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Russia to complete Nord Stream 2 this year – experts

Gas

21 May 2021 12:22

Foto: Shutterstock.com

Foto: Shutterstock.com

Bonn

21 May 2021 12:22

(Montel) Russia is likely to complete its Nord Stream 2 gas pipeline to Germany this year, observers told Montel on Friday, though the project could still face operational obstacles.

“Completion should be finalised this autumn,” said Maria Shagina, a researcher at the University of Zurich dedicated to eastern European energy affairs. 

“The [Biden] administration has made its peace with the idea that the completion is inevitable, but it will keep its leverage over the project's operation.”

Reports this week that the US would waive sanctions against the German operators of the 55bcm/year pipeline prompted speculation the connection may come online in time to relieve tight European gas markets ahead of next winter.   

“The waiver is an acknowledgement [Nord Stream 2] cannot be stopped without causing a major political and economic rift, which Washington clearly does not want,” said Jonathan Stern, a distinguished research fellow at the Oxford Institute for Energy Studies. 

Stern expected Russia’s Gazprom to complete the 1,230km pipeline pending the progress of pipelaying vessels working off Denmark and Germany. 

Legal challenges by environmental groups have delayed work in German waters, though only until June. A separate planning permit is set to allow work to proceed from next month on the last 30km of the connection in German territory.   

Danish maritime authorities in March indicated work on the 120km of the pipeline that stretched through their waters should be completed by September

The pipeline was supposed to have been completed last year. The threat of US sanctions delayed progress as European companies, including pipe-laying specialists, ended their involvement. Russian vessels Fortuna and Akademik Chersky are completing the final legs.  

Pipeline faces 3 obstacles
Yet the pipeline still faced three obstacles before it could deliver gas to Europe, observers said. 

These include US sanctions affecting certification companies that Russia cannot easily substitute, European Union competition rules and the outcome of September’s German elections in which a resurgent Green Party is demanding the project’s cancellation.  

A “limited operation” of the pipeline is the most likely outcome of any deal the US and German governments are able to reach, said Shagina.

Material flows next year

“Some volumes may be possible this year, but material commercial flows are likely in 2022,” said Kateryna Filippenko, principal analyst for European gas at consultancy Wood Mackenzie. “If it looks like start-up might slip beyond winter, Europe will be quite exposed to winter price spikes given the low levels of storage. We expect storage to fill to only 80% this year.”

Stern expects any gas flows able to reach Europe via the connection to alleviate a market that has emerged from a chilly winter and spring with heavily depleted inventories.

“Gazprom will have the 40bcm ship-or-pay commitment to Ukraine until 2024 and so it will almost certainly flow those volumes,” he told Montel. “Any [Nord Stream 2] volumes will be additional to what Gazprom could otherwise have delivered.”

The US opposes the pipeline on the grounds it would deprive Ukraine of its role as a vital Russian conduit, potentially dividing Europeans and threatening their security.

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