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Nord Stream 2 natural gas link concedes possible start-up delay on Danish permit law

Highlights

A senior official from the Nord Stream 2 operating company conceded Wednesday that the controversial gas pipeline faced a likely delay if Denmark applies new legislation that would take into account its foreign policy objectives when approving the routing of energy infrastructure through its waters.

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Nord Stream 2 CFO Paul Corcoran, speaking at a gas conference in Milan, said the operator of the planned 55 Bcm/year line from Russia to Germany would have to be re-routed outside Denmark's territorial waters if the new legislation gets parliamentary approval and is then applied.

"We might have to re-route [and] that would cost more more and probably cause a delay," Corcoran said.

"We are looking into options -- looking at the new route and any environmental work in case we have to submit a new [permitting] application," he said.



Nord Stream 2 is planned to flow first gas by the end of 2019, and any delay to the timetable would strengthen Ukraine's hand in negotiating a new Russian gas transit contract for when the current deal expires at the end of 2019.

The Danish parliament is currently considering the new law that would allow the government to take foreign policy and security considerations into account when giving approvals for energy infrastructure on its territory.

Given some European opposition to Nord Stream 2 -- which it is claimed increases Europe's dependence on one route and one source of gas supply -- the Danish parliament is expected to pass the legislation as it has broad cross-party support.

"If the foreign minister then applies the law and blocks the permit in Denmark's territorial waters, then we would have to look at our options, with re-routing one option," Corcoran said.

The original 55 Bcm/year Nord Stream pipeline is routed through Danish territorial waters, and Corcoran called it "bizarre" that Copenhagen was now looking to force a re-route into its Exclusive Economic Zone (EEZ) instead.

"Nord Stream 1 only went into the Danish territorial waters because it was the preference of the Danes not to go through the EEZ," he said.

Despite the frustration caused by the possible delay to Nord Stream 2's timetable, Corcoran said implementation of the project was moving forward.

"We expect the first permit in Germany in December and the last will come from Russia in May-June 2018," he said.

Further approvals are required from Finland, Sweden and Denmark.

Corcoran said it was planned to begin construction of the offshore part of the pipeline in June 2018.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com