Germany’s energy regulator on Friday declined to grant a waiver of European Union gas directives to the operators of the Nord Stream 2 pipeline, dealing a fresh blow to the project to carry gas from Russia to Germany under the Baltic Sea.
Nord Stream 2, designed by Russia’s Gazprom (GAZP.MM) to increase direct shipments to Europe, is already long behind schedule and has faced political opposition from Washington as well as from Ukraine and Poland, through whose territory Russian gas is currently shipped to consumers in western Europe.
Germany’s Bundesnetzagentur regulator said on Friday that the project is not exempt from so-called unbundling rules, which imply production, transport and distribution of energy must be independently organised, on the section that runs through German territory.
It said the Nord Stream 2 consortium - which also includes Uniper (UN01.DE), Wintershall-Dea (BASFn.DE), Shell (RDSa.L), OMV (OMVV.VI) and Engie (ENGIE.PA) - did not qualify for an exemption because the pipeline had not technically been completed by May 23, 2019.
The consortium, whose five Western partners put up 50% of the finance for the pipeline, argued that while not physically complete the project had been economically functional, with billions of euros of investments made in good faith.
In a statement on Friday after the German regulator’s publication, the consortium said it had one month to evaluate the decision and to consider further action, including an appeal.
“International legal experts have confirmed that narrowing the definition of ‘completed’ to the conclusion of the physical construction of a gas pipeline would violate the protection of legitimate expectations and other fundamental rights in EU law,” it said.
It said it also considered the ruling in breach of German constitutional guarantees.
The ruling implies higher costs and time delays to the consortium, as it suggests it may have to set up a transport operating company and seek bids by third parties to participate in gas auctions.
Fees charged on the network would be monitored by the Bundesnetzagentur.
