Germany halts Nord Stream 2 pipeline approval, gas prices soar

The squeeze of higher natural gas prices on European households and businesses could get even more uncomfortable after Germany’s energy regulator on Tuesday slammed the brakes on a greenlight needed to allow Russian gas to flow to Europe through the long-delayed Nord Stream 2 pipeline.

Construction finished on the Nord Stream 2 earlier this year, but it is not yet operational. The pipeline, which is owned by Russian gas giant Gazprom and has investment from some major European firms bypasses Ukraine to pump Russian gas under the Baltic Sea directly to Europe.

Long a geopolitical lightning rod, Nord Stream 2 has attracted opposition from the United States, Ukraine and some European nations who are concerned that it will make Europe even more reliant on Russian natural gas.

Ukraine also stands to lose transit revenues once the pipeline is operational.

But geopolitical concerns could be of cold comfort to European and British consumers who are shelling out a lot more for natural gas this year, thanks to a global energy crunch and uncertainty over when Russia will start pumping more gas to Europe.

Natural gas prices vaulted 9 percent on Tuesday after Germany’s network regulator said it had suspended its procedure to certify the operator of Nord Stream 2.

The German regulator, the Bundesnetzagentur, said the certification process was halted because the Swiss-based operator of the pipeline needed to form a company under German law.

“Following a thorough examination of the documentation, the Bundesnetzagentur concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organized in a legal form under German law,” the regulator said in a statement.

The regulator added that the Swiss-based operator had formed a German subsidiary and that the approval process will move forward once the operator has transferred major assets and budgets for staffing to that subsidiary.

Last month, Russian President Vladimir Putin said his country could  help ease Europe’s natural gas supply crunch once German regulators gave the go-ahead for gas to start flowing legally through Nord Stream 2.

Russia has already pumped gas under the Baltic Sea via Nord Stream 1, which has the capacity to carry 55 billion cubic metres.

Nord Stream 2 will double that volume and make Germany a central distribution hub for natural gas.