Russia Expects Nord Stream 2 to Deliver 5.6 Bcm of Gas This Year
MOSCOW (Reuters) — The Nord Stream 2 pipeline, which is currently under construction, is expected to deliver 5.6 billion cubic meters (bcm) of Russian natural gas to Europe this year, gas producer Gazprom said on Thursday.
The $11 billion Nord Stream 2, designed to bypass Russia's political foe Ukraine and double the capacity of the existing Nord Stream pipeline to 110 billion cubic meters per year, has been a focal point of tensions between Moscow and Washington.
The construction of the undersea pipeline to Germany has been hampered by sanctions introduced by the United States at the end of 2019, political tensions and Washington's plans to boost sales of its seaborne liquefied natural gas to Europe.
It is now, however, 99% complete. The project's Switzerland-based operating company said on Wednesday the Fortuna pipe-laying vessel is working on the final part of the pipeline.
The key question for Ukraine is how Russia will transport its gas to Europe once the current transit deal between Kyiv and Moscow expires in 2024.
Dmitry Marinchenko, a senior director at Fitch, said Russia would not be able to completely avoid transit through Ukraine if European regulations are applied to Nord Stream 1 and Nord Stream 2, effectively capping exports via the route.
He added that Gazprom would be able to ship 5.6 bcm of gas through Nord Stream 2 if it starts supplies in October. Gazprom declined to comment on the timing of the start of flows.
The European gas market is eagerly awaiting Russian flows via Nord Stream 2. According to EU statistics, gas consumption in the European Union last year amounted to 394 bcm.
European gas prices have reached record highs due to low liquefied natural gas supply, record low storage stocks for the time of year and Russia holding off booking much additional capacity at auctions.
Prices in the Dutch TTF market, the European gas benchmark, dropped on Thursday following the news from Gazprom.
"Market consensus was a bit more pessimistic (on Nord Stream 2 gas supplies volumes in 2021) given the risk of further delays, and that technical and regulatory certifications still need to be issued. Hence prices are trading lower on this news," James Huckstepp, EMEA Gas Analyst at S&P Global Platts, said.
Gazprom also said on Thursday that gas flows via the existing Nord Stream pipeline reached 33.7 bcm in January-July, up from 32.9 bcm in the same period of last year and 31.7 bcm in the first seven months of 2019.
Russian President Vladimir Putin and German Chancellor Angela Merkel are due to meet in Moscow on Friday and most likely will discuss the pipeline.
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