German court says EU rules apply to Nord Stream 2 pipeline

DUESSELDORF, Aug. 25 (Reuters) – The Nord Stream 2 gas pipeline is not exempt from European Union rules that require the owners of the pipelines to be different from the suppliers of the gas flowing through them to ensure fair competition, said a German court Wednesday.

The Düsseldorf Higher Regional Court dismissed a challenge brought last year by the operators of the Gazprom-backed project (GAZP.MM) to transport gas from Russia to Germany under the Baltic Sea. They had argued that the rules were discriminatory.

The court did not immediately explain its decision, which is subject to appeal.

Dutch prices at the TTF hub were trading higher after the decision.

“Russian Gazprom will be forced to auction off pipeline capacity, which could further delay deliveries,” Refinitiv gas analyst Xun Peng said.

EU rules require that the companies that produce, transport and distribute gas within the block be segregated or “unbundled”. They aim to ensure fair competition in the market and to prevent companies from possibly hindering competitors’ access to infrastructure.

This means that the company transporting the gas must auction its capacity to third parties.

Operator Nord Stream 2 says the rules, amended in 2019, were aimed at torpedoing the pipeline. The project is strongly opposed by many European governments, some of whom see it as a Russian state-owned enterprise designed to increase the EU’s dependence on Russian gas.

Nord Stream 2 said the German court ruling highlights the “discriminatory effect” of the EU’s amended gas directive.

The rules will cost Nord Stream 2, which connects Germany directly to Russia under the Baltic Sea, additional time and money, but will not stop its completion.

The decision came after the operating consortium requested a review of the decision in May 2020 by the German energy regulator, the Bundesnetzagentur, refusing to grant it an exemption.

The Kremlin said Wednesday’s court ruling was a “corporate issue,” adding that the consortium would have to deal with it itself.

“We can only repeat (…) that the Nord Stream 2 is a purely commercial project (…) aimed at considerably strengthening European energy security,” Kremlin spokesman Dmitry Peskov told reporters. .

The consortium also includes five Western oil and utility companies – Uniper (UN01.DE), Wintershall-Dea (BASFn.DE) (WINT.UL), Royal Dutch Shell (RDSa.L), OMV (OMVV.VI) and Engie (ENGIE.PA) – which provided 50% of the funding.

The $ 11 billion project, with a transport capacity of 55 billion cubic meters, has faced political opposition from Washington as well as Ukraine and Poland, which risk losing transit activities lucrative if the pipeline is put into service.

President Joe Biden and German Chancellor Angela Merkel reached an agreement last month that avoided the threat of US sanctions targeting the pipeline and its operators. Read more

Russian President Vladimir Putin said last week that there is only 15 km to go. Merkel urged him to extend a gas transit deal with Ukraine which expires in 2024. read more

The project’s identically sized precursor, Nord Stream 1, has been exempt from unbundling rules since it opened in 2011 because it was treated as an interconnector rather than a direct supplier.

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Additional reporting by Nina Chestney in London, Dmitry Antonov and Katya Golubkova in Moscow; Editing by Madeline Chambers, Maria Sheahan and Mike Harrison

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