Gazprom Strikes Back... OPAL exempted from the obligation to apply the TPA principle

The European Commission decided to exempt the OPAL gas pipeline from the obligation to apply the third-party access (TPA) principle.
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OPAL is a gas transmission pipeline approx. 470 km in length running through Germany (crosses the federal states of Mecklenburg-Vorpommern, Brandenburg and Saxony) along the Polish-German border, with a maximum capacity of approximately 35 bcm. It is an extension of the Nord Stream 1 pipeline. The entry point is situated in Lubmin near Greifswald by the Baltic Sea and the exit point in Brandov on the Czech-German border.

On 28 October 2016 the European Commission (EC) decided to exempt the OPAL gas pipeline from the obligation to apply the third-party access (TPA) principle. On the very same day the Bundesnetzagentur (German energy market regulator) signed a contract with Gazprom, Gazprom Export and OPAL Gastransport GmbH exempting the owners of the OPAL gas pipeline from the obligation to apply in full EU regulations on TPA. This contract enters into force on 31 December 2016.

The EC decision was widely criticised by the PGNiG Supply & Trading GmbH (owned by PGNiG SA) which filed complaint to the European Court of Justice against a decision by the European Commission.

The decisions and the mode of proceedings by the European Commission and the Bundesnetzagentur are without precedence. They are destroying the development of the competitive gas market and expanding the privileges enjoyed by Gazprom, which can in turn lead to the Russian company acquiring a monopoly in the supply of gas to Central and Eastern Europe. This is a serious threat to the security of gas deliveries to Poland and the entire region, said Piotr Woźniak, CEO of PGNiG Polish Oil and Gas Company.

In the opinion of the PGNiG Group the decision by the European Commission regarding the OPAL gas pipeline violates EU regulations concerning competition on the European natural gas market, Treaty regulations on legal certainty, regulations addressing the protection of third parties and proportionality, as well as the terms of the association agreement between the EU and Ukraine. Furthermore, in the process of making its decision the Commission acted in a discriminatory manner. Specific charges were presented during special PGNiG's press conference (05.12.2016).

What is more, both PGNiG SA and NAFTOHAZ Ukraine immediately demanded (28 November and 1 December 2016, respectively) suspension of the performance of the contract between Bundesnetzagentur, OPAL GmbH, Gazprom and Gazprom Export. Yet neither PGNiG SA nor NAFTOHAZ Ukraine have received a positive response to their demands from the Bundesnetzagentur.

The exemption of OPAL gas pipeline from the obligation to apply the TPA principle may result in strengthening Gazprom's monopolistic position: its access to the OPAL’s transmission capacity will be increased to 80%. This means that the Russian company will be able to bring even up to 20 bcm/year more gas to Germany via Nord Stream 1.

According to EU rules there could be some possible gas infrastructure exemptions based on following criteria:

  • the investment must improve security of supply and boost competition in the gas market
  • the investment could not go ahead without the exemption due to the level of risk
  • the infrastructure must be owned by a legally separate firm from the TSO in whose system it will operate
  • users of the infrastructure must pay for access
  • the exemption does not harm the functioning of the EU's internal gas market or the transmission system to which the infrastructure is linked

In 2009, the OPAL pipeline was fully exempted from third-party access and tariff regulation provisions. According to the revised decision, the use of 50 % of OPAL's capacity will be exempt from third-party access rules and the operation of the other 50 % of the pipeline capacity will be covered by EU market rules. As Agata Łoskot-Strachota, Szymon Kardaś and Tomasz Dąborowski (The Centre for Eastern Studies - OSW) pointed out:

The European Commission has not yet published the content of its decision regarding the OPAL pipeline in its official documents, and its press release raises numerous doubts, for instance due to the incomplete nature of the information contained therein.

EEH team is waiting for EC response regarding the full text of current decision including the justification.