Sefcovic: Nord Stream is not in conformity with the Energy Union’s goals

Maroš Šef?ovi? will chair the trilaterals [European Parliament]

Maroš Šef?ovi? [European Parliament]

The European Commission so far is only aware of general information about the project, and is therefore unable to make conclusive decisions, Commission Vice-President Maroš Šef?ovi? told EURACTIV in an exclusive interview.

Maroš Šef?ovi? is a Slovak diplomat and the Vice-President of the European Commission, in charge of Energy Union.

Šef?ovi?spoke to EURACTIV’s Senior Editor, Georgi Gotev.

What’s new regarding Nord Stream 2? Previously, you said it was difficult to clear the legal aspects, but are you going to respond to the letter by the seven ministers who oppose the project?

I will respond to the letter, even though its primary goal was that Nord Stream 2 be included in the agenda of the European Council and debated, which actually happened. But of course if it comes to the issue of Nord Stream, we are still studying the matter. There are several concerns: security of supply, what it would mean for the overall gas balance in Europe, what it means if the Ukraine route is cut off, when most of the Russian supplies will go through two routes [Nord Stream and Yamal pipeline across Poland]. But I was quite encouraged by the statement by [German Vice Chancellor] Sigmar Gabriel who said that also for Germany, the preservation of the transit route through Ukraine is very important.

Then, of course, there are market concerns we need to analyse very carefully, because in the future a very important role for the gas pricing will be played by the gas hubs in Europe. So we need to study how gas hubs are performing. And we have legal concerns. It’s quite clear that for the Commission, it’s of absolute importance that all aspects of EU law are fully respected. But for the detailed assessment, we will need more information, because so far we rely only on information from the press, and from the German regulator. We need more information, so that all aspects of compliance with EU law are properly assessed.

Is it the German regulator who should give more information?

The interaction is ongoing. So far we are aware only of the general outline of the project which was presented to the media, and it’s very difficult to be definite and make conclusive decisions as we still don’t have all the required information. 

What we know is that it’s not in conformity with the general goals of the Energy Union, which call for the diversification of routes, of sources, and of course, we need to assess the project in great detail.

You mentioned gas hubs. It’s also the strategy of Gazprom to invest in gas hubs in the EU. They have been acquiring shares and more and more ownership, hoping to influence pricing. Is this a matter of concern for the Commission?

I think, of course, we need to study the matter. What we want is clearly to have a liquid market for gas as possible, and therefore we are supporting the development of the new gas hubs and the good performance of the existing gas hubs. Part of our LNG strategy is also related to the better management of the gas storages. It’s the overall aim of the Energy Union to have well performing gas storages in the EU. And when we look at the tendency, I think in the future we will see the price to be more and more decided by the gas hub pricing, by the regional markets. With the big arrival of LNG, we will see such a gradual transformation, of gas becoming a true global commodity.

The Commission will scrutinise the member states’ commercial contracts for buying gas, with special attention for those who represent more than 40% of the country’s needs. Can you explain the reasoning?

If I can go back a little bit in time, when we adopted the Energy Union strategy [February 2015], and in the related Council Conclusions, it was clear that not only the Commission, but also European leaders were pushing for more transparency not only in intergovernmental agreements, but also in commercial contracts.

So when we’ve been approaching these issues, we clearly understood there were two aspects we need to cover. The Intergovernmental agreements, where it’s clear what we’re been proposing, and also the commercial contracts. And there we wanted to go for automatic notification of all contracts of critical importance. Then, of course, we had to decide what critical importance means. And we took the approach which was used by DG Competition, who are starting to assess the case of a possible dominant position, if one market player is covering 40 or more percent of the market. If it would be over 50% it would be easier. It would clearly be a dominant position, but this is very rare.

So we decided to go for the 40% benchmark. This means that if you have a long-term contract for a period of more than a year, which would represent more than 40% of gas on the local market, this would be a contract worth to study, and that should be automatically notified to the Commission.

The Commission will consider the scenario what happens if such a contract is suddenly not executed. That’s why we need to know all the details of the contract so we can plan for an emergency, so that the country or the region would not collapse.

Can you be more specific? Are you referring to the market of the country, or the region?

