EU strikes deal on rules to govern Russia’s Nord Stream 2 pipeline

Eastern European, Nordic and Baltic Sea countries see the pipeline as increasing EU reliance on Russian gas, while those in northern Europe, especially Germany, prioritise the economic benefits. [© Nord Stream 2 / Paul Langrock]

The European Union reached a deal on Tuesday (12 February) on new rules governing import gas pipelines including Russia’s planned Nord Stream 2, but added a special loophole to make sure the German-backed project can go ahead.

Representatives of the European Commission, the European Parliament and of the 28 member states reached a deal, which will lead to a new law in the coming months. EU countries would then have nine months to transpose into national law.

The aim of the revised EU gas directive is to ensure hat the principles of EU energy legislation apply to all gas pipelines to and from third countries, the Commission said. This includes rules on third-party access, tariff regulation, ownership unbundling and transparency, the EU executive explained.

“Today’s agreement meets this aim,” it said in a statement, adding that the revised gas directive will ensure EU rules “are applied on EU territory (land and sea)”.

Loopholes

EU Commissioner Miguel Arias Cañete, responsible for energy, said Europe was closing a legal loophole as its dependency on natural gas imports increases.

“Today, Europe is closing a loophole in the EU legal framework. The new rules ensure that EU law will be applied to pipelines bringing gas to Europe and that everyone interested in selling gas to Europe must respect European energy law,” he said in a statement.

While the new law preserves those key principles, it also creates loopholes for Nord Stream 2, according to Bloomberg news agency. A Franco-German compromise on the updated gas directive denies the regulatory authority in Denmark a decisive say over the project and puts that power primarily in the hands of German regulators, Bloomberg reported.

That means Germany will now be in a position to seek an exemption from EU market-opening requirements as long as it doesn’t hurt competition or supply, Bloomberg said.

Indeed, derogations for existing pipelines – those connected to the EU pipeline network before the law comes into effect – may be obtained by “the member state in which the first entry point of the pipeline is located…provided this derogation is not detrimental to competition in the EU,” the European Parliament said in a statement.

“Exceptions are only possible under strict procedures in which the Commission plays a decisive role,” the Commission said.

Under the agreed procedure, the Brussels-based EU Commission “will will take the binding decision” on whether to grant the exemption or not. “If the member state’s assessment differs from that of the Commission, it is the Commission’s assessment which prevails,” the Parliament statement said.

Denmark is the last country which still has to complete its national permitting procedure for Nord Stream 2 and was threatening to block the entire project. Sweden and the Baltic States have all granted permission for the planned pipeline, which is already under construction.

All eyes on Denmark after Sweden awards Nord Stream 2 permit

Denmark is the last country still to complete its national permit procedure for the Nord Stream 2 gas pipeline designed to bring Russian gas offshore to Germany under the Baltic Sea, after Nord Stream 2 obtained a permit from the Swedish government yesterday (7 June).

Divisions

Nord Stream 2 has divided the EU, with Polish opposition to the new draft rules stalling discussions since it was proposed by the EU executive in November 2017.

Eastern European, Nordic and Baltic Sea countries see the 1,225 km pipeline as increasing EU reliance on Moscow, while those in northern Europe, especially Germany, prioritise the economic benefits.

Germany to back Nord Stream 2 despite Ukraine tensions

Germany will not withdraw its political support for the Nord Stream 2 gas pipeline with Russia, its foreign minister said on Monday (3 December), as some lawmakers suggested curtailing the project to punish Moscow for its seizure of Ukrainian ships and their crew.

The draft law will likely slow but not stop the project, led by Russian state energy firm Gazprom in partnership with five Western firms – Germany’s Uniper and BASF’s Wintershall unit, Anglo-Dutch firm Shell, Austria’s OMV and France’s Engie.

It calls for all import pipelines to meet EU energy market rules by not being directly owned by gas suppliers, applying non-discriminatory tariffs and transparent reporting and allowing at least 10% of capacity to be made available to third parties.

“The European Union’s dependency on imported natural gas is growing,” the Commission said, adding this trend is likely to continue due to falling domestic gas production. For the first time, the Netherlands became a net importer of gas in 2017, reflecting the inexorable decline in production from Europe’s North Sea fields.

Imports represented 74.4% of EU consumption in 2017, with Russia meeting 42% of European demand, followed by Norway (34%) and Algeria (10%). Imports have increased over the last two years, driven by higher consumption, lower prices and falling domestic production, the EU executive said.

Europe grapples with Dutch gas production ‘collapse’

For the first time, the Netherlands became a net importer of gas last year, reflecting the inexorable decline in production from Europe’s North Sea fields – an issue EU policymakers are only starting to come to terms with.

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