Page 9 - FSUOGM Week 36 2019
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FSUOGM PIPELINES & TRANSPORT FSUOGM
EU court backs cap on Gazprom’s use of German pipeline
GERMANY
The ruling could impede Russian flows via the Nord Stream pipeline.
THE EU Court of Justice (ECJ) has quashed a 2016 decision by the European Commission granting Russia’s Gazprom expanded use of a German pipeline. The politically charged rul- ing could restrict Gazprom’s sales in Europe, which have already seen a slump this year, and also undermine its controversial Nord Stream 2 project.
The 36bn cubic metre per year OPAL pipeline plays a vital role in distributing gas from Gaz- prom’s Nord Stream across Germany and other Central European countries. The EC imposed a 50% cap on Gazprom’s use of the pipe in 2011, however, to prevent the Russian exporter from dominating regional supply. In practice, this meant that OPAL was left half empty.
Finding its position increasingly difficult to defend, the EC lifted the restriction in October 2016. But this move also met with opposition, with Poland and several other central and east- ern European countries challenging the decision in court.
“The General Court annuls the Commis- sion decision approving the modification of the exemption regime for the operation of the OPAL gaspipeline,”theECJsaidinastatementonSep- tember 10. “That decision was adopted in breach of the principle of energy solidarity.”
“The court has agreed with our arguments,” Polish Energy Minister Krzysztof Tchorzewski responded, noting the ruling would prevent risks to regional supply security. Poland’s state gas company PGNiG weighed in, saying the
EC’s decision had been in conflict with EU law, including its Third Energy Package.
The ECJ’s verdict can be enforced immedi- ately, although the EC may still launch an appeal.
Ramifications
The OPAL ruling could have a sweeping impact on Gazprom’s strategy in Europe.
The reintroduction of the 50% cap would limit gas flows via the 55 bcm per year Nord Stream and its twin project, the 55 bcm per year Nord Stream 2, tentatively scheduled to start up at the end of this year.
This challenge comes at a time when Gaz- prom is struggling to fend off the threat to its European market share from soaring LNG imports. The Russian firm would likely have to divert some supplies from the Nord Stream pipelines using Ukraine and other export routes, just as it is preparing to reduce Ukrainian transits drastically, starting next year.
Russia and Ukraine’s long-term transit contract is due to expire on December 31, and talks on reaching a new agreement have stalled. Ukraine and its EU partners want Russia to agree onalonger-termcontractforasmuchgasaspos- sible. Russia, on the other hand, is interested in a shorter-term deal that would allow it to cut shipments as soon as Nord Stream 2 and another pipeline it is building, TurkStream, are running at full capacity.
If enforced, today’s court ruling will weaken Gazprom’s negotiating position substantially.
Week 36 11•September•2019 w w w . N E W S B A S E . c o m P9
