20 Jan 2021 | 14:25 UTC — London

FEATURE: Pressure mounts on Nord Stream 2 gas link as sanctions bite

Highlights

Growing reports of companies seen exiting project

Fortuna still holding off German port of Rostock

Germany setting up foundation to help complete link

London — The developer of the Nord Stream 2 gas pipeline from Russia to Germany has said it remained committed to completing the controversial link, despite growing reports of auxiliary service companies suspending participation in the project due to the threat of US sanctions.

In one of his last actions before the Biden administration takes office, US Secretary of State Mike Pompeo said on Jan. 19 that sanctions had been imposed on Russia-based KVT-RUS, owner of the pipe-laying vessel Fortuna, because of its role in the project.

And expanded sanctions that were approved by the US Senate on Jan. 1 now also target any company that provides services to vessels laying Nord Stream 2 and companies that carry out pipeline testing, inspection or certification activities.

Nord Stream 2 has declined to comment on the potential impact of US sanctions actions on specific companies, but the US measures are clearly taking their toll on the project despite widespread condemnation of the unilateral measures by the European Commission and Germany itself.

On Jan. 4, Norway-based quality assurance company DNV GL said it would no longer provide pipeline integrity verification services for the almost-complete pipeline due to the threat of US sanctions.

Nord Stream 2 had engaged DNV GL to verify the safety and technical integrity of the pipeline system once completed.

The Nord Stream 2 operating company could try to engage a different company to carry out the certification work, but it may need to apply for an updated Danish permit to change the certifying entity.

Numerous media reports in the past week have also pointed to other European service companies seen suspending participation.

These include Switzerland-based insurance company Zurich, Danish consultancy Ramboll and Germany-based engineer Bilfinger.

Zurich told S&P Global Platts it did not comment on any customer relationships, adding: "Zurich has a comprehensive compliance framework in place and is committed to fully comply with any applicable sanctions regulations."

Bilfinger, which was reported in the German Bild newspaper Jan. 19 as having withdrawn from work on the project, also declined to comment.

According to its website, Bilfinger is responsible for the engineering and commissioning of a heat generation plant at Nord Stream 2's landing point at Lubmin in northeastern Germany.

Ramboll, which could not be reached for comment, was engaged to carry out environmental assessments and deal with permit issues for Nord Stream 2, according to the pipeline company's website.

Nord Stream 2 also declined to comment on the rising number of reports of companies halting work due to US sanctions.

Climate foundation

The project has also come under even more scrutiny since Jan. 6 when the government of the northern German state of Mecklenburg-Western Pomerania said it would set up a climate fund that would contribute to completing Nord Stream 2.

A state-owned fund, it is thought, might be able to finance certain works related to Nord Stream 2 without being exposed to US sanctions, with government-owned entities thought to be exempt from certain measures.

It remains to be seen if any of the services that would normally have been carried out by auxiliary companies could be paid for by the foundation, but the regional government was unequivocal in its messaging.

"The foundation can contribute to the completion of the Nord Stream 2 pipeline through its own business operations," it said.

The state government said it would contribute Eur200,000 ($240,000) to the fund, while it said the Gazprom-owned Nord Stream 2 development company was to donate Eur20 million.

Opponents have slammed the foundation, saying it showed undue Russian influence over a regional German government.

Vessel activity

The impact on pipe-laying activity of the US move to impose sanctions on KVT-RUS, which could not be reached for comment, and the Fortuna vessel directly remains to be seen.

Work in Danish waters was scheduled to take place from Jan. 15 but, according to Platts cFlow, trade flow software, the Fortuna was not at the site of the unfinished pipeline and remained off the German port of Rostock.

It was due to be accompanied in the work by two service vessels -- the Baltic Explorer and the Murman -- according to a notice to sea-farers published by the Danish Maritime Authority in late December.

The movements of these vessels could also help assess when work might resume.

The Murman left the German port of Mukran on Jan. 16 and is now located at the site of where the Danish part of the pipe currently ends, according to Platts cFlow. That suggested the vessel was ready to resume work.

However, the Fortuna has been stationary off Rostock since it left the German port of Wismar on Jan. 14.

The Baltic Explorer, meanwhile, remained in the Swedish port of Ystad.

A Nord Stream 2 spokesman said Jan. 15 there would be "preparatory work and tests" to be carried out before actual pipe-laying would resume.

A little over 150 km of Nord Stream 2 remains to be laid in Danish and German waters, and the threat of US sanctions -- and the fact that Nord Stream 2 will alter the European gas landscape significantly once operational -- has led to major interest in the timetable for pipe-laying work.

Without Nord Stream 2, Gazprom will have to rely on the transit of gas via Ukraine in much larger volumes than it intended when it signed a five-year deal at the end of 2019.


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