Eni offers to sell pipelines to settle EU probe

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Italy's Eni has offered to sell its international gas pipelines, worth some 1.5 billion euros, in a move that should help the oil and gas major avoid a hefty antitrust fine and ease regulatory pressure.

Eni is ready to sell its Transitgas and TENP pipelines on the market and sell its TAG pipeline to a public entity, Eni Chief Executive Paolo Scaroni said on Thursday (4 February), adding however it will hang on to transport rights in all three assets.

Eni, the world's seventh-biggest listed oil company, has been the object of an EU antitrust probe since 2007 over allegations it restricted rivals' access to the pipelines.

If found to be in violation, the EU could fine Eni a maximum of up to 10% of its previous year's sales. Press reports have spoken of more than 500 million euros.

The European Commission said in a statement on Thursday it would market-test Eni's proposal and may then accept it as a legally-binding commitment without fining the company.

Eni's proposal, if accepted, would make it the fourth energy company, after Germany's E.ON and RWE and French utility GDF Suez, to settle with the regulator on charges of abusing a dominant position.

"These remedies have the potential to improve access to the Italian gas markets and contribute to an integrated and competitive single European market," EU Competition Commissioner Neelie Kroes said at a press conference with Scaroni.

"Our concerns were that Eni in particular hoarded pipeline capacity and deliberately underinvested in transport capacity despite significant demand from third-party shippers," she said.

According to Kroes, these concerns "directly flowed from the conflict of interests that Eni was facing" as operator of transport pipelines and gas seller at the same time.

Any incentive for Eni to transport more gas on its pipelines "was more than outweighed by the incentive for Eni to maximise its profits from selling gas to customers on the Italian wholesale market by reducing access to that market for potential competitors," she said.

Russian gas

Eni, controlled by the state, owns 89% of the TAG pipeline, which carries Russian gas into Italy. The Italian government considers the pipeline strategic.

Eni also owns 49% of TENP and 46% of the Transitgas pipeline. They carry gas from northern Europe.

"The value of the three pipelines is in the region of 1.5 billion euros, most of it in the TAG pipeline," Scaroni told a news conference. He said TAG is worth around 800 million euros.

"This amount of cash won't change our balance sheet. We have no plans to spend this cash," he said.

Eni, which cut its interim dividend last July, is one of Europe's most leveraged oil companies.

At home, Eni has been under regulatory pressure to sell down its 52.54% stake in Italian gas transmission grid operator Snam Rete Gas, also considered a strategic asset by the government.

(EURACTIV with Reuters.)

In March 2009, the European Commission's antitrust department indicated that ENI may have abused its dominant position on the Italian gas market by:

  • Refusing to grant competitors access to capacity available on the transport network (capacity hoarding);
  • Granting access in an impractical manner (capacity degradation), and;
  • Strategically limiting investment (strategic underinvestment) in ENI's international transmission pipeline system.

The Commission said these practices had taken place despite strong demand from third-party shippers, thwarting competition on the gas markets and harming customers in Italy.

The probe dates back to 2007 when the Commission's antitrust department said it suspected Eni and Germany's RWE of illegally excluding competitors from the gas-supply market (EURACTIV 14/05/07).

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