Page 6 - FSUOGM Week 49 2021

FSUOGM COMMENTARY FSUOGM

Germany rules out early

launch for Nord Stream 2

The regulator's decision to suspend the certification sent gas prices soaring

once more

GERMANY THE German government has ruled out allow- but the US Congress is nevertheless pushing
ing Russia’s Nord Stream 2 gas pipeline to go for tougher measures against the pipeline. A
WHAT: online before its certification is completed – an document recently leaked to Axios shows that
The German government outcome that some analysts had suggested was Germany is lobbying for such sanctions to be
has ruled out a pre- possible. dropped, arguing that Nord Stream 2 cannot
certification Nord Stream “We are not currently in a situation where the pose a threat to EU energy security as long as
2 launch. certification process is complete,” the press secre- transit via Ukraine continues. Ukraine’s existing
tary for Germany’s economy ministry, Nina-Ma- gas transit agreement with Russia expires at the
WHY: rie Guttler, told reporters on December 6. “And end of 2024, but Kyiv is pushing for a long exten-
Previously there was as long as it is, Nord Stream 2 cannot be put into sion that guarantees that it continues receiving
expectations that this operation.” the same annual revenues for many years to
might be an option. Katja Yafimava, a senior research fellow at the come.
Oxford Institute for Energy Studies (OIES), had
WHAT NEXT: suggested in a recent paper that it was most likely Market update
European gas prices are that Nord Stream 2 would be permitted to flow The announcement of the suspension sent gas
on the rise once more, gas on an ad hoc and time-limited basis before hub prices in Europe soaring, even though the
while storage volumes the certification process was completed, given pipeline’s certification was not expected to pro-
continue to deplete. current conditions on the European gas market. vide any extra supply for the continent until the
That paper was released before Germany’s end of winter.
energy regulator BNetzA on November 16 said “There is clearly considerable concern in
it would suspend the process until the pipe- the market about a cold winter and constrained
line’s holding company had created a German supplies from Russia,” Yafimava said. “Now with
subsidiary to manage the asset. Currently the Russia seemingly having filled its own storage,
operating company is a Swiss-based subsidiary in principle this should make more supply avail-
of Gazprom. able for export, even with rising Russian domes-
In another paper released after the reg- tic demand, but this has not yet been materially
ulator’s decision, Yafimava warned that the reflected in the prices.”
suspension would result in a delay of any- The European gas market is “hyper-sensitive”
thing between a couple of months and a half to any bad news, she said. “As the weather gets
a year. Given that the regulator was previously colder and demand rises it could be a bumpy
expected to take possibly until January to ride in the markets, unless Russia steps up sup-
reach a decision, and that decision will have plies now it has more production available for
to be reviewed by the European Commission, exports.”
a delay into the summer of 2022 was already Front-month contracts at the Dutch TTF
anticipated as being possible. have remained stubbornly above $1,000 per
By suspending the process, Yafimava noted 1,000 cubic metres over the past month, despite
that the regulator was abiding by both the letter subsiding somewhat on news of the spread of
and the spirit of EU law, in line with Germany’s the Omicron COVID strain. A key concern for
agreement with the US in July on letting the the market is the dwindling amount of gas that
project go ahead. The suspension “may go some Europe has in storage.
way towards pacifying the staunchest critics of As of December 6, storage facilities in the EU
Nord Stream 2 in Europe, especially Poland and and the UK were less than 67% full, even though
Ukraine, defusing the threat of US sanctions, there are several more months of the winter
and ultimately safeguarding the Nord Stream 2 heating period left to come. This marks a sev-
certification process and the start of operation,” en-year low for this time of winter, and, assum-
she said. But she added a warning that “this could ing an average rate of depletion during the rest of
come at a price of delayed flows and higher gas winter, Europe will only have 10% of its capacity
prices throughout winter 2021-2022.” remaining by the end of the heating period, rep-
The Biden administration has agreed to resenting a record low. Unusually cold weather
hold off on additional Nord Stream 2 sanctions, could result in even faster withdrawal. ™

P6 www. NEWSBASE .com Week 49 08•December•2021