EU
deals Gazprom a competition
setback By Vladimir Socor
The European Commission has ruled that the
Gazprom-led consortium, Nord Stream, must allow
other gas suppliers to share the capacities of
that consortium's pipelines on German territory.
This requirement, known as third-party
access, is based on the European Union's
competition law and EU energy market legislation
(natural gas and electricity). It is designed to
mitigate the effects of vertically integrated
monopoly arrangements, forcing
a monopoly supplier to grant
access to its own infrastructure for third-party
competitors in a given market.
The objects
of the commission's decision are the OPAL and NEL
gas pipelines in Germany. These lines connect the
Nord Stream offshore pipeline (transporting
Gazprom's gas on the Baltic seabed) with Germany's
interior and farther afield in Europe. In effect,
the commission has denied the requests for OPAL
and NEL to be exempted from third-party access.
OPAL (Ostsee Pipeline Anbindungs Leitung,
or Baltic Connector Pipeline) starts from the
maritime Nord Stream's landfall point, at Lubmin
near Greifswald on the Baltic coast. It runs 470
kilometers southward to the German-Czech border,
enters for a short distance into Czech territory,
and turns westward into Germany again.
Owned 80% by the Gazprom-Wintershall joint
venture Wingas (as OPAL's operator), and 20% by
E.ON Ruhrgas, OPAL was completed and connected
with the offshore Nord Stream pipeline in 2011, at
a cost of 1 billion euros ($1.3 billion). OPAL has
an annual capacity of 35 billion cubic meters
(bcm), all dedicated to Gazprom's gas (until the
European Commission's decision).
NEL
(Norddeutsche Erdgas Leitung, or North German
Natural Gas Pipeline) runs also from Lubmin,
westward to Hamburg and toward the border with the
Netherlands. NEL runs for 440 kilometers, with an
annual capacity of 20 billion cubic meters, and is
connected with the Rehden gas storage site
(Germany's largest).
It is due to be
completed and connected with the offshore Nord
Steam in 2012-2013, at a cost of another 1 billion
euros. NEL's owners are Wingas again with 70% (and
NEL operator), E.ON Ruhrgas with 10% and
Nederlands Gasunie (a late entrant) with 20% of
the shares.
OPAL and NEL exemplify the
implantation of Gazprom-led, vertically integrated
monopoly arrangements in Germany, where Gazprom
acts as the supplier and co-owner of the
transmission infrastructure at the same time.
A similar example is Wingas, a parity
venture of Wintershall and Gazprom, with jointly
owned distribution pipelines in Germany and
extending into neighboring countries. Wintershall
has long been a trailblazer of such arrangements
for Gazprom. Their joint venture Wingas also
operates the Rehden storage site, with a capacity
of 4.2 bcm, situated in Germany's north-west,
whence Gazprom also targets the Dutch market.
In 2009, German regulatory authorities had
granted OPAL exemptions from third-party access
and from transit-fee regulations for a period of
22 years of operation. NEL had applied for similar
privileged treatment, with the outcome uncertain,
although Moscow seemed to feel confident of
success.
The European Commission, however,
has now disallowed those anti-competitive
exemptions. As a consequence, OPAL and NEL would
have to make available from 35% to 50% of pipeline
capacities for other gas suppliers - potential
competitors to Gazprom.
The combined
capacities of OPAL and NEL add up to 55 bcm
annually, coinciding with the combined capacities
of the Baltic offshore pipelines, Nord Stream One
and Two, at 27.5 bcm of Russian gas annually each.
Nord Stream One is operational since 2011 (though
well below capacity), Nord Stream Two is planned
to become operational in 2013 (though far from
certain).
If the commission's decision is
enforced, Gazprom could then use 65% of NEL's
capacity and 50% of OPAL's capacity for Gazprom's
own gas. With Gazprom and its Nord Stream
consortium partners limited to using only parts of
OPAL's and NEL's capacities, it follows that
Gazprom would have to reduce its gas deliveries
through the Nord Stream pipeline(s)
correspondingly.
Whether Gazprom has the
gas volumes available to deliver 55 bcm annually
through Nord Stream One and Two is doubtful,
particularly since the mothballing of the Shtokman
offshore gas extraction project. Nord Stream forms
a major element in Gazprom's strategy to build
surplus export pipeline capacities, so as to play
various transit and consumer countries against
each other. This strategy pre-dates the 2009-11
economic crisis in Europe and Russia.
If
Gazprom and its partners are serious about
building Nord Stream Two, it would signify a
return to that strategy in the post-crisis period.
Moscow presents Nord Stream (as it does
South Stream) as a competitive threat to Ukraine's
gas transit system. Threatening to re-direct
export volumes from Ukrainian transit into Nord
Stream (as it successfully threatened Belarus, and
might not be above acting similarly in Poland with
the Yamal pipeline), Moscow seeks to intimidate
transit countries into ceding control of their
pipelines to Gazprom.
If, however, Gazprom
must downsize exports via Nord Stream to the level
of pipeline capacities available to Gazprom in the
OPAL and NEL pipelines, this would mitigate
Gazprom's threats to redirect major transit
volumes away from Ukraine.
The threat to
Ukraine rests mainly on the South Stream project,
however. Gazprom has recruited a new chairman of
South Stream's board of directors. He is Henning
Voscherau, former mayor of Hamburg,
Social-Democrat politician and brother of Eggert
Voscherau, board chairman of BASF, the parent
company of Wintershall, Gazprom's partner in
Wingas.
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