• Natural Gas News

    EC Approves Gazprom Anti-Trust Solution

Summary

The decision ends the seven-year probe and should lead to market-oriented prices for gas in the Balkans in particular.

by: William Powell

Posted in:

Complimentary, Natural Gas & LNG News, Europe, Security of Supply, Energy Union, Corporate, Import/Export, Competition, Political, Regulation, Balkans/SEE Focus, News By Country, EU, Poland, Russia

EC Approves Gazprom Anti-Trust Solution

After a seven-year probe, the European Commission (EC) has imposed a set of obligations on Russian gas export monopoly Gazprom that enable the free flow of gas at competitive prices in central and eastern Europe, it said May 24. It has not however imposed the financial penalties sought by Polish state-run gas incumbent PGNiG.

Competition commissioner Margrethe Vestager said the EC decision removes obstacles created by Gazprom and provides "a tailor-made rulebook for Gazprom's future conduct. It obliges Gazprom to take positive steps to further integrate gas markets in the region and to help realise a true internal market for energy in Europe. And it gives Gazprom customers in central and eastern Europe an effective tool to make sure the price they pay is competitive.... The enforcement of the Gazprom obligations starts today."

In April 2015, the EC sent a Statement of Objections to Gazprom, saying the company breached EU antitrust rules by pursuing an overall strategy to partition gas markets along national borders in eight member states: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. That strategy may have enabled Gazprom to charge higher gas prices in five of them: Bulgaria, Estonia, Latvia, Lithuania and Poland.

Today's May 24 decision puts an end to this behaviour by Gazprom, the EC said, and furthermore imposes on Gazprom a detailed set of rules that will significantly change the way Gazprom operates in Central and Eastern European gas markets:

  • No more contractual barriers to the free flow of gas: Gazprom has to remove any restrictions placed on customers to re-sell gas cross-border.
  • Obligation to facilitate gas flows to and from isolated markets: Gazprom will enable gas flows to and from parts of central and eastern Europe that are still isolated from other member states due to the lack of interconnectors, namely the Baltic States and Bulgaria.
  • Structured process to ensure competitive gas prices: Relevant Gazprom customers are given an effective tool to make sure their gas price reflects the price level in competitive Western European gas markets, especially at liquid gas hubs.
  • No leveraging of dominance in gas supplyGazprom cannot act on any advantages concerning gas infrastructure, which it may have obtained from customers by having leveraged its market position in gas supply.

If Gazprom breaks any of these obligations, the EC can still impose a fine of up to 10% of the company's worldwide turnover, without having to prove an infringement of EU antitrust rules.

Accepting that the European Union could have done more to limit Gazprom's alleged violations, it said that "effective competition in central and eastern European gas markets does not only depend on the enforcement of EU competition rules but also on investment in gas supply diversification, well-targeted European and national energy legislation and their proper implementation. This is why it is a key priority of the Commission to build a European Energy Union."

The EC's full May 24 statement may be accessed here.  Commissioner Vestager's statement is also available.

In an interview with NGW last week, PGNiG CEO Piotr Wozniak said he would not be happy if the European Commission accepted Gazprom's proposed settlement without imposing a fine.