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01/09/2016

Russian pipeline breaks free from EU rules

Competition

Russian pipeline breaks free from EU rules

pipes gazprom.jpg

Both the EU-favoured Nabucco pipeline and its Gazprom-sponsored competitor South Stream will "most probably" get a derogation from the Third Energy Package, the EU's legislative framework that provides competitors with free access to pipeline networks, Bulgarian Energy Minister Traycho Traykov announced today (14 July). EurActiv's partner in Bulgaria, Dnevnik, reports.

The Bulgarian minister stressed that for the time being not a single gas pipeline project could work according to the rules of the fully-liberalised market. It is therefore necessary for new projects to postpone compliance with a requirement to offer competitors access to their planned pipeline networks, he explained.

Should Traykov's statements prove to be true, then the EU is effectively axing its rules on the liberalisation of gas markets, negotiated in 2007-2008.

Asked to comment, Energy Commissioner Günther Oettinger's spokesperson Marlene Holzner evasively said that "exemption requests must be assessed on a case-by-case basis". "The [European] Commission cannot predict the outcome of the assessment by national energy regulatory authorities, neither its own assessment," she said.

Dnevnik quoted Russian Energy Minister Sergei Shmatko as saying that the EU should consider South Stream as a continuation of the Russian pipeline network, and that it should forbid the access of third parties to it.

In fact, Energy Commissioner Günther Oettinger hinted that the European Commission was heading in this direction, ever since he cited the legitimisation of a EU-Russian gas treaty last November as "a step in the right direction".

Oettinger also referred to a more recent request by the Commission for Bulgaria to change a 2008 bilateral agreement with Russia on building the Bulgarian section of South Stream as an example of the policy the EU executive was determined to follow.

"New pipelines are welcome. We are ready to combine our different interests – the investment decision for pipelines with the Third Energy Package of the internal market, meaning competition and unbundling," Oettinger said.

Asked about the Nabucco pipeline project's future, Traykov argued that its construction would not cost more than initially estimated. Officially, the pipeline is to cost 7.9 billion euro, although specialists said that if built, its price would be much higher, up to 12-15 billion euro.

Recently, the Commission asked Bulgaria to change a 2008 bilateral agreement with Russia, providing for full and unrestricted transit of Russian gas across the EU newcomer's territory.

The draft initially said South Stream shareholders would enjoy exclusive gas transportation, while a new sentence has since made that possibility conditional upon the Commission's approval.

Positions

Background

Nabucco and South Stream are seen as competing projects and have similar timeframes for beginning and completing construction.

South Stream is a Russia-sponsored planned natural gas pipeline. Once completed, the pipeline will run under the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another to Romania, Serbia, Hungary, Slovenia and Austria. Its planned capacity is 63 billion cubic metres per year (bcm/y).

The key partner for Russia's Gazprom in the South Stream project is Italy's largest energy company, ENI.

Another pipeline in the project phase, Nabucco, does not enjoy the favour of Russian state monopoly Gazprom. It widely resembles South Stream, but is intended to diversify the EU's pool of supplier countries, bringing gas to Europe from the Caucasus and the Middle East to a gas hub in Austria, via Turkey, Bulgaria and Romania.

The construction of the pipeline is expected to start in 2011 and the first gas is expected to flow in 2014. The pipeline will carry 31 billion cubic metres of gas per year, but this maximum capacity will only be reached in 2018.

The Nabucco consortium comprises leading European energy companies from Austria, Hungary, Germany, Bulgaria, Romania and Turkey (see map).

Timeline

Further Reading