Nord Stream 2 Won’t Go Live in First Half of 2022, Gas Prices Soar

The German energy regulator’s eagerly-awaited decision on fully certifying the Nord Stream 2 gas pipeline won’t come in the first half of next year, it said on Thursday, in a setback for the Russian project that has sparked global political tensions.

“There will be no decisions in the first half (of 2022),” Bundesnetzagentur (BNetzA) President Jochen Homann said with regard to the certification process.

The pipeline was built to carry Russian gas directly to Germany, bypassing Ukraine – currently a major transit route for Russian supplies. It has been completed for months but it remains unclear when deliveries will start.

EUROPEAN ENERGY CRISIS: Please, keep moving; nothing to see here: just a crazy day of natural gas and electricity prices across all Europe. TTF up to €117 per MWh. Germany one-year forward power above €200 per MWh. And day-ahead electricity prices in France above €300 per MWh. pic.twitter.com/PNnVaIINIC

— Javier Blas (@JavierBlas) December 13, 2021

Russia’s foreign ministry last week said it hoped the Gazprom-led pipeline would receive its certification in the spring, RIA news agency reported.

Pressure on the project has intensified in recent weeks in light of diplomatic tensions between Moscow and western nations, mainly triggered by fears of a possible Russian attack on Ukraine.

BNetzA said the operating company of Nord Stream 2 had started the process of setting up a subsidiary in Germany as required under German law.

It had halted its certification process – originally due to run until Jan. 8 – last month, pending the creation of the German subsidiary to comply with the law.

Once the BNetzA has made a decision it will go to the European Union, which will then have another two months to review it, a period that can be extended by a further two months if needed.

Elena Burmistrova, the head of Gazprom Export, told Reuters it was “difficult to answer” when asked when Nord Stream 2 would start selling gas.

Source: Reuters

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Natural gas prices in Europe soared on Tuesday after Germany confirmed that it has suspended the process of certifying a controversial new Russian pipeline called Nord Stream 2.

The German energy market regulator said in a statement that it could not certify Nord Stream 2 as an independent operator because the company was based in Switzerland, not Germany.

The decision comes at a time of rising tension between the European Union and Russia over Ukraine and a migrant crisis on the Belarus-Poland border.

“Following a thorough examination of the documentation, the [regulator] concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organized in a legal form under German law,” the German regulator said.

European gas futures prices gained 10%, piling on the pain for businesses and households already paying much higher bills. Leading energy traders have already warned of the risk of rolling blackouts in Europe in the event of a colder than average winter and some analysts say the suspension of Nord Stream 2 certification means it now won’t begin commercial operations before the middle of 2022 at the earliest.

“Nord Stream 2 is the pipeline that can change the supply game in Europe and tip the scale, so delays in its utilization mean the current tight gas market conditions will persist through the winter,” said Carlos Torres Diaz, head of gas and power markets at Rystad Energy.

The European Union gets about 40% of its imported natural gas from Russia. Nord Stream 2, which bypasses Ukraine and connects Russia directly to Germany, was completed in September despite years of opposition from countries including the United States, which warned that it would boost Moscow’s influence in Europe.

Risk of ‘rolling blackouts’

Natural gas prices have rocketed this year in Europe, where the fuel plays an essential role in power generation and home heating. Leading industry experts were already warning of the risk of shortages this winter, before Tuesday’s news.

“We haven’t got enough gas at the moment, quite frankly. We’re not storing for the winter period,” Jeremy Weir, CEO of energy trading company Trafigura, told a conference organized by the Financial Times. “So hence there is a real concern that. . . if we have a cold winter that we could have rolling blackouts in Europe.”

Source: CNN

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With winter just beginning, European natural gas prices have once again reached record highs, as worries grow over potential supply disruptions because of tensions over Ukraine or from cold weather.

“We are literally at the mercy of the weather for the next month or two,” said Henning Gloystein, an analyst at Eurasia Group, a political risk firm.

On Europe’s main trading hub for natural gas, the TTF in the Netherlands, futures are trading at their highest levels in more than a decade and are roughly eight times their value of a year ago.

Around $41 per million British thermal units, the gas futures are priced at more than 10 times what gas is selling for in the United States and comparable to about $230 a barrel for oil, figures Laura Page, a gas analyst at Kpler, a research firm. (Brent crude is now trading for about $73 a barrel.)

Alarm bells about gas prices started sounding late last summer. Prices hit a peak in October, but lately they have resumed climbing, reaching new highs. Several factors are pushing prices higher, including the fact that supplies are straining to keep up with strong demand as the effects of the pandemic lockdowns ease.

At the same time, import volumes from Russia, Europe’s chief supplier, remain low. The buildup of Russian troops on the border with Ukraine is both creating worries over the possibility of disruptions of gas flows through that country, and the political tension is making it unlikely that Nord Stream 2, the recently completed but not approved gas pipeline between Russia and Germany, will open anytime soon.

Germany’s new foreign minister, Annalena Baerbock, sent gas prices soaring on Monday when she said the giant pipeline could not be certified because it did not meet European Union rules.

Whatever happens with Ukraine, Europe has not built up sufficient gas in storage to guarantee that there will be enough fuel to heat homes and power businesses if the weather turns frigid, as some forecasters predict.

Europe burns far more gas in the winter than in summer, and European gas suppliers last summer failed to replenish inventories that were drained by a late cold snap last spring. Adding to concerns, in November European storage facilities “depleted at the fastest rate since records began,” according to Ms. Page of Kpler.

Much of course depends on the weather and whether tensions ease over Ukraine, but analysts say the market is likely to be on edge at least until the peak of winter — bad news for businesses that use large amounts of gas, like fertilizer producers or metals smelters.

Elevated gas prices will continue to push electricity bills higher in countries like Britain and Italy that use large amounts of gas to generate power. Rising bills in turn will squeeze consumers and boost inflation, which hit 5.1 percent in Britain for November, the highest in a decade.

Source: The New York Times