Russia’s Gazprom obstructs Romanian cross-border trading – sources

LONDON (ICIS)–Russian supplier Gazprom has blocked third parties from accessing a key eastern European gas pipeline for cross-border trading since the expiry of a long-term legacy contract, according to several regional sources close to the matter.

Two old transit contracts held by Gazprom along the first string of the trans-Balkan pipeline (T1) expired in 2016. Under interconnection agreements for firm and interruptible capacity between Bulgaria’s Bulgartransgaz and Ukraine’s Ukrtransgaz, Romania was expected to implement third party access on the Isaccea-Negru Voda 1 segment of the line from October 2016.

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.

Obstruction

Several regional sources told ICIS that EU third party access rules could not be implemented at Isaccea 1 because Gazprom had threatened to curtail the supply of natural gas to regional off-takers ahead of winter 2016.

The revelations come less than a month after the commission settled an anti-trust case against Gazprom.

The commission probe noted that the Russian producer was blocking the flow of natural gas in eastern European countries such as Bulgaria, by imposing destination clauses in supply contracts which effectively block the resale of gas.

However, ICIS has found that Gazprom had also been pressuring Romania, which was not identified in the commission’s investigation.

Sources said Gazprom has been forcing the implementation of the Russian gas day, rather than the European gas day for the delivery of gas to regional countries, which complicates the implementation of EU network codes at the border.

The Russian gas day starts at 10:00 hours Moscow time or 08:00 hours Central European Time, while the European gas day starts at 05:00 hours Coordinated Universal Time (UTC) for winter time or 04:00 hours UTC for summer time, when daylight saving is applied.

Gazprom refused to comment on any of the allegations made by sources interviewed for this investigation.

Russian gas day

Regional and EU sources told ICIS that Bulgaria, Romania and Ukraine were expecting to implement EU network codes at the expiry of the legacy contracts in 2016, but when they informed Gazprom of their intention, but their notification was ignored.

They were also expecting that the metering of the natural gas would move from the Ukrainian side at Orlovka, where the Gazprom transit contract remains in place until the end of 2019, to the Romanian side at Isaccea 1.

However, when all counterparties, including Gazprom, were due to sign the new protocols, the Russian producer refused to comply, quoting the gas day mismatch, according to the same sources.

“It was at that time that they [Gazprom] threatened Bulgaria and Romania to stop the flow,” a source familiar with the matter said. “No one wanted to do so ahead of winter, therefore, the parties had to sign an amendment to the agreement to postpone the application of new business rules.”

A Transgaz source noted that the transit was being carried out along T1 in line with the terms of the supply contracts and that circumstances may only change if the supply of gas were to be diverted via TurkStream which Gazprom is building across the Black Sea to Turkey.

He also acknowledged that the Russian gas day was applied at the border, in order to ensure consistency with the volumes transiting Ukraine.

“This has always been the case. The supplier controls, through a pre-established measurement at a specific hour if quantities delivered and measured on the Russian-Ukrainian border match quantities exiting Ukraine and earmarked for clients downstream,” a Transgaz source told ICIS.

ICIS understands that despite the fact that these terms were expected to apply only temporarily over the critical winter period of 2016, they continue to remain in place.

EU informed

Two sources familiar with the 2016 negotiations said the European Commission was informed of the situation at the time.

Ukraine is not an EU member, but as a contracting party of the Energy Community