GERMAN ENERGY, Regulator Says ‘NS2’ Papers Complete!


German Energy
NS2 At Lubmin Entrance

FRANKFURT: As Russian natural gas transit to Germany via the just completed Nord Stream 2 pipeline heats up on every passing day, the bloc pushes for EU regulatory certification which must be met by the pipeline’s operator before it becomes operational. In view of this, the German energy regulator has made it clear on Monday that the agency has received all the necessary documents needed for an application for the operation license from the pipeline operator.

The project which a number of critics classified as controversial have drawn criticism from Ukraine, the U.S., and among others, notably the aforementioned which for decades enjoy the bulk of Russian gas transit fees is suddenly faced with a lot less gas flows via the traditional transit channel due to diplomatic decoupling and energy war. However, Washington says the NS2 will increase Europe’s reliance on Russian energy supplies. Yet, series of U.S. sanctions did delay the project, one of which saw Swiss Allseas abandoning the project in 2019 due to potential U.S. sanctions.

Meanwhile, the German regulatory body – the Bundesnetzagentur, stated on its website, which was updated on September 13, that the four-month period to certify the Nord Stream 2 AG group started on Sept. 8.

Noting that after the regulator completes its inspection, the authority will send a draft decision to the European Commission, it said.

This was based on the fact that the Nord Stream 2 AG applied in late June for the certification with the BNetzA, which has over the weeks been reviewing the subject application since then to ensure it was complete. The regulatory body clarified on its website in its September 13 update that,

“Nord Stream 2 AG has applied for certification as an independent transmission operator under sections 10 to 10e of the Energy Industry Act and has now submitted all necessary documents”.

“The time period started on Sept. 8. The Bundesnetzagentur has four months from this date to produce a draft decision and transmit it to the European Commission”.

Commercial flows and concerns

As the timetable to begin the commercial flows of the subject natural gas via the 55 billion cubic meters per year pipeline draw closer, it became necessary that this should be noted as one of the key factors that are currently affecting the European gas market, with benchmark prices have broken through the Eur58/MWh mark on continued supply concerns.

Nonetheless, the Russian energy giant Gazprom has remained resilient over its determination as efforts made by the company point at piping 5.6 Bcm of natural gas via the Nord Stream 2 within 2021. But there are concerns regarding the time frame, more significantly is the time it will take European Commission to give its opinion to the draft decision published by BNetzA before it’s returned to the German regulator for a final decision, a process analyst says could take up to four months.

“NS2 [needed] to submit a request for certification to the German regulator before it [could] start its operations”, a spokesperson for the European Commission per S&P Global Platts.

“The Bundesnetzagentur would then be required to submit to the Commission its draft certification decision, requesting the Commission’s opinion as prescribed by the amended Gas Directive,” the spokesperson said.

“When the Commission receives that submission, it has two months to react, Extendable by another two months under certain conditions. BNetzA would have to take utmost account of the Commission opinion” they added.

It’s worth noting that Russian Gazprom had earlier planned its first flows at the start of October, which could prove difficult based on required BNetzA certification and approval. Yet, one may argue if Gazprom could start piping while the case is still pending, but should the energy giant double down in this trajectory, it will be subject to penalties, a BNetzA spokesperson said.

Further on this that could make the process more rigorous since technical certification is also required is the withdrawal of certification company DNV due to the threat of U.S sanctions.

Market impact

The Wholesale European gas markets recorded one of its biggest upward-opening moves ever seen based on its response to the news while building upon already record-high prices for winter-season delivery.

It was reported that, by 0750 GMT, the British NBP front-winter contract was changing hands at 155 pence/therm, a notable increase of 6.50 p/th from its Platts Market on Close assessment on Sept. 10. Equally, Spot prices also received considerable support based on reports.

Nonetheless, the news of Nord Stream 2’s physical completion on September 10 pressured the next two seasons, Summer 2022 and Winter 2022 respectively, reflecting the market interpretation of this statement. While in a nutshell, it all seems to demonstrate a market consensus that the Russian NS2 will most likely have a little impact this winter.

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