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German part of Russia's Nord Stream 2 built, legal issues loom: NS2

Brussels — The company building Russia's 55 Bcm/year Nord Stream 2 gas link has finished the German section, and may use that to argue for a waiver from new EU rules for offshore links, a Nord Stream 2 representative said Tuesday.

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The EU has changed its gas directive so that national governments must apply EU internal energy market rules, including regulated tariffs, to the EU section of offshore gas links by February 24, 2020.

The directive allows governments, however, to grant waivers from the additional requirements to offshore gas links completed before May 23, when it enters into force and becomes fixed in EU law.

"The section in the German territorial waters is effectively completed, except for some minor works," Nord Stream 2's EU representative Sebastian Sass said.

The revised gas directive's scope is limited to the territorial waters of the landing EU country, so "it is certainly an argument" that as the German section is already built Nord Stream 2 is eligible for a waiver as a "completed" pipeline, Sass said.

National governments can grant such waivers for up to 20 years, or more if renewed, and have until May 24, 2020 to do so.

Nord Stream 2 has asked the European Commission to confirm that the project will be eligible for such a waiver by May 13.

If the EC does not confirm this, Nord Stream 2 may decide to make a formal complaint under the Energy Charter Treaty, which is intended to protect international investors, Sass said.

He would not comment in detail on what the implications would be for Nord Stream 2's operating conditions if it is not eligible for the waiver.

They depend on what precise words the German government will use when it transposes the directive into national law, he said.

TRANSIT BATTLE WITH UKRAINE

Nord Stream 2 is planned online by the end of this year, before Russia's transit contract with Ukraine expires.

The EC and Ukraine, however, want Russia to sign a new, long-term contract to keep the Ukrainian route open and viable.

Forcing a part of Nord Stream 2 to submit to regulated tariffs would reveal information about its costs that could help Ukraine offer competitive tariffs for its rival transit route.

Russia has said it would probably send less than 20 Bcm/year through Ukraine once Nord Stream 2 and its 31.5 Bcm/year Turk Stream routes to Europe become available.

Turk Stream is expected online by the end of this year, but first gas through Nord Stream 2 may be delayed as it is waiting for a permit from Denmark for the Danish section, and there is no specific timeline for granting it.

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

-- Edited by James Leech, newsdesk@spglobal.com