Germany Halts Authorization of Nord Stream 2 Natural Gas Pipeline

Researched by Industrial Info Resources (Sugar Land, Texas)--After Russia recognized and sent troops to two breakaway regions in the Ukraine on Tuesday, German Chancellor Olaf Scholz halted the certification process for the Nord Stream 2 natural gas pipeline, running from Russia to Germany. Completed in September, the pipeline was intended to approximately double the amount of gas received from Russia to Europe. After billions of dollars and years of construction, the move is seen as a sanction of sorts on Russian natural gas. According to news media, natural gas from Nord Stream 2 could be worth as much as $15 billion a year to Russia's state-owned gas company Gazprom (Moscow). Without the certification, the pipeline cannot operate. Europe presently receives approximately 35%-40% of its gas from Russia.

"In light of the most recent developments we must reassess the situation, in particular regarding Nord Stream 2," Scholz said at a news conference.

As Nord Stream 2 has supplied no gas to Europe by this point, the European Commission is maintaining the status quo in regard to the bloc's energy situation. A European Commission spokesperson said in a press meeting, "Nord Stream 2 is not yet functioning, is not supplying energy to Europe. It's not a different source of energy; it's a different pipeline for an existing supplier... There's no change in the current situation."

But the current situation has changed. Europe is already facing elevated natural gas prices, which hit a record high in December and remain well above year-ago levels. Russia has, in fact, already decreased its gas supplies to Europe, and Europe has moved into position as the top destination for U.S. liquefied natural gas (LNG). About 61% of U.S. LNG went to Europe in December, which escalated even further in January, according to data from Refinitiv. Europe is poised to remain the top destination for U.S. LNG this month.

The world remains poised to see what will happen next in regard to Russia's gas supply to Europe. Pipelines running to Europe via Ukraine could be damaged in fighting. Russia could stop delivering natural gas to Europe altogether should the conflict escalate, although this remains unlikely since it would also hurt Russia, according to Henning Gloystein, director of energy, climate and resources at Eurasia Group in an interview with CNN Business. "If Russia stops sending any gas to Europe, there isn't enough LNG to cope with that," Gloystein said, highlighting the geopolitical aspects of the situation.

Regardless of what happens, Europe, and especially Germany, is being forced to reassess its dependence on Russian gas. The U.K., Ukraine and Poland have been opposed to the construction of Nord Stream 2, noting the Russian influence it leverages on Europe. The truth in this now seems to be becoming apparent, even before the pipeline has started operating.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Pipelines Project Database can click here for related project reports.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.