Key eastern gas route remains blocked despite EU access rules

Source: Heren

2018/06/11

LONDON (ICIS)--A key eastern European gas pipeline, which should have been freed up for third party access at the expiry of a long-term legacy contract remains unavailable for cross-border trading, according to multiple sources interviewed by ICIS.

The Romanian transmission system operator, Transgaz, signed landmark interconnection agreements for firm and interruptible capacity with Bulgaria’s Bulgartransgaz and Ukraine’s Ukrtransgaz after two old transit contracts held by Gazprom along the first string of the trans-Balkan pipeline [T1] expired in 2016.

Under the agreements, Romania was expected to implement third party access on the Isaccea-Negru Voda 1 segment from October 2016.

However, an ICIS investigation has found that while Transgaz is applying third party access at its Negru Voda 1–Kardam interconnection point with Bulgaria, it has not done so at the Isaccea 1 point, where the terms of the legacy contract remain in place.

The capacity at the Negru Voda 1 – Kardam interconnection point has been mainly booked by Gazprom or Gazprom affiliates in the last two years, a source familiar with the matter told ICIS.

An Agency for the Cooperation of Energy Regulators (ACER) report published at the end of May notes that the Negru Voda 1–Kardam interconnection point remains congested and no interruptible capacity is available. The interconnection point was one of 17 out of 262 surveyed across the EU by ACER.

According to information published on the Gazprom website, Gazprom Export has a long-term contract for the supply of 2.9 billion cubic metres (bcm)/year with the Bulgarian incumbent Bulgargaz until 2022. The gas is delivered via the T1 pipeline across Ukraine and Romania, which has an estimated 5bcm/year capacity.

Because there is no third party access applied at the Isaccea 1 point, 2.1bcm/year of capacity remains unavailable for booking by third parties, according to the same sources.

Transgaz has said it has not been able to start cross-border trading with Ukraine because the interconnection point was required for the transit of natural gas to Bulgaria.

EU compliance

ICIS has learnt that the European Commission has been aware of the situation since it occurred at the end of 2016.

A spokeswoman said the commission would not comment on the lack of third party access on the pipeline, but added the commission was “neither a regulatory authority, nor a market player”.

“The commission’s role is to set up a legal framework,” the spokeswoman said. “The implementation and application of European laws falls to the EU member states and their respective national regulatory authorities.”

The Romanian regulator ANRE, as the authority tasked with the implementation of EU laws, did not reply to questions from ICIS.

A spokesman for the Bulgarian regulator DKER confirmed that third party access was applied at the Negru Voda 1 – Kardam interconnection point.

In a statement to ICIS, ACER said national regulatory authorities such as ANRE or DKER could apply long-term use-it-or-lose-it or firm day-ahead mechanisms to remedy contractual congestions, if relevant conditions were met.

“ACER monitors the implementation of network codes/guidelines - in this case the capacity allocation mechanism and congestion management procedures are the most relevant ones. We do not check on a structural basis whether the third party access or entry-exit regime is functioning. As always, the commission can start an infringement procedure, should a member state not have fulfilled its legal obligations,” ACER’s statement said.

Romania and Bulgaria were expected to carry out a survey for incremental capacity at the Negru Voda 1 – Kardam interconnection point as part of a wider exercise initiated by the European Network of Transmission System Operators for Gas (ENTSOG) last year and required by all EU member states as part of the capacity regulation. Both transmission system operators failed to do so.

An ENTSOG spokeswoman said the institution was aware that no such report had been undertaken by Transgaz and Bulgartransgaz for the Negru Voda 1 – Kardam interconnection point.

Neither Transgaz nor Bulgartransgaz commented specifically on the matter.