The EU Council finally approved a European gas directive on April 15 that is expected to delay commissioning of the Nord Stream 2 gas line – and potentially leave it half empty.

Extending EU rules to non-EU pipelines – particularly those outside of the EU territory –  the directive will force Gazprom to “unbundle” or hand over operation of the line to a company independent of Russia’s state gas producer. However, Gazprom maintains a jealously guarded monopoly over gas exports from Russia and will be very reluctant to share the right to export with anyone. Currently the only other entity allowed to export gas is privately owned Novatek, which is limited to exporting LNG.

Potentially more seriously, half of the pipeline has to be reserved for third companies. Given Gazprom’s gas export monopoly, this could leave half of the pipe empty until Russia creates a separate gas exporter, and will almost certainly create delays for the pipeline.

Nord Stream 2 is due to come online at the end of this year and construction is progressing well with 800km of the 1,200km pipeline already built according to recent reports. Ukraine is afraid of the pipeline as the extra 55bn cubic metre (cm) capacity will allow Russia to completely bypass Ukraine, depriving it of a badly needed circa $3bn a year in gas transit revenues.

Ukraine’s mission to the EU issued a statement welcoming the new rules. A delayed launch of Nord Stream 2 might require Gazprom to discuss 65-70bn cm per year transit through Ukraine, VTB Capital (VTBC) said in a note.

Nord Stream 2 AG submitted a third application for a route through Danish waters on April 15, as the company seeks ways to dodge the new rules. It envisages a route in the Danish exclusive economic zone (EEZ) in the waters south of Bornholm island in accordance with the decision made by the Danish Energy Agency (DEA) on March 26, VTBC reports.

At the end of March, the Danish regulatory authority mentioned that it did not plan to examine the previous two Nord Stream 2 route applications until the company had considered an alternative route in the waters south of Bornholm, Kommersant reports.

According to the paper, the delay in the approval of the Nord Stream 2 route through Denmark might require Gazprom to discuss a new transit contract with Ukraine for a significantly higher volume than the 10-15bn cm per year previously announced by Gazprom CEO Alexey Miller. Volumes of 65bn cm via Ukraine would effectively make Nord Stream 2 useless.

“Gazprom has received permissions from all the countries along the route (Sweden, Finland, Germany and Russia), except Denmark,” VTBC said. “The potential risk that the pipeline might not be commissioned on time is negative for the company, given that the gas transit contract with Ukraine expires at the end of this year, and the gas monopoly had previously planned to reduce gas transit via Ukraine from 87bcm/a in 2018 to 10- 15bcm/a after 2019. Therefore, were the commissioning of the 55bcm/a Nord Stream- 2 to be delayed, that might require Gazprom to discuss the transit of 65-70bcm/a through Ukraine in 2020. Such negotiations could, in our view, be quite tough. Since the Ukrainian route might require higher transportation costs compared with Nord Stream 2 (around 30% on our estimate, based on the company’s financials), we deem the news as negative for sentiment on the name.”

Gazprom’s stocks have been punished as the political uncertainty swirls around its business. In 2008 Miller famously boasted that the company was on the way to becoming the world’s first trillion dollar concern with a market capitalisation of $300bn at the time. Since then Apple managed to make it to the trillion dollar market line and Gazprom’s market cap has fallen back to $53bn. It is now one of the most undervalued stocks on the Russian exchanges and smaller independent oil and gas producers Novatek and Lukoil are threatening to overtake it as bne IntelliNews reported in a recent piece “King of the castle.”