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Nord Stream 2 pipeline could be delayed until early 2021, Putin says

The Nord Stream 2 natural gas pipeline from Russia to Germany might not begin operations until the first quarter of 2021, Russian President Vladimir Putin said, signaling a possible further delay to the controversial project.

Speaking at a press conference alongside German Chancellor Angela Merkel in Moscow on Jan. 11, Putin said the pipeline project, which has a gas transportation capacity of 55 billion cubic meters, or Bcm, would still be completed without the need for international assistance.

"Completion of the construction [of Nord Stream 2] will be delayed by several months," Putin said at the press conference, which was posted to the Kremlin website.

"But I hope that by the end of this year, or in the first quarter of next year, work will be completed and the pipeline will begin to work," he said.

Previously, Russian Energy Minister Alexander Novak said the pipeline would be operational by the end of 2020.

Remaining kilometers

Just 160 kilometers of the total length of the 2,460-kilometer, two-string line is left to lay, after contractor Allseas halted pipe-laying work due to U.S. sanctions signed into law in mid-December 2019 that threatened measures against companies that are helping to build the project.

Russia is expected to fit out a pipe-laying vessel of its own, the Akademik Cherskiy, to lay the final kilometers of the pipeline.

"We will undoubtedly be able to complete it on our own, without bringing in foreign partners," Putin said. "The question is timing. This is the only question that comes up on this."

Nord Stream 2 — which has been criticized by the European Commission, the U.S. and countries in Eastern Europe as a gas transportation solution that focuses too much European gas import capacity on one route and one source — will double the Russia-Germany subsea gas export corridor to 110 Bcm/year.

Ukraine transit

Nord Stream 2 was originally expected to come online by the end of 2019 to coincide with the end of PJSC Gazprom's 10-year gas transit agreement with Ukraine's Naftogaz. If authorities in Denmark had not waited until the end of October 2019 to award a permit for construction in its waters, the pipeline would likely already be completed.

That would have given Moscow considerably more leverage in its negotiations with Ukraine over a new gas transit deal too. But with Nord Stream 2 delayed, Russia agreed to a new five-year gas transit deal with Ukraine late in December 2019.

Under the deal, Gazprom has agreed to transit 65 Bcm of Russian gas via Ukraine to Europe this year.

"Postponing the commissioning of Nord Stream 2 is unlikely to affect Gazprom's exports in 2020, given that the company signed a new gas transit contract with Ukraine," analysts at VTB Capital said Jan. 13.

"We calculate that Gazprom might have to supply some 75 Bcm through Ukraine in 2020 in the absence of the Nord Stream 2 pipeline," they said.

A Russian expert has said the gas policies of Putin indicate that the country will increasingly focus on competing for world LNG market share and minimizing the role of Gazprom.

Stuart Elliott and Rosemary Griffin are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.