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Nord Stream 2 — a joint project between Russia's state-owned gas company Gazprom and private groups Shell, EON, Wintershall, OMV and Engie — would double the capacity of the Baltic Sea pipeline route. But many eastern European countries fear that it will increase reliance on politically-sensitive Russian supplies.
UOKiK, the Polish anti-monopoly watchdog, said last week it objected to the project as it would increase Gazprom's already dominant position in European gas markets. An official at the watchdog told the Financial Times this week that it had given the consortium four weeks to present its arguments for the objections to be dropped.
"The initiative is with them," said the UOKiK official, who declined to be named as they were not permitted to speak to the media. "So far they didn't respond directly to our concerns or propose remedies regarding the statement of objections."
Gazprom needs the Polish regulator's approval before it can sell shares in the company set up to carry out the project to its five European partners. The pipeline is not planned to go through Poland or Polish waters — but UOKiK has the right to rule on the business impact of the pipeline as some of these companies have assets in Poland, and due to the broad powers of the watchdog under Polish competition law.
A delay in the share sale could in turn hold up the project's financing, potentially delaying the entire construction schedule. Nord Stream 2 is scheduled to be completed by the end of 2019.
"We are quite tight in terms of the schedule, a couple of months' delay would be quite detrimental to the overall schedule of the project," said a person close to Gazprom.
The consortium has already awarded tenders for steel pipes, with the first deliveries due this September. "By autumn we need to be clear about what we are going to do and how we are going to do it," said the person close to Gazprom.
In a statement, Gazprom said the Polish regulator's decision influenced only the sale of shares in the project company and that the "Nord Stream 2 project schedule remains unchanged".
Poland has led a backlash against the pipeline by some eastern EU states, which worry that it is a geopolitical move by Moscow to increase Europe's reliance on its gas. A number of eastern European countries, as well as the US, also fear that Nord Stream 2 could allow Gazprom to reduce gas supplies along pipelines that run through Ukraine, hurting the country's fragile economy.
Gazprom's gas-transit contract with Kiev ends in 2019. The company has said it plans to cut down sharply on sending supplies through Ukraine after that, with much of the gas instead going through Nord Stream 2. However, if the project is not completed by the end of 2019 as planned, Gazprom may be forced to negotiate again with Ukraine.
After a successful 25 years of democracy and a decade of EU membership, Warsaw is facing political uncertainty and a debate on how best to maintain the country's enviable rate of economic development
Should the Polish regulator reject the Nord Stream 2 deal, Gazprom could in theory decide to build the pipeline alone — but that would heap a hefty financial burden on the Russian group.
"It [would] make no business sense," said the person close to Gazprom. The consortium is hoping to reach a compromise with the Polish regulator, they added.
Continuing with the share sales without the Polish regulator's approval could open up the consortium to fines from Poland. UOKiK declined to comment on its investigation as it is ongoing.
The consortium also needs to apply for environmental clearances from regulators in the five countries whose waters it would pass through: Russia, Finland, Sweden, Denmark and Germany. These clearances are expected to be obtained over the course of next year so that work on the pipeline could begin in 2018.
Polish hurdle [Link]