The chance that natural gas will reach Western Europe via the Russian Nord Stream 2 pipeline this winter is minimal. On Tuesday, the German regulator Bundesnetzagentur decided not to give the green light for the time being for the commissioning of the internationally controversial gas pipeline. The approval process will be suspended until Gazprom, owner of Nord Stream 2, has formed a subsidiary under German law. Once that’s done and the Bundesnetzagentur has no further objections, the European Commission still has to give its approval, which can take up to three months.
The blockage comes at a time when gas prices were already rising for a few days in the run-up to winter. After the announcement from the Bonn agency, the price rose almost 10 percent compared to Monday. The rate exceeded 88 euros per megawatt hour for contracts where the gas will be supplied in the next month.
Crucial
Rapid deployment of Nord Stream 2 may have depressed gas prices. Russian President Vladimir Putin previously offered to increase production for Western Europe, but indicated that this transport would have to take place via Nord Stream 2. This is not strictly necessary because existing pipelines have overcapacity. Nord Stream 2 can supply 55 billion cubic meters of gas on an annual basis. Dutch households and companies jointly use almost 40 billion cubic meters per year.
Gazprom, operator of the 1,230 kilometer pipeline from Russia to Germany, is in charge through its subsidiary NordStream AG in Zug, Switzerland. That company must now first set up a German company, which will then be responsible for the management of the German part.
The Bundesnetzagentur assumes that Gazprom itself can meet all EU requirements without having to divest. But according to the German business newspaper Handelsblatt there is a chance that the European Commission will interpret the rules more strictly. Crucial in this is that under EU rules the management of pipeline and gas supply may not be carried out by the same company. So far, this unbundling is believed to not necessarily mean Gazprom Nord must sell Stream 2, but clarity may not come until later from a European judge. The construction of Nord Stream 2 has been under political fire for years. For example, the US believes that Europe is becoming too dependent on Russia for its energy supply. At the same time, Ukraine fears that it will lose income because that country’s transit function threatens to disappear, but Germany has now compensated the country.
The gas price of more than 88 euros is not as high – above 100 euros – as at the beginning of October. The comparison with 2020 is telling: in November 14 euros per megawatt hour was paid.
Due to the high gas price, the energy bill for many households will be considerably higher in the coming months. According to Vattenfall, one of the three major energy suppliers in the Netherlands, this is an increase of approximately 25 euros per month, including the tax reduction.
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