European natural gas prices surged this week after the German regulator Bundesnetzagentur suspended the certification process for the Nord Stream 2 gas pipeline, according to a bne IntelliNews report on Nov. 16, citing the regulator.
According to the report, citing a tweet by Bundesnetzagentur, the regulator decided to suspend the process until the Nord Stream 2 holding company has reorganized its legal structure to conform with German law. This will involve the transfer of the assets and people to a subsidiary.
Nord Stream 2 AG is owned by Zug, Switzerland-based Gazprom International Projects LLC, a subsidiary of Russia’s state-run gas producer Gazprom PJSC.
The regulator said it would resume work once the changes were made, adding that it would probably take the four months mandated to consider the application.
Gazprom was said to be planning to set up a fully-owned German subsidiary in a bid to secure approval from the German regulator, according to a Bloomberg report on Nov. 17, citing a person familiar with the discussions.
According to the source cited by the report, the new company, which will operate the German section of the Baltic Sea link, will be 100 percent owned by Nord Stream AG. The move is an attempt to meet European Union (E.U.) rules that require natural gas producers to be legally separate from entities transporting the gas, and have the operator registered in the E.U.
An initial decision by the German regulator is expected by Jan 8 (GM Oct. 29, p. 1). The regulator’s decision is only a provisional one, after which it is passed to the European Commission (E.C.) for comment.
A gas market analyst at Norway’s Rystad Energy AS, Zongqiang Luo, cited by Bloomberg, believes the certification can only be completed around April of next year at the earliest. The E.C. evaluation potentially could last two months after the German certification is completed, with “ample potential for an extension through to August,” said Luo. Furthermore, the Commission has no obligation to uphold the recommendation.
The prospect of the Nord Stream pipeline not coming online this Northern Hemisphere winter was weighing heavily on European gas markets at mid-week
Benchmark European gas prices – the Dutch TTF front month (currently December) – rose 10 percent on the initial news of the pipeline certification delay, hitting €87.69 a megawatt hour as of 12:20 pm (GMT) on Nov. 16. By early afternoon the next day it had reached €100.495, up nearly 7 percent on the day. However, by 4:49 pm (GMT) on Nov. 18, the front-month contract had eased back a little, to €92.7 a megawatt hour.
Adding to Europe’s gas supply woes, Belarusian President Alexander Lukashenko late last week threatened to shut down a key pipeline carrying Russian gas to the E.U. if Poland closes the border as thousands of migrants seek to cross into the European bloc (GM Nov. 12, p. 1).
About 20 percent of Russian gas flowing to the European bloc crossed Belarusian territory this year, mainly via the Yamal-Europe pipeline, according to a Bloomberg report.
However, Russian President Vladimir Putin said in an interview on Russian television this past weekend that he would talk to Lukashenko about gas flows to Europe, and that any interruption in gas supplies would threaten the countries’ relationship as transit partners, according to a Bloomberg report.
Gas pipelines crossing Belarus are owned by Gazprom, but according to the report, Putin said theoretically Lukashenko, as president of a transit country, can probably give instructions to cut supplies to Europe – although this would be a violation of the transit contract.
Gas shipments from Gazprom, which is Europe’s biggest supplier, have recovered from their low level at the start of November, but are far below last year’s levels. Late last month, Putin ordered Gazprom to start refilling European gas storage facilities in November (GM Oct. 29, p. 1).
Early this week, the E.U. approved new sanctions powers on the Belarus regime over the migrant crisis. The powers enable the E.U. to target individuals and entities such as airlines and travel agencies that are involved in attempts to facilitate illegal crossing of migrants into the European bloc.
Late this week, there were signs Belarus was moving to de-escalate the migrant crisis on the Belarus/Polish border, providing shelter for some of the migrants stuck at the border and apparently pushing for a diplomatic solution via Germany’s outgoing Chancellor Angela Merkel.