Nord Stream 2 gas link construction to be completed by end-August: CEO

Construction of the Nord Stream 2 gas pipeline from Russia to Germany is expected to be completed by the end of August and the link operational this year, the CEO of the pipeline development company said July 11.

In an interview with Handelsblatt, Nord Stream 2 AG CEO Matthias Warnig also said he was certain that Ukraine would retain a role in the transit of Russian gas to Europe.

Warnig said Nord Stream 2 was now 98% complete, with one 27.5 Bcm/year string already finished and the remaining 2% of work to be carried out on the second 27.5 Bcm/year string.

"We expect the construction work to be finished by the end of August," Warnig said.

He said work had already begun on the testing and certification of the completed string, and that it would take two to three months to carry out this work for each line.

With the first string completed in June, Warnig's comments suggest that that line could become operational by September at the latest.

There have been questions over which entity would certify Nord Stream 2 as complete after Norway-based quality assurance company DNV GL in January said it would no longer provide pipeline integrity verification services for the pipeline due to the threat of US sanctions.

"The US sanction threats have made our work much more difficult in every respect, and this also applies to certification," Warnig said.

"But we are working on solutions and are sure we will find a way. In the end, we will have a pipeline that meets all certification requirements and international industry standards," he said.

In May, the administration of US President Joe Biden decided not to impose sanctions against Switzerland-based Nord Stream 2 AG and its CEO Warnig, issuing waivers for both.

The US State Department said that applying those sanctions would "negatively impact US relations with Germany, the EU, and other European allies and partners."

However, both the US and Germany have since said they would look to come up with proposals that would mitigate the impact of Nord Stream 2 once it is operational, particularly with regard to Ukraine.

Ukraine transit

Kyiv has repeatedly said that Nord Stream 2 is an existential threat to Ukraine as Russia would no longer rely on its western neighbor for gas transit to Europe.

Warnig declined to speculate on what concessions could be appropriate in order for the US to accept Nord Stream 2 coming online.

But, he said, he was certain Ukraine would continue to play a role in Russian gas transit.

Russia's Gazprom has agreed to transit 40 Bcm/year of Russian gas via Ukraine from 2021 until 2024 -- down from a recent peak of 94 Bcm in 2017 -- as it looks to divert gas away from Ukraine into Nord Stream 2.

"As early as May 2015, Chancellor Angela Merkel insisted that gas transit through Ukraine must be permanently secured even after the completion of Nord Stream 2," Warnig said.

"The transit of Russian gas through Ukraine will continue to be an integral part of the gas transport from Russia to Europe after 2024. I do not have the slightest doubt about that," he said.

"I assume that this already has been been raised in government talks between the German government and Russia. The topic will certainly also be part of the talks between Chancellor Merkel and US President Biden," he said.

Merkel is due to travel to Washington to meet with Biden on July 15.

A number of ideas on reducing the impact of an operational Nord Stream 2 have been tabled in recent months.

These include Germany reserving the right to regulate the pipeline's use depending on Russian political behavior, for the current five-year transit deal with Kyiv to be extended, or for Ukraine to be compensated for lost transit revenues.

Warnig said nothing could be ruled out in terms of new action with regard to Nord Stream 2 as the US Congress continues to put pressure on the project.

"The risk is high, it is not something that can be denied," Warnig said.

But, he said, if buyers of Russian gas were to be sanctioned, "we would be entering a new dimension of trade war."

Hydrogen role

Warnig also said Nord Stream 2 could carry hydrogen in the future and would be ready to do so within 10 years.

"Promising preliminary tests have already been carried out. Material tests are still underway, although the fact that the testing and certification companies are holding back due to the threat of sanctions is proving to be a challenge," he said.

"All in all, it seems very realistic that in 10 years at the latest we will be able to blend hydrogen into one or both lines and transport it," he said.

Warnig added that Nord Stream 2 AG owner Gazprom was working on various hydrogen technologies.