Russia may only be allowed to use half of the capacity of its Nord Stream 2 undersea pipeline to Germany, a German regional court ruled on Aug. 25.
Under European regulations, half of the pipeline’s capacity must be auctioned to third parties to be allowed to operate in Europe, the court ruled, according to Bloomberg.
There are no third-party gas exporters in Russia, where state company Gazprom is a monopoly.
This ruling would only allow Gazprom to send 27.5 billion cubic meters through the pipeline per year. The maximum annual capacity is 55 billion cubic meters.
The ruling may delay the start of Nord Stream 2 but it won’t stop the project. As of Aug. 20, only 15 kilometers of pipe were left to lay, according to Russia’s President Vladimir Putin.
Yuriy Vitrenko, the CEO of Ukraine’s state-owned gas distributor Naftogaz, and Sergiy Makogon, the head of Ukraine’s gas transmission operator, praised the court’s decision on social media on Aug. 25.
“And now our main battlefield will be just around applying these European rules to all pipelines that combine Russia and Europe,” Vitrenko wrote on Facebook.
“This is exactly what the Ukrainian side insists on in the negotiations on Nord Stream 2,” Makogon added, followed by a tongue-in-cheek comment saying Ukraine’s gas transmission system could manage Nord Stream 2 as an independent operator.
Oleksandr Kharchenko, managing director of the Energy Industry Research Center, believes the German court ruling is not final.
“It is not a done deal and a lot of things must be done further, but it is a really positive signal for Eastern European countries,” he told the Kyiv Post on Aug. 25.
Nord Stream 2 must now be certified as a system operator independent from Gazprom under the EU regulation to ensure fair competition in the market, according to European laws.
Gazprom and Nord Stream 2 could be fined if they fail to comply with the EU regulations once the gas starts flowing.
When completed, Nord Stream 2 will allow Russia to bypass Ukraine while transporting gas to Europe through Germany, depriving Ukraine of at least $1.5 billion in transit fees per year.
The pipeline became a fait accompli in July 2021, when the U.S. and Germany put out a joint statement condoning its completion, angering Ukraine, which sees the pipeline as Russia’s economic weapon.
On Aug. 19, Gazprom announced that it intends to transport 5.6 billion cubic meters of gas to Germany by the end of 2021, which means 2.8 billion cubic meters must come from other suppliers.
Russia and Ukraine currently have a five-year agreement through 2024 that guarantees Russia will transport no less than 40 billion cubic meters through Ukraine each year and must pay Ukraine at least $7.2 billion until 2024.
OPAL precedent
Gazprom already had to reduce some of its pipelines’ capacity in the past due to EU regulations, Kharchenko said.
The 470-kilometers OPAL pipeline, which links Nord Stream 1 with onshore European gas grids, runs from northern Germany to the Czech Republic and has an annual capacity of 36 billion cubic meters of natural gas.
OPAL is jointly owned by Gazprom and Germany’s Wintershall Dea, which makes Gazprom a producer and owner of the pipeline.
Since the OPAL pipeline started operating in 2011, Gazprom has been unable to use more than half of its capacity due to a cap imposed by the European Commission.
However, Nord Stream 1 has been exempted from unbundling rules because it was classified as a connection between two other pipelines rather than a gas supply pipeline in its own right.
Some experts believe the EU regulations won’t hurt Nord Stream 2.
“There are chances to postpone it, but I’m not sure about its cancellation,” energy expert Andrian Prokip told the Kyiv Post on Aug. 25.
