Nord Stream 2 Construction Wraps Up, but Politics Complicate Commissioning

Russia’s Nord Stream 2 pipeline is now complete, although gas will not be flowing until regulators issue various approvals, expected by the end of the year.

Nord Stream 2 -laying of the last pipe
On 6 September 2021, specialists on the Russian pipe-laying vessel Fortuna celebrate after welding the last pipe of the Nord Stream 2 Pipeline—pipe number 200,858, which was later lowered onto the seabed in German waters.
Credit: Axel Schmidt/Nord Stream 2.

Russia’s Nord Stream has formally completed construction of the second of the project’s twin gas pipelines—Nord Stream 2—although the new system will not be delivering any gas to Europe until commissioning is complete and German regulators grant the necessary approvals.

When that might happen might still depend on the continued geopolitical maneuvering between Russia, the United States, Germany, and Ukraine on issues that have less to do with the economics of Europe’s gas market and more to do with politics.

Alexei Miller, head of Gazprom’s management board, announced at a company meeting on 10 September that construction of the $11 billion Nord Stream 2 had been completed at 8:45 a.m. when the last individual sections of the 1,230-km pipeline were finally joined.

The Nord Stream pipeline originates in Vyborg near the Russian/Finish border while Nord Stream 2 enters the Baltic Sea at Ust-Luga near the Estonian border. The two lines meet in Germany at Greifswald.
Credit: Gazprom.

With the second 55 billion m3 capacity line in place, Russia can now ship twice as much gas to Germany via the Baltic Sea as it did with only the first Nord Stream line (also 55 billion m3). It will also be able to supply gas to Europe without having to pass through Ukraine’s Soviet-era gas-export system, depriving Ukraine and possibly other Eastern European nations of transit income.

Estimates suggest Ukraine could lose about $3 billion a year in transit fees. Among its European allies in the struggle to stop Nord Stream 2 has been Poland, which will not be renewing its current contract for Russian gas supplies and instead is building its liquefied natural gas import capacity, much of it purchased from the US.

Gas could flow through Nord Stream 2 as early as October, according to the German news outlet DW.com. The Swiss-based Nord Stream 2 consortium, however, has been more vague, issuing a statement that “precommissioning” would be carried out with intent to begin operations “before the end of this year.”

Norway’s provider of pipeline safety and technical verification services, DNV GL, withdrew from the Nord Stream 2 project in January as the US Senate moved to widen sanctions.

German regulator, the Bundesnetzagentur, did not say how long its approvals process might take, though European news outlets speculate a decision could happen within 4 months. Among other things, Nord Stream 2 must honor European unbundling rules requiring pipeline owners to be different from the suppliers of gas fed into the pipeline.

Gazprom began construction of the Nord Stream 2 pipeline from Russia to Germany 5 years ago, but the project stalled in 2019 when the Trump administration imposed sanctions as the project neared completion, a negotiating tactic in part to pressure Germany to invest in infrastructure to accept more US liquified natural gas deliveries.

Gazprom’s partners in Nord Stream 2 are Germany’s Uniper, BASF’s Wintershall Dea, Royal Dutch Shell, Austria’s OMV, and French energy company Engie.

In May, US President Joe Biden issued waivers that allowed construction to continue, a move interpreted as Washington’s attempt to improve its relationship with Berlin, which has argued that the project is a European business matter.

Russia’s 5-year gas-transit deal with Ukraine expires after 2024. Kyiv has lobbied lawmakers in Washington to insure its transit fees are protected while also pressing the argument that Russia’s dominant role as a supplier of energy to Europe threatens European security.

Biden met with German Chancellor Angela Merkel in Washington on 15 July, and, on 1 September, the US president hosted Ukraine President Volodymyr Zelensky, who had welcomed the German chancellor to Kyiv only a week earlier.

Among terms of the current US/German deal, Ukraine will get $50 million in green energy technology credits and a guarantee of repayment for gas-transit fees it will lose by being bypassed by the pipeline through 2024.