Preloader

Russia completes Nord Stream 2 construction, gas flows yet to start

Reading Time: 3 minutes

MOSCOW, Sept 10 (Reuters) – Gazprom said on Friday it had finished construction of the Nord Stream 2 subsea pipeline to Germany, which could allow Russia to double lucrative gas exports to Europe via the Baltic Sea while bypassing and cutting off a source of income for political foe Ukraine.

Although German regulators have yet to clear gas flows, completion of the construction stage means Russia has boosted its energy exporting capabilities towards Europe both from the north in the Baltic Sea and from the south in the Black Sea, where it operates the TurkStream pipeline.

“The head of the management board, Alexei Miller, told the morning meeting at Gazprom that the construction of Nord Stream 2 was fully completed today in the morning at 0845 Moscow time,” Gazprom said.

Gazprom started construction of the 1,200-km long Nord Stream 2 pipeline from Russia to Germany five years ago. Progress of the $11 billion project stalled at the end of 2019 when then U.S. president Donald Trump imposed sanctions.

Construction restarted around a year later with the engagement of Russia’s own vessels.

The route, jointly with the existing Nord Stream pipeline, will double annual export capacity to 110 billion cubic metres, around half of Russia’s total gas exports to Europe a year.

The project has drawn criticism from the United States and Ukraine among others. Washington says it will increase Europe’s reliance on Russian energy supplies.

The United States is seeking to boost sales of sea-borne liquefied natural gas to Europe, and has touted its super-chilled gas exports as “molecules of freedom”.

Gazprom is Europe’s largest supplier of natural gas, accounting for more than a third of the region’s gas market.

On Thursday, Russia said pumping commercial gas supplies via Nord Stream 2 would not start until a German regulator gives the green light.

The Swiss-based Nord Stream 2 AG consortium said in a statement it has completed welding the pipeline with help from Russian vessel Fortuna.

“The required pre-commissioning activities will be carried out with the goal to put the pipeline into operation before the end of this year,” it said.

NO CLEARANCE YET

Gazprom’s announcement on the construction completion was met with scepticism in Kyiv, which risks losing billions of dollars in gas transit fees if Moscow halts gas supplies via Ukraine.

Russia’s five-year gas transit deal with Ukraine expires after 2024. Russian President Vladimir Putin has said Ukraine must show good will if it wants to continue.

“Constructed doesn’t mean to put it on stream. And this won’t happen until the pipeline is certified,” Olha Belkova, a manager at Ukraine’s gas pipelines operator, said in emailed comments to Reuters.

Carlos Torres Diaz, head of Power and Gas Markets at analysis firm Rystad Energy, said it takes time for gas to flow via pipes of Nord Stream 2.

“There hasn’t really been a reaction from the market so far so I guess this just also confirms expectations that no commercial deliveries are expected in the short term,” he said.

The Kremlin said “everyone” was interested in Nord Stream 2 obtaining clearance.

Before Germany’s energy regulator approves Nord Stream 2, it must comply with European unbundling rules that require pipelines owners to be different from suppliers of gas flowing in them to ensure fair competition.

Gazprom’s Western partners are Germany’s Uniper, BASF’s Wintershall Dea, Anglo-Dutch oil major Shell, Austria’s OMV and French energy company Engie.

The German regulator, the Bundesnetzagentur, said it does not know how long it will take to reach a decision on certification but it can penalise the consortium if it starts operations without approval. (Reporting by Vladimir Soldatkin, Oksana Kobzeva in Moscow, Pavel Polityuk in Kyiv, Vera Eckert in Frankfurt and Nora Buli in Oslo; editing by Jason Neely, David Evans, Elaine Hardcastle and David Gregorio)