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Russia's Nord Stream 2 gas link will be delayed 'years': EC official

Brussels — Russia's 55 Bcm/year Nord Stream 2 gas link to Germany will miss its end-2019 start-up target, and may not be fully operational for "some years," a senior European Commission official said Thursday.

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The project is still waiting for a Danish permit, which could take at least another year, and the extra onshore transmission capacity needed to reach customers in southeast Europe would not be available by 2020, the EC's deputy director-general for energy, Klaus-Dieter Borchardt, told a Politico event in Brussels.

This delay means Russia's Gazprom will need to transit gas via Ukraine to meet its supply obligations to EU customers after 2019, and so it will have to discuss what those terms should be before the end of this year, Borchardt said.

"There will be some years of delay, for me that's clear, and that is our trump card" for talks with Russia on a new transit contract, he said.

"The problem is [Gazprom] might need this transit for two, three years -- I don't know, it depends -- and we want to have a longer period," he added.

Last month the CEO of Ukraine's Naftogaz, Andriy Kobolyev, said Gazprom could always book short-term entry and exit capacity, for example for a year, under Ukraine's current tariff and capacity booking terms and conditions.

Such short-term tariffs would be higher than those possible with a long-term contract, he said.

Kobolyev also said Gazprom would be able to honor its minimum contractual commitments to EU customers without Nord Stream 2 or Ukrainian gas transit from January 1, 2020 -- a different view from Borchardt's.

But if Gazprom did that, it could spike EU gas prices as customers would have to cover any extra gas they needed from storage and more expensive LNG imports, Kobolyev said.

The EC wants to hold another round of high-level transit talks with Russia and Ukraine in mid-May, ideally, or at least before the summer break, EC vice-president for energy union Maros Sefcovic said on Tuesday.

He said the EC wants Russia to sign a new 10-year transit contract with Ukraine, as part of EU efforts to support Ukraine as a key transit partner.

DANISH PERMIT KEY

It could take six to eight weeks from receiving the last permit needed from Denmark to fill in the Danish section of Nord Stream 2, based on average pipe lay rates, according to data from the project company building it.

The exact timing depends on the final route, the weather, and the number of pipe lay barge vessels involved.

That means it will be clear several weeks before the end of this year if Nord Stream 2 will be completed on time for an end-2019 start.

The Danish Energy Agency last month asked the Nord Stream 2 project company to consider a third route for the Danish section, including an environmental impact assessment. Nord Stream 2 said on Monday that is still evaluating this request.

It already applied for a permit for its original preferred route in Danish territorial waters south of the island of Bornholm in April 2017, as well as for an alternative route in the Danish EEZ northwest of Bornholm in August.

There is no legal deadline for the DEA to decide on a permit, so Nord Stream 2's start date remains uncertain.

--Siobhan Hall, siobhan.hall@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com