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2021-11-17 13:20:00

NORD STREAM 2 CERTIFICATION SUSPENDED

NORD STREAM 2 CERTIFICATION SUSPENDED

PLATTS - 16 Nov 2021 - Germany's energy regulator, the Bundesnetzagentur, has suspended the procedure to certify Nord Stream 2 AG as an independent transmission operator, it said Nov. 16, bringing new uncertainty over when the controversial gas pipeline will begin operations. 

The regulator said a new subsidiary of Nord Stream 2 AG announced by the operator would need to submit a new application for certification.

"Following a thorough examination of the documentation, the Bundesnetzagentur 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," it said in a statement.

Gazprom-owned Nord Stream 2 AG is based in Zug, Switzerland.

The regulator said the company had decided not to transform its existing legal form, but instead to found a subsidiary under German law "solely to govern the German part of the pipeline".

"This subsidiary is to become the owner and operator of the German part of the pipeline," it said. "The subsidiary must then fulfill the requirements of an independent transmission operator as set out in the German Energy Industry Act."

The regulator said the certification procedure would remain suspended "until the main assets and human resources have been transferred to the subsidiary and the Bundesnetzagentur is able to check whether the documentation resubmitted by the subsidiary, as the new applicant, is complete".

New subsidiary

A spokesperson for Nord Stream 2 AG said the regulator had temporarily suspended the process due to the foundation of the Nord Stream 2 subsidiary company. "Our company undertakes this step to ensure compliance with applicable rules and regulations," the spokesperson said.

"We are not in a position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations."

The spokesperson declined to say whether the new Germany subsidiary had already been created or whether it was in the process of being formed.

Nord Stream 2 AG applied in June for approval as an independent gas transmission network operator, but the Bundesnetzagentur only deemed the application as complete in early September.

The regulator has up to four months from Sept. 8 to produce a draft decision on certification, meaning a first decision might not be published before January.

The Bundesnetzagentur said Nov. 16 that once the new requirements had been fulfilled by Nord Stream 2 AG and the new application by its subsidiary is complete, it would be able to "resume its examination in the remainder of the four-month period set out in law, produce a draft decision and deliver it to the European Commission for an opinion, as provided for in the EU legislation on the internal market".

The regulator said the German energy ministry and the European Commission were informed in advance of its decision. "The parties involved in the proceedings were notified of the decision, which was then published," it said.

According to S&P Global Platts Analytics, with the Nord Stream 2 certification process now suspended, it was unlikely that flows will be seen before 2022.

"Russian pipeline imports remain low and the month-ahead capacity auction results on Nov. 15 show how resistant Gazprom are to booking additional capacity through Ukraine and Belarus/Poland," James Huckstepp at Platts Analytics said.

"Platts Analytics are further reducing assumed Russian imports over the coming months, with our TTF forecast likely to remain bullish to market," Huckstepp said.

Ukraine reaction

Responding to the suspension of the process, Yuriy Vitrenko, the CEO of Ukraine's state-owned Naftogaz Ukrayiny, said on Twitter that the move to create a German subsidiary made a "mockery" of European rules and urged the US to impose sanctions against the new entity.

Poland's PGNiG, however, welcomed the move. "The suspension of the Nord Stream 2 certification process is a good sign for Poland and Europe," PGNiG CEO Pawel Majewski said in a tweet.

"EU law and the principle of energy solidarity must be scrupulously observed," Majewski said.

The surprise suspension of the process came just a day after the regulator said it had approved Naftogaz and grid operator GTSOU to take part in the certification process.

GTSOU said it expected the certification process to take "several" months.

GTSOU head Sergiy Makogon said the company would continue to oppose the Nord Stream 2 project. "When we learned that Nord Stream 2 AG had applied for certification as an independent gas transmission operator, we could not stand idly by," Makogon said.

"We knew that it was our responsibility to intervene in this process with BNetzA, to state our earnest objections, and to present our legal arguments."

Olga Bielkova, GTSOU's director of corporate affairs, said: "GTSOU has a direct stake in the Nord Stream 2 AG certification process. This is what motivated us to apply in the first place. And it is encouraging that this has now been duly recognized by the Bundesnetzagentur."

"We expect the process to take several months. And what I can promise with confidence is that GTSOU will resolutely defend Ukraine's interests within this legal process," Bielkova said.

Russia has said that Nord Stream 2 is ready to begin commercial operations pending regulatory approval and that flows through the pipeline would help ease European gas prices which remain at sustained highs on winter supply concerns.

According to S&P Global Platts price assessments, the TTF day-ahead contract hit an all-time high on Oct. 5 of Eur116.10/MWh and has remained volatile through the remainder of October and into November.

The TTF day-ahead price was assessed at Eur79.55/MWh on Nov. 15, up 472% from the same assessment a year ago.

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Tags: NORD, STREAM, GAS, GAZPROM, RUSSIA, EUROPE