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Russia's Gazprom to use Nord Stream 2 system capacity for domestic market

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Russia's Gazprom to use Nord Stream 2 system capacity for domestic market

Highlights

Would only commission one line if Germany reverses opposition

Second line would only be available from 2028

Nord Stream 2 certification process currently suspended

  • Author
  • Stuart Elliott
  • Editor
  • Agamoni Ghosh
  • Commodity
  • Natural Gas

Russia's Gazprom said May 5 it would use the onshore capacity in Russia designed to flow gas into the Nord Stream 2 system to Germany for the domestic market.

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Nord Stream 2 has never started commercial operations despite construction work on the two-string 55 Bcm/year pipeline having been completed in September last year.

Germany on Feb. 22 suspended the certification process in order to review its position toward the project in terms of supply security and US President Joe Biden followed up by imposing sanctions against operator Nord Stream 2 AG on Feb. 23.

"Due to the fact that the Nord Stream 2 offshore gas pipeline is currently not in use, and taking into account the implementation of gas supply for consumers in northwest Russia, Gazprom has decided to use the excess onshore gas transmission capacity of Nord Stream 2 for the development of gas supply to the regions of northwest Russia," Gazprom said in a statement.

While Germany has effectively cancelled the project, there remains the possibility that the pipeline could start operations at some point in the future.

However, Gazprom said only half of its capacity would be available in the event the pipeline was allowed to operate.

"If the German side decides to commission Nord Stream 2, only one line of the pipeline with 100% load can be put into operation," it said.

"The commissioning of the second offshore string of Nord Stream 2 may not begin until 2028," it said.

Price strength

Uncertainty over Nord Stream 2 contributed to the rise in European gas prices toward the end of 2021, and Berlin's new opposition to the pipeline also helped push prices up further in February this year.

European gas prices remain at sustained highs on Russia supply concerns, with the TTF month-ahead price having reached a record high of Eur212.15/MWh on March 8, according to Platts price assessments by S&P Global Commodity Insights.

The contract was last assessed on May 4 at Eur104.25/MWh, still 350% higher year on year.

Billed by Moscow as offering much-needed additional gas supply infrastructure to Europe, the 55 Bcm/year Nord Stream 2 pipeline was opposed by Ukraine, the US and most of eastern Europe from the beginning.

They argued it would mean increased European dependence on one route of gas under the control of the Kremlin -- Nord Stream 2 doubles the capacity of the Baltic Sea route to 110 Bcm/year on top of the existing first Nord Stream system.