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Germany’s energy regulator has temporarily suspended certification of the Nord Stream 2 pipeline, after the Swiss-based project created a German subsidiary to own and operate the German section of the pipeline.
The Bundesnetzagentur said Nord Stream 2, which was set to begin operations this year, failed to organise an operator recognised under German law, sending gas prices higher.
“The subsidiary itself must meet the requirements of the Energy Industry Act for an independent transport network operator,” the regulator said in a statement.
“The certification process remains suspended until the transfer of the essential assets and human resources to the subsidiary has been completed.
“The Federal Network Agency will be able to check the newly submitted document of the subsidiary as the new applicant for completeness.”
The project is set to pump 55 billion cubic metres of gas under the Baltic Sea from Russia to Germany, and elsewhere in Europe. This would allow gas exporter Gazprom to reach customers on the bloc and bypass pipelines through Ukraine.
The 760-mile link has been built at a cost of €9.5bn (£8bn, $10.8bn), and could potentially meet one third of Europe's gas needs, according to Gazprom.
The head of the Ukrainian energy firm Naftogaz, which opposes the pipeline as it will lose revenues if gas from Russia bypasses pipelines on Ukrainian territory, welcomed the German regulator’s decision to suspend certification.
Watch: Russia will supply more gas if Europe asks — Putin
It comes as yet another setback to the Kremlin-backed gas project, despite pressure from Vladimir Putin to approve Nord Stream 2, causing UK and European gas prices to spike on Tuesday.
UK gas contracts for delivery in December jumped 10% to £2.24 a therm, while the European benchmark rose 8% to €87.80 per megawatt hour.
Although Britain does not import much of its gas directly from Russia, it does import from Europe, which gets around 40% of its gas from the country.
Gas prices in Britain and Europe have climbed as much as six-fold in recent weeks, pushing 20 UK energy suppliers into administration since September and causing household bills to soar.
Read more: Three more UK energy companies go bust
“If one believes that flows could only start after certification has been completed, this means that flows via Nord Stream 2 will be further delayed, with negative implications for European gas balance over winter,” said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.
Elsewhere, the International Energy Agency (IEA) predicted in its monthly report that the recent surge in oil prices could ease as production picks up.
The Paris-based agency said the rise in prices, which saw Brent crude (BZ=F) hit a three-year high last month, should spur global production, particularly in the US.
“The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon. Contrary to hopes expressed in Glasgow at COP26 this is not because demand is declining, but rather due to rising oil supplies,” it said.
“Current prices provide a strong incentive to boost US activity even as operators stick to capital discipline pledges.”
The IEA added that new COVID waves in Europe, weaker industrial activity and higher oil prices will temper gains, leaving its forecast for oil demand growth largely unchanged since last month’s report at 5.5 mb/d for 2021 and 3.4 mb/d in 2022.