Page 12 - FSUOGM Week 43

FSUOGM PIPELINES & TRANSPORT FSUOGM

New US sanctions unlikely to

slow Nord Stream 2 progress

EUROPE EXPANDED US sanctions imposed on Russia’s Stream 2, but could prove bad for investors’ gen-
Nord Stream 2 pipeline are unlikely to affect the eral sentiment towards Gazprom.
Evidence suggests the schedule for its completion, analysts have said. The main ship anticipated to lay Nord Stream
Russian vessels will The US State Department on October 20 2’s remaining pipes is the Russian-flagged
not require substantial broadened the scope of sanctions against the Akademik Cherskiy.
upgrades to finish the project under the Protecting Europe’s Energy “However, as this ship is already conducting
pipeline. Security Act (PEESA). Within less than a month, pipelaying exercises in an apparent shakedown
sanctions will also apply to any companies “pro- cruise in the Baltic Sea, it is not apparent to [sup-
viding services or facilities or upgrades or instal- pose] that these additional measures will neces-
lation of equipment” for vessels taking part in sarily impair operations in any meaningful way,”
Nord Stream 2, rather than just the vessel owners BCS GM said.
themselves. BCS GM still expects Nord Stream 2 to be
Work on Nord Stream 2 was halted in Decem- completed in one or two years. It will be ready
ber when PEESA was first imposed, forcing Swiss for service “when truly needed by the European
pipelayer Allseas to quit the project. But Russian market, which will be when Europe again has a
has its own vessels in northern European waters cold winter and the heavy oversupply of LNG
that are expected to finish the job. According to provided by the [second] LNG glut abates from
VTB Capital (VTBC), recent reports that these the market, likely sometime in 2023.”
vessels are undergoing tests could suggest they Meanwhile, Moscow-based Sova Capital per-
do not require major technical upgrades. ceives a greater threat to Nord Stream 2 coming
“We do not expect the widening of the cur- from a clause included in the US Senate’s version
rent sanctions to have a major effect on Nord of the new sanctions act, concerning the pipe-
Stream 2’s completion schedule, which has not line’s certification.
been cleared by the company,” VTBC analysts “The Danish permit issued for the comple-
said. “However, the news might have a marginal tion of Nord Stream 2 requires Norwegian reg-
negative effect on investors’ perception of Gaz- istrar Det Norske Veritas to inspect and certify
prom’s shares.” the compliance of Nord Stream 2 before it can
As Nord Stream 2 is now almost complete, be put into operation,” Sova said. “If the US
with just 160 km of pipeline left to lay, its €9.5bn Senate’s version of the bill passes, this would
($11.3bn) of capital expenditure is almost all a require a new Danish permit at the very least,
sunk cost. Once the pipeline is running, Gaz- but it would also require Nord Stream 2 to find
prom will benefit from lower costs to transport a certification agency that is willing to be subject
gas to Europe. This impact will amount to 5% of to sanctions.”
the company's forecasted Ebitda in 2023, accord- This, and EU legislative moves that could pre-
ing to VTBC. vent the pipeline from running at full capacity,
Analysts at BCS Global Markets (BCS GM) means Sova is cautious on Gazprom deriving any
agreed that the broadened sanctions were benefits from Nord Stream 2 over the next few
unlikely to lead to a material delay at Nord years. ™

P12 www. NEWSBASE .com Week 43 28•October•2020