January 29, 2023

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Germany suspends Nord Stream 2. Gas prices are skyrocketing

Germany’s Federal Network Agency has announced a temporary suspension of the approval process for the controversial Nord Stream 2 gas pipeline between Russia and Germany, citing a legal obstacle. Nord Stream 2 certification, which is one of the last steps before commissioning, is “only possible if the operator is regulated according to a legal form under German law,” the authority wrote in a statement. The pipeline connects Germany with Russia via the Baltic Sea.

The German energy regulator’s decision to suspend certification procedures caused a sharp rise in the price of gas on the European market: the December contract for the Fund of Funds, which operators use as the benchmark for the European market, saw an 11% jump at €88/MWh immediately after the announcement.

Prices are also supported by the suspension of production from a field in Norway due to technical problems, which according to forecasts will not be resolved before Friday.

The German regulator said it had suspended the certification process for Nord Stream 2 due to a change in the legal form at its company. Nord Stream 2 AG decided to set up a branch to become the owner and operator of the German section of the pipeline, so the authorization process was put on hold until major assets and human resources were transferred to the branch.

German branch

The move comes as pipeline operator Nord Stream 2 has decided to create a German subsidiary in a bid to meet EU rules that require gas producers to be legally separated from companies that transport fuel. Russia’s state-controlled Gazprom is the owner of the pipeline.

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