Natural gas prices in Europe soared higher after Germany indicated this week it had no intention of approving the Nord Stream 2 gas pipeline project before requirements under German law were satisfied.
However, Foreign Minister Annalena Baerbock also said that the situation in Ukraine was also a factor in the German government's decision on the matter.
"In the event of further escalation, this gas pipeline could not come into service," Annalena Baerbock told German media, as quoted by AFP, earlier this week.
The remarks follow a comment from Germany's new Prime Minister, Olaf Scholtz, that "It would be a serious mistake to believe that violating the borders of a European country would remain without consequences."
Meanwhile, the certification process for the infrastructure has been suspended by the German authorities because the pipeline must have an operator that is incorporated under German law.
This means that the commissioning of the pipeline could be delayed until March next year. It could be delayed even further because after Germany approves it-if it does-the project will have to go to the European Commission, which would be tasked with making sure it complies with EU regulations.
As a result, natural gas prices on the continent topped $1,400 per 1,000 cubic meters for the January futures. New threats from Belarus that it would turn the transit gas tap off for Europe if the EU decided to impose more sanctions on Minsk did not help matters, adding to upward price pressure.
Meanwhile, the European Union is this week discussing measures to tackle the gas shortage that is fueling the price rally and threatening energy supply this winter. Among the measures are joint gas buying for member states and more disciplined gas storage management to create strategic reserves to protect the countries and consumers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
This winter more warm not cold.
Germany and the EU Secretariat are politicizing energy and delaying the certification of Nord Stream 2 with incitement from the United States and its small puppets inside the EU, namely Poland and the Baltic States. However, it will be them who will pay a heavy energy bill and their people who will shiver this winter.
While Germany can delay the certification of Nord Stream 2 for a short while, it will eventually be forced along with the EU to certify it. It is they who need Russia gas and therefore Nord Stream 2.
And while an operational delay of Nord Stream 2 will cost Russia’s gas giant Gazprom a lot, it will cost Germany far more in losses incurred by the hundreds of German companies who have invested in the pipeline and Germany itself in far higher gas and energy bills.
Germany imports 64% of its energy needs mainly oil and gas. It is dependent on Russia for 36% of its crude oil imports and 40% of its natural gas. Moreover, Germany currently has no infrastructure for the direct import of LNG so it is overwhelmingly dependent on piped natural gas. So it will end up the big loser along with the EU.
Germany is using the excuse of Ukraine to delay the certification of Nord Stream. But if it is that worried about a possible invasion of the Ukraine, its new chancellor Olaf Scholtz should show some statesmanship acting on behalf of the EU and the United States and give an undertaking to Russia that they won’t bring Ukraine to NATO. That is crux of the matter. Were this to happen, it will be the end of Ukraine as an independent country. Neither the United States nor the EU or both combined could stop this happening with the loss of royalties from Russian gas shipments across its territory to boot.
Neither Qatari or US LNG exports nor Norway’s gas exports could satisfy the EU gas needs. Only Russia can.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London