A court in Germany has rejected an appeal from the Swiss-registered operator of Russia's Nord Stream 2 pipeline subsea gas export pipeline, with the implication that the system may be kept to half of its capacity.
The Higher Regional Court in Dusseldorf ruled to support an earlier decision by the German Federal Network Agency, saying that Nord Stream 2 had missed a May 2019 deadline to become exempt from amended European gas market regulations, known as the Third Energy Package.
Nord Stream 2 had tried to appeal the agency’s decision by arguing to the court that the “pipeline was completed from the perspective of economic functionality” by this date when the amended gas rules went into effect.
“The company had made investments worth billions of euros long before the European Commission announced its plan to amend the EU gas regulations," the operator said.
The gas regulations cover incoming gas import pipelines from countries outside Europe into the framework of these regulations, the operator said.
Failing to secure the exemption means that Nord Stream 2 will operate at 50% of its annual capacity of 55 billion cubic metres of gas once its two lines come into service sometime later this year.
The restriction may only be lifted if Russian energy giant Gazprom’s shareholding in the pipeline project falls below 50%.
Gazprom has laid out plans to reduce its 100% stake in Nord Stream 2 by converting previously received loans from five European gas companies into minority shareholdings in the pipeline project.
However, Gazprom still expects to keep the controlling interest in the project.
Alternatively, Russian laws would have to be amended to remove Gazprom’s monopoly over pipeline gas exports from the country, thus permitting independent gas producers in Russia to fill the other half of the remaining spare pipeline capacity.
The court’s ruling was welcomed by Poland’s state oil and gas producer PGNiG, which had joined court proceedings in Germany to present its arguments against Nord Stream 2’s requests.
According to PGNiG, it is currently working to object to another of Nord Stream 2’s application to German authorities, which had requested European certification under the preferential Independent Transmission Operator model.
Poland has already seen a major reduction in Russian gas pipeline transit volumes to Germany this year via the Yamal Pipeline as it has no long-term transit agreement with the Russian monopoly.
The court’s ruling also provides a higher chance for Ukraine to bring Gazprom to the negotiating table to discuss the extension of Russian gas transit commitments beyond 2024 when the current transportation agreement between them expires, according to industry analysts in Moscow.
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