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09/12/2016

EU fires warning shots at Gazprom

Competition

EU fires warning shots at Gazprom

Margrethe Vestager [European Commission]

The European Union’s competition chief challenged Russian gas giant Gazprom on Thursday, when she pledged to act decisively against energy companies that break competition law.

The European Commission has been investigating Gazprom for more than two years for allegedly over-charging customers in eastern Europe, thwarting rival suppliers and blocking the free flow of gas across the region.

Margrethe Vestager, making her first US trip since she took office in November, said in a speech in Washington that she would be tough with energy companies that “harm rivals, block energy flows from on EU country to another, or threaten to close the tap”.

Although she did not mention Gazprom by name, her speech comes in the wake of remarks by the bloc’s energy chief that the Commission would present the results of the Gazprom investigation very soon.

The probe was put on hold last year following the crisis in Ukraine. Vestager’s spokesman has said the Commission is ready to move forward with the case.

>> Read: Vestager: Commission ready to move forward with Gazprom probe

Gazprom warns against blocking Turkish Stream

Gazprom warned the European Union on Monday against moves to block Moscow’s plans to bypass Ukraine as a transit country for its gas to Europe and said it needed guarantees on gas purchases.

Russia is pushing ahead with plans to build a pipeline to Turkey and further on to Greece via the Black Sea, in line with its plans to stop exporting gas via Ukraine by 2019.

>> Read: Russia says it will shift gas transit from Ukraine to Turkey

Moscow had to drop its $40 billion South Stream pipeline via Bulgaria to Europe last year, saying it was blocked by EU regulations, choosing the Turkish Stream project instead.

“If someone thinks about blocking Turkish Stream … it is a very serious mistake,” Gazprom head Alexei Miller told a conference in Berlin, adding volumes could go to other markets and construction of the pipeline could be paused if necessary.

The European Commission has said the Turkish Stream project was not viable.

>> Read: Šef?ovi?: Turkish Stream ‘will not work’

Russia to stop transiting gas via Ukraine

Speaking to reporters in Berlin, Russian Energy Minister Alexander Novak said Russia did not plan to extend its gas transit deal with Ukraine after the current contract expires in 2019.

Russia supplies around a third of the European Union’s gas demands, though the EU is trying to diversify its energy supplies, to lessen dependence ob Russia. Relations have cooled over Moscow’s role in the Ukrainian conflict.

Miller said the EU had to guarantee future gas purchases from Russia. He said Gazprom could produce 617 billion cubic meters (bcm) of gas per year, while in 2014 output was 444 bcm, leading to excessive idle capacity.

“We don’t hear the main statement that Europe will rely on Russian gas … We fully bear the risks of creating new production capacities,” he said, warning that the gas which Europe refuses to buy may be diverted to Asia.

Gazprom has clinched a deal to supply China with 38 bcm of east Siberian gas per year starting in 2018. It also wants to supply an additional 30 bcm annually to China from west Siberia.

Miller also said gas prices for Europe will increase in the final quarter of the year, while Russian gas exports will increase this year from 147 bcm in 2014 to exceed the previous record of 162 bcm set in 2013.

Some analysts have warned that Gazprom may not be able to meet rising gas demand in Europe, but Miller said the company can quickly double its exports.

Background

Gazprom is suspected of being in breach of Article 102 TFEU, which prohibits the abuse of a dominant position which may affect trade between member states.

The implementation of this provision is defined in the Antitrust Regulation (Council Regulation No 1/2003), which can be applied by the Commission and by the national competition authorities of EU member states.

Gazprom delivers gas to 25 EU countries, the exceptions being Spain and Portugal. The vast majority of contracts to Europe are 20-25-year contracts.