Regarding the 40% it’s the market of the country. But you are asking the right question, because we realised as a conclusion of the stress tests, that it’s very difficult to talk all necessary precautions in these contingency plans, if you would try to resolve the situation only within national borders. Because the markets, especially for Central and East European countries are too small, we want to group them into regions, and therefore we want to motivate the member states to prepare these contingency plans on the regional level. Meaning that if there is a disruption of gas supply, say to Slovakia, protected customers, that is households, hospitals, SMEs, emergency services, should be supplied also by the countries in the region.

How about the next winter package for Ukraine, for the next winter? Do they need one?

We still need to assess the current winter package. So far, thanks also to the financial assistance which was offered by the European Commission, the EBRD, EIB and World Bank. So I think this winter should be OK if there are not any unforeseen circumstances. The current reserves in underground storages are around 10 bcm (billion cubic metres).

With the World Bank and the EIB, we developed a new approach to this financial instrument for the next winter, based on a revolving basis. It would be better to prepare for all eventualities as soon as possible, but of course there are developments in Ukraine. They approved some new measures, like the increase of transit fees, like the anti-monopoly fine, which make the situation much more complex. Also, there is a prolonged waiting for the ruling of the Stockholm arbitrage on a whole complex of issues. Hopefully, it will happen this year and will clarify many outstanding issues. This is important for the new framework, which clearly needs to be created for the cooperation between Russia and Ukraine in the field of gas supply.

We are always ready and on standby if it comes to any emergency situation. The previous winter, we used our monitors in the Kyiv dispatch centre. This winter there was no such need for that. Hopefully the situation will stay like this. But of course this gas cooperation also very much depends on the overall political climate in Ukraine and on the relations between Russia and Ukraine. So it’s very difficult to predict how this can evolve in the coming weeks and months.

It seems as though Russia and the Ukraine’s difficult relations have not affected the transit.

It’s a positive experience that in the last two years, the transit was unhindered. It was executed in a smooth way despite the difficult political circumstances. One of my very important arguments is that despite those circumstances the Ukraine transit plays a very important role, and that transit to the EU takes place without any significant problems. If there was any worry from any of the sides, we are ready to send, very quickly, the monitors.

When I met with the Ukrainian President over an EU summit, there was a proposal to start the negotiations of a new transit agreement between Russia and Ukraine. The EU was invited to be the honest broker, as we are in these trilateral gas deals, and from our side there was a positive response. But we need to see if we can explore such possibilities before the Stockholm arbitrage adopts its ruling on this big case [an arbitration court’s ruling on a price and debt dispute between Gazprom and Naftogaz is expected in the fall of 2016].

I would like to say also that this year, Ukraine consumed 25% less gas than last year, because people started finally to save the energy. There is a famous figure about what would happen if Ukraine reaches the EU average in energy efficiency, and that is that they would save the same amount of energy Spain consumes in one year. There is a huge potential in Ukraine for energy saving. They could be probably a net exporter for energy and gas.

Another fragile country is Greece. Do you have any messages for this country, which is struggling with the bailout, and the refugee crisis?

I am planning the visit to Greece on 10 March, as part of our Energy Union tour. Greece, of course, is ready to play a very important role in different transits of gas, if I can use this expression. The Southern Gas Corridor should bring the new Caspian gas to Europe before 2020, and this pipeline goes through Greek territory. We see very interesting developments in the Eastern Mediterranean, with gas fields discovered around Cyprus, close to Israel, and close to Egypt. Europe could become a destination of this gas, and again, Greece would play a very important role.

And now we are working on the IGB interconnector between Bulgaria and Greece, and the atmosphere is very positive. That would be a very important gateway for the new supplies which will be coming to Europe from the Caspian, but also from the Mediterranean, for shipping them North to Bulgaria and in perspective to the Western Balkan countries. These are of course projects we will discuss once in Greece. What we hear from the new energy minister is that they try to be as helpful as possible, that IGB will be built on time, and that Greece would be able to profit from its geographical location and become a quite important transit country from gas coming from at least two important directions.

How about electricity in Greece? Their national company is still a monopoly.

I’m sure the current Greek government has so many issues to deal with, that they have to concentrate according to their priorities. We will assess the country-specific recommendation to Greece jointly, on the occasion of the coming visit. 

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