Gazprom Plans Fully Owned German Unit to Win Pipeline Consent
Gazprom Plans Fully Owned German Unit to Win Pipeline Consent
(Bloomberg) --
Gazprom PJSC is planning to set up a fully owned German subsidiary in a bid to win approval for its controversial Nord Stream 2 gas pipeline, according to a person familiar with the discussions.
The new entity -- which will operate the German section of the Baltic Sea link -- will be 100% owned by Nord Stream 2 AG, the Swiss unit of the Russian gas giant, said the person, who asked not to be identified because the talks are private. Gazprom is opting for full ownership instead of bringing in partners.
The new structure is an attempt to meet European Union rules requiring natural gas producers to be legally separate from entities transporting the fuel, and have the operator registered in the bloc. Once completed, it will also allow the restart of certification of the 1,200-kilometers pipeline halted by the Germany energy regulator on Tuesday, a move that sent European gas futures soaring.
“We now estimate that the certification can only be completed around April next year at the earliest,” said Zongqiang Luo, a gas markets analyst at Norwegian consultants Rystad Energy AS. “Delays in utilizing Nord Stream 2 may have a lasting effect through the region’s 2021 winter and beyond.”
Gazprom referred questions to Nord Stream 2 AG, while the Swiss entity said it’s not in a position to comment on details.
Europe is facing an energy crunch, with gas prices soaring as the winter season started with the lowest stockpiles in more than a decade. Delays to Nord Stream 2 pipeline -- a major source of friction between the U.S. and Germany for years -- will further tighten the market just a cold weather sets in.
Nord Stream 2 AG will try to meet the EU’s legal requirements by putting in place a separate management for its German subsidiary, according to the person. Once the new firm has been registered, it will need to appoint a board and a chief executive officer or chairman, the person said. Only then can the assets be transferred and the certification process restart.
How long the process takes depends on how quickly Nord Stream 2 AG gets the new subsidiary up and running. While setting up a limited liability company in Germany can be relatively easy and fast, transferring the assets and the personnel could take longer. The Kremlin said Wednesday that the operator is ready to fulfill all the requirements to launch the pipeline “as soon as possible.”
The EU will also have a say, with its evaluation potentially lasting two months after the German certification is completed. The German energy regulator has to take the bloc’s opinion into account, but it has no obligation to uphold its recommendations.
Depending on how stringent the EU’s evaluation is, there’s “ample potential for an extension through to August 2022,” Rystad’s Luo said.
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