Germany’s energy regulator said it had “temporarily suspended” certification of the Nord Stream 2 pipeline, dealing a setback to the Kremlin-backed gas project and sparking a rise in the UK and continental European gas prices.
The regulator said it could not yet approve the project, led by Russia’s Gazprom because its owners had chosen to create a German subsidiary branch that was not yet properly set up according to German law.
The suspension comes at a critical time for European gas supply, with prices surging across the continent. Gazprom has been accused by some countries of restricting exports to western Europe to increase pressure on Germany and accelerate approval of the project.
UK gas contracts for delivery in December rose 17.2 percent to 22.40 a therm on the news on Tuesday, while the European benchmark gained 15.2 percent to €94 per megawatt hour, with both contracts trading near their highest level in a month. Having eased slightly in October on hopes of higher Russian supplies, gas prices have now gained more than 40 percent in the last week.
The Swiss-based Nord Stream 2 project is creating a German subsidiary to own and operate the German section of the pipeline in response to EU “unbundling” regulations, which require that companies producing, transporting and distributing gas within the bloc are separate entities. The project’s request to be exempted from the rules was rejected by German courts in August.
“Our company undertakes this step to ensure compliance with applicable rules and regulations,” Nord Stream 2 told the Financial Times.
German regulators said certification would be suspended until all