EC obliges Gazprom to enable free flow of gas at competitive prices in CEE markets, including Bulgaria

Written by on May 24, 2018 in Bulgaria - Comments Off on EC obliges Gazprom to enable free flow of gas at competitive prices in CEE markets, including Bulgaria

The European Commission said on May 24 2018 that it had adopted a decision imposing on Gazprom a set of obligations that address the Commission’s competition concerns and enable the free flow of gas at competitive prices in Central and Eastern European gas markets, to the benefit of European consumers and businesses.

Among other points, the Commission said that it was concerned that Gazprom imposed territorial restrictions in its supply agreements with wholesalers and some industrial customers in all eight EU countries concerned – Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia.

“These restrictions include export bans and clauses requiring the purchased gas to be used in a specific territory (destination clauses) and other measures that prevented the cross-border flow of gas.”

In response, the Commission decision requires Gazprom to remove all such contractual barriers to the free flow of gas in Central and Eastern European gas markets, regardless of whether they make cross-border sales impossible or merely financially less attractive. Gazprom will also not re-introduce such clauses in the future.

Gazprom has to adapt provisions in its contracts regarding the monitoring and metering of gas in Bulgaria, which have isolated the Bulgarian gas market from neighbouring EU gas markets, the European Commission said.

“This will allow the transfer of control from Gazprom to the Bulgarian operator of the gas transmission infrastructure. Following the market test, Gazprom clarified a number of technical elements to ensure the obligation would be fully effective.”

These obligations will remove contractual obstacles created by Gazprom, which stand in the way of the free flow of gas in Central and Eastern Europe.

The European Commissioner in charge of competition policy, Margrethe Vestager, said: “All companies doing business in Europe have to respect European rules on competition, no matter where they are from.

“Today’s decision removes obstacles created by Gazprom, which stand in the way of the free flow of gas in Central and Eastern Europe. But more than that – our decision provides a tailor-made rulebook for Gazprom’s future conduct. It obliges Gazprom to take positive steps to further integrate gas markets in the region and to help realise a true internal market for energy in Europe.And it gives Gazprom customers in Central and Eastern Europe an effective tool to make sure the price they pay is competitive.

“As always, this case is not about the flag of the company – it is about achieving the outcome that best serves European consumers and businesses. And the case doesn’t stop with today’s decision – rather it is the enforcement of the Gazprom obligations that starts today.”

Gazprom is the dominant gas supplier in a number of Central and Eastern European countries. In April 2015, the Commission sent a Statement of Objections to Gazprom.

It set out the Commission’s preliminary view that the company breached EU antitrust rules by pursuing an overall strategy to partition gas markets along national borders in eight EU countries (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia).

This strategy may have enabled Gazprom to charge higher gas prices in five of these Member States (Bulgaria, Estonia, Latvia, Lithuania andPoland).

The May 24 2018 Commission decision puts an end to this behaviour by Gazprom. Furthermore, it imposes on Gazprom a detailed set of rules that will significantly change the way Gazprom operates in Central and Eastern European gas markets.

These include no more contractual barriers to the free flow of gas: Gazprom has to remove any restrictions placed on customers to re-sell gas cross-border.

Obligation to facilitate gas flows to and from isolated markets: Gazprom will enable gas flows to and from parts of Central and Eastern Europe that are still isolated from other Member States due to the lack of interconnectors, namely the Baltic States and Bulgaria.

Structured process to ensure competitive gas prices: Relevant Gazprom customers are given an effective tool to make sure their gas price reflects the price level in competitive Western European gas markets, especially at liquid gas hubs.

No leveraging of dominance in gas supply: Gazprom cannot act on any advantages concerning gas infrastructure, which it may have obtained from customers by having leveraged its market position in gas supply.

“Combined, these obligations address the Commission’s competition concerns and achieve its objectives of enabling the free flow of gas in Central and Eastern Europe at competitive prices,” the Commission said.

The Commission decided to make these obligations (so-called “commitments”) legally binding on Gazprom (under Article 9 of the EU’s antitrust Regulation 1/2003).

If a company breaks any of these obligations, the Commission can impose a fine of up to 10 per cent of the company’s worldwide turnover, without having to prove an infringement of EU antitrust rules.

“More generally, effective competition in Central and Eastern European gas markets does not only depend on the enforcement of EU competition rules but also on investment in gas supply diversification, well-targeted European and national energy legislation and their proper implementation. This is why it is a key priority of the Commission to build a European Energy Union,” the Commission said.

(Photo: Gazprom)

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