NORD STREAM 2 RULES

PLATTS - 25 Aug 2021 - A German court has rejected an appeal by Nord Stream 2 AG to allow its pipeline to be exempt from the EU's Gas Directive rules.

"The 3rd Cartel Senate of the Dusseldorf Higher Regional Court, which is responsible for energy industry law proceedings, rejected Nord Stream 2 AG's complaint," the court said Aug. 25.

The rejection meaning the 55 Bcm/year Nord Stream 2 pipeline will have to follow regulations relating to third-party access rules, requirements on transparent tariffs, and the legal unbundling of transportation and production operations.

"This means that the Nord Stream 2 gas connection pipeline is subject to German regulation by the Federal Network Agency. Whether, when and under what conditions the pipeline will be put into operation is not the subject of the court's decision," the court said.

The first Nord Stream pipeline does have derogation from these rules, as the 55 Bcm/year twin pipeline system was built prior to the rules coming into force in May 2019.

Nord Stream 2 AG said the "final and irreversible investment decision had been made on the reporting date", but the court found that "the pipeline was not completely built and therefore not completed in accordance with the law".

The pipeline is nearing completion, and market participants have been expecting it to become operational before the end of 2021. However, the ruling may push back the commencement of commercial gas flows from Russia directly into Germany via the system.

During the week ended Aug. 20, Gazprom said it may flow as much as 5.6 Bcm of gas through the system before the beginning of 2022.

The court noted that "Nord Stream 2 AG has the opportunity to appeal against the decision of the Senate to the Federal Court of Justice".

Poland's PGNiG -- which has been opposed to Nord Stream 2 -- said it "welcomed today's judgment ... to reject the application."

PGNiG president Pawel Majewski said "it was unequivocally confirmed that Nord Stream 2 must operate in accordance with the rules resulting from the Third Energy Package".

Ukrainian energy minister Herman Haluschenko shared Poland's PGNiG president Pawel Majewski's statement on welcoming the German court's decision on Russian Nord Stream 2's appeal.

"I welcome the decision of Dusseldorf Higher Regional Court on rejecting the appeal of Nord Stream 2 AG. The German court has confirmed that EU standards apply to the pipeline," said Haluschenko in a ministry statement on Aug. 25, adding that "the court affirmed our legitimate expectations of upholding the [EU-mandated] Third Energy Package's standards to Nord Stream 2 [as well]."

Ukrainian gas transmission system operator GTSOU CEO Sergiy Makogon also welcomed Dusseldorf Higher Regional Court's verdict.

"This is a fair decision, which fully complies with the EU legislation. All participants of the European gas markets including consumers, suppliers, traders and transit operators must comply with the rules of the Third Energy Package - without any preferences or exceptions," said Makogon in an email sent to S&P Global Platts. "Universality of the common European framework benefits the consumer, fosters competition, and assures energy security for all."

"According to the EU directive, no gas production company can simultaneously be the owner of the pipeline through which the gas it produces is transported," Makogon explained in terms of the Third Energy Package in relation to Nord Stream 2.

"This means that the operator of Nord Stream 2 must be independent of Gazprom, and 50% of its capacity must be made available to other suppliers," said Makogon.

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