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EU lifts cap on Gazprom's use of Nord Stream pipeline link
October 28, 2016 / 4:06 PM / a year ago

EU lifts cap on Gazprom's use of Nord Stream pipeline link

BRUSSELS (Reuters) - The European Union has lifted a cap on Gazprom’s (GAZP.MM) use of the Opal pipeline in Germany which takes gas from its Nord Stream Baltic Sea pipeline to end-users in Germany and the Czech Republic, opening the way for Russia to expand Nord Stream’s capacity and bypass Ukraine as a gas transit route.

A general view shows the headquarters of Gazprom in Moscow, Russia, June 30, 2016. REUTERS/Maxim Shemetov/File Photo

Together with a separate move to settle an antitrust case against Gazprom, the resolution of key disputes with Moscow angers some EU nations who want a tougher stance taken towards Russia over its military actions in Ukraine and Syria.

“It’s very good for Gazprom, it’s very good for Europe and it’s very bad for Ukraine,” Thierry Bros, a senior researcher at Oxford Institute of Energy Studies, said of the Opal decision.

Russia’s state gas exporter, which supplies around a third of the EU’s gas, retains its access to 50 percent of the pipeline under the new rules.

But it gains the right to bid for another 7.7 billion cubic metres (bcm) of gas carrying capacity or as much as 12.8 bcm if other suppliers do not take up a provision giving them access, a Commission official said on Friday.

Reuters reported earlier that rivals will be given access to up to 20 percent of Opal’s 36 bcm of annual capacity.

Since its completion in 2011 Gazprom has only been allowed to use 50 percent of the Opal pipeline under an EU ruling to aimed at preventing dominance of the supply infrastructure.

The Commission said its latest decision, which applies until 2033, would improve competition: “This is not just a decision we’ve taken for political reasons, that we want to be friends with Gazprom,” a Commission official said.

It modifies a proposal made by Germany in May that would have given Gazprom almost full access to the pipeline. A spokesman for the German energy regulator Bundesnetzagentur said it would now hold talks with the affected companies.

In giving ground on Opal the EU executive is seeking guarantees that Gazprom will keep piping gas across Ukraine after its contract expires in 2019, an EU source said. It also wants three-way talks with Kiev over winter transits, the source said.

“We are not trading in a void,” an EU source said.

European energy chief Maros Sefcovic said on Thursday he was “making a maximum effort” to broker a deal between Russia and Ukraine to ensure uninterrupted gas supplies for European and Ukrainian clients this winter.

“So far we haven’t been successful,” Sefcovic told Reuters, adding he hoped to meet with Russian official soon.

President Vladimir Putin said on Thursday that Russia was ready to resume supplies to Ukraine “any second” if Kiev agreed to pre-pay. .

NORD STREAM 2

Opening up Opal also removes a key hurdle for Gazprom’s 9.9 billion-euro plan to double the capacity Nord Stream pipeline under the Baltic Sea that had stalled investment from European partners in the project.

With Russia’s gas routes to Europe increasingly politicised since its annexation of Ukraine’s Crimea region in 2014, many eastern European countries and the United States have opposed the project as threatening to sideline Ukraine as a transit route.

As a result of changes to Opal alone, Ukraine’s state energy company said in a statement on Thursday it could stand to lose as much as 425 million dollars a year in transit fees.

Before Friday’s decision the Polish state-owned gas company PGNiG PGN.WA threatened to sue the Commission over the Opal decision, saying it threatened its own security of supplies.

However, the Commission has said it sees no need for Nord Stream 2, with an official saying Friday’s decision further reduces the rationale for a new big pipeline.

Gazprom’s partners in the Nord Stream 2 project are Uniper (UN01.DE), Wintershall (BASFn.DE), Shell (RDSa.L), OMV (OMVV.VI) and Engie (ENGIE.PA). But it said it might cancel the agreement after Poland’s anti-monopoly watchdog objected to the consortium..

Additional reporting by Vera Eckert in Berlin and Oleg Vukmanovic in Milan; Editing by Tom Heneghan, Greg Mahlich

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