Page 5 - Euroil Week 20 2020

EurOil COMMENTARY EurOil
helping the supplier limit transit flows through Ukraine. The pipeline was meant to come on stream before the end of last year, but construc- tion was delayed, first by permitting issues in Denmark and then by the US sanctions, which led Swiss-based pipelayer Allseas to abandon the project in December.
The pipeline’s launch is now scheduled for early 2021, Russian President Vladimir Putin has said. Gazprom is expected to use its own pipelayer, the Akademik Cherskiy, to finish the remaining 6% of Nord Stream 2’s offshore section.
Gazprom bought the Chinese-built vessel in 2016, as a back-up option in case international contractors were unable to finish Nord Stream 2. The ship is now stationed at the German port of Mukran, having left the Russian Far East in mid-February and journeyed through the Asia-Pacific region and around Africa to get to northern Europe. Gazprom has been using a facility near Mukran to store Nord Stream 2’s pipes over the years.
Reactions
The Nord Stream 2 operating company, wholly owned by Gazprom, told NewsBase in a state- ment that it had a month to evaluate the German regulator’s decision and consider further action, such as lodging an appeal.
“International legal experts have confirmed that narrowing the definition of ‘completed’ to the conclusion of the physical construction of a gas pipeline would violate the protection of legit- imate expectations and other fundamental rights in EU law,” it said.
Nord Stream 2 added it viewed the ruling as a breach of German constitutional guarantees.
Poland, which has long campaigned against Nord Stream 2, took some credit for the verdict. “[The] Poles’ energy security is one of the government’s priorities. We strongly oppose all monopolistic practices of foreign companies and
attempts to divide European customers into bet- ter and worse,” Poland’s deputy prime minister, Jacek Sasin, said in a statement. “Today’s deci- sion of the German regulator, which rejected the Nord Stream 2 request for privileged treatment, is further proof of the effectiveness of our energy policy.”
Poland has fought against the project for years. Gazprom originally formed a consor- tium with European gas firms Uniper, Winter- shall Dea, Royal Dutch Shell, OMV and Engie to finance, build and operate the pipeline. But Polish regulators in 2016 succeeded in getting the consortium disbanded on the grounds that it could undermine regional competition.
Gazprom’s five Western partners instead pro- vided 50% of the pipeline’s financing, leaving its construction and operation to Gazprom.
Implications
The court ruling and German decision could mean higher costs and time delays for Nord Stream 2, which has already exceeded its €9.5bn ($10.5bn) budget because of earlier delays. Russia may have to set up a new oper- ator for the pipeline that is independent of Gazprom. It is also unclear how third-party access will be ensured, as Gazprom is the only company allowed under Russian law to export gas via pipeline.
Other Russian gas producers such as Novatek and Rosneft have lobbied intensively over the years for the country’s export pipelines to be lib- eralised. But the government has resisted these calls, fearful that it will result in Russian compa- nies competing with each other in Europe, driv- ing down prices and cutting revenues.
Russia is likely to come up with a more inventive way of complying with EU regulation instead. Gazprom could, for instance, auction off Nord Stream 2’s capacity in contests under conditions that would make it hard for other companies to actually participate. ™
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