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Germany approved on Tuesday the construction and operation of the Russia-led Nord Stream 2 gas pipeline in its territorial waters, thus issuing all necessary permits for the German section of the project that has torn Europe and EU member states over the implications of Russia’s gas giant Gazprom gaining even more foothold on the European gas market.
Hailing the project as necessary to cover Europe’s future supply gap and contributing to the “security of supply and competition in the EU gas market,” the pipeline company Nord Stream 2 AG said on Tuesday that the permitting procedures in the other four countries along the route – Russia, Finland, Sweden and Denmark – were proceeding as planned.
“Further permits are expected to be issued in the coming months. Accordingly, scheduled construction works are to be implemented in 2018 as planned,” the company said.
Germany is the key beneficiary of Nord Stream 2 and supports the project on the grounds that it is an economic issue.
Other EU states, however--including Poland and the Baltic states, as well as the European Union institutions--argue that the project further solidifies Russia’s grip on Europe’s gas market and undermines efforts to diversify supplies.
For Russia, Nord Stream 2 – a project to twin the existing Nord Stream pipeline between Russia and Germany via the Baltic Sea -- not only boosts its gas supplies to the EU, but also bypasses the Ukrainian transit route.
With the spy poisoning scandal in the UK and the West-Russia tension high, Nord Stream 2 has taken center stage in energy policies again in recent weeks. Earlier this month, U.S. Senators urged the U.S. Administration “to utilize all of the tools at its disposal to prevent its construction.”
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Last week, the Energy Committee at the European Parliament approved draft amendments to the EU rules to state that all gas pipelines from third countries into the EU must comply fully with EU gas market rules on EU territory, including Nord Stream 2, which is far from complying with those.
While it’s no surprise that Germany has now issued all permits to Nord Stream 2, other countries along the pipeline route, Denmark in particular, could block the proposed route in its waters on security grounds, but Danish officials are not rushing the decision.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Putting geopolitics and political pressure from the United States aside, I am convinced that the other countries along the route –Finland, Sweden and Denmark – will also follow suit and grant permitting procedures. They realize that the Nord Stream 2 is an economic issue first and foremost though it is viewed by the United States, Poland and the Baltic States as tightening Russia’s grip on Europe’s energy supplies. Russia provides roughly 40% of Europe’s gas needs.
Once completed by the end of 2019, Nord Stream 2 along with its twin Nord Stream 1 will eventually provide a total of 110 billion cubic metres per year (bcm/y) of Russian gas supplies to Germany and the North-West European gas market.
The US has always been opposed to Nord Stream II, which it views as Russia’s attempt to solidify its hold on Europe’s energy supplies. But some in the EU are saying that the US wants to displace Russia as a gas supplier to Europe. While there is some truth in this, US LNG can’t compete with Russian gas supplies to Europe. Russia has a fully integrated gas industry underpinned by the world’s second largest proven reserves of natural gas, the cheapest production costs , doesn’t have to convert its gas to LNG to ship it to Europe and already has a monopoly on export pipelines to Europe, even without Nord Stream II.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London