the EU and under the Energy Charter Treaty, it said.
While the ruling is certainly a setback for Nord Stream 2, it should not have any bearing on its completion. Gazprom has said it expects the pipeline to start flowing gas in mid-October and pump 5.6bn m3 of supplies by the end of the year. Even though the Biden administration has conceded it cannot stop Nord Stream 2, and has reached an agreement with Germany to let the project go ahead, the US State Department nevertheless imposed extra sanctions on the Russian vessels laying the pipeline earlier this week.
Gazprom conceived Nord Stream 2 initially as a means of bypassing Ukraine as a transit route for its gas supplies to Europe, although delays to its completion enabled Kyiv to secure a new five-year transit deal in late 2019. How much gas will flow via Ukraine after 2024 that point is unclear. In her final official visit to Russia on August 20, outgoing German chancellor Angela Merkel discussed with Russian president Vladimir Putin assurances that Russia could provide that it would continue flowing gas through Ukraine's pipelines after 2024.