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Gazprom told South Stream natural gas pipeline not EU compliant

05 Dec 2013 15:48:41 | esgm

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International government agreements (IGAs) for the development of the South Stream natural gas pipeline do not comply with EU legislation, according to the European Commission.

The commission has advised the member states concerned and the Russian energy minister to re-negotiate the agreements.

EU unbundling regulations state new gas pipelines must not be managed by the supplier or suppliers using the infrastructure, in this case Gazprom.

But IGAs signed indicate that Gazprom will be in control of South Stream in breach of EU law.

The IGAs also show that Gazprom will be responsible for arranging tariffs on the infrastructure. EU legislation states this must, however, be done by a country’s transmission system operator or an independent organisation, with the tariffs then ratified by the national regulator.

Lastly, any new pipeline must allow third party access to the infrastructure, unless an exemption has been granted. But the existing IGAs indicate Gazprom will be the only user of South Stream, with no stipulations that suggest other shippers will have access.

Marlene Holzner, spokeswoman of the commission, said that if the agreements are not renegotiated to comply with EU law then infringement proceedings would commence. She said that some of the IGAs are compliant and it is not clear at this stage which agreements are in breach of EU policy.

However, Gazprom has indicated that it considers the IGAs to be final.

A spokesperson for the Russian producer said: “Gazprom and its partners do not think it is necessary to reconsider the intergovernmental as well as inter-corporate agreements connected with the South Stream project.

“Onshore construction permits we’ve obtained in 2013 spell the fact that the South Stream matches the requirements. Our cooperation presently is in no breach of the legal framework and will match it in future.”

Holzner said the EU would not interfere with construction, which has already begun in Bulgaria and Serbia, but that the important moment will come when South Stream is operational.

If other companies are denied access to the pipeline at this point then the EU will look to take action. She added that banks financing the project would likely be put off providing capital unless there is clarity around the legal position.

Last month Gazprom singed an agreement over third-party access on the OPAL pipe that takes Nord Stream gas from Russia onwards through Germany ( see ESGM 20 November 2013 ). Ben Samuel

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