Report: Nord Stream 2 eyes way to curb EU oversight of pipeline

MOSCOW, Mar 14 (PRIME) -- The group building the Nord Stream 2 pipeline to import Russian gas into Germany is exploring plans to hive off its last 50 kilometers into a separate company, a move that would undermine E.U. plans to regulate the entire U.S. $9.5 billion project, the Financial Times reported on Thursday.

Under the proposal, a new company would own and manage the small part of the undersea pipeline within German territorial waters. While this section would be subject to E.U. rules, the rest of Nord Stream 2 — nearly 1,200 kilometers through the Baltic Sea — would remain outside the bloc’s jurisdiction, according to three people familiar with the plans.

The plan, while in its early stages, could stoke further criticism of Nord Stream 2, owned by Russia’s Gazprom, which some central and eastern European member states charge is counter to E.U. efforts to diversify its energy sources. The U.S. has threatened sanctions against the project and criticized Germany for its strong support for the pipeline.

Governments on both sides of the Atlantic worry that Moscow could use the pipeline to reduce gas shipments through Ukraine and deny Kiev an important source of revenue.

The corporate structure being considered for Nord Stream 2 would substantially undermine an E.U. decision last month that the complete project be subject to the E.U.’s energy rules.

Applying E.U. rules — including measures insisting on non-discriminatory tariffs and access for third parties — was expected to change the project’s economics. If the rules are limited to the portion of the pipeline in German waters, this impact would be limited.

“This will move the debate from a legal or technical one into a purely political discussion,” said a senior European diplomat briefed on the proposal.

Germany and Gazprom maintain that Nord Stream 2 is a purely economic project needed to replace Europe’s declining gas supplies. Moscow contends that U.S. hostility to the project is motivated by a desire to hurt Russian business interests and support exports of American LNG into Europe.

The plan to split the pipeline into separate companies echoes the ownership structure used for pipes known as Opal, which are within Germany and link the first Nord Stream pipeline, in operation since 2011, into the country’s gas network.

The proposal to split the offshore portions of Nord Stream 2 has not yet been discussed with German regulators, who will be responsible for applying E.U. rules.

Both the German economy ministry and Nord Stream 2 declined to comment on the idea of creating an E.U.-regulated “stub” for part of the project. The company and ministry said they were awaiting the final text of the new E.U. legislation, which is expected to come into force this summer.

Gazprom owns the entire Nord Stream 2 project but has financing agreements with five European partners — Anglo-Dutch Shell, Engie of France, OMV of Austria, and Uniper and Wintershall of Germany.

However, Gazprom and the Russian government say the project will be built regardless of E.U. support or investment from its potential partners.

The pipeline is expected to be complete by the end of the year, with only Denmark still to issue required permits.

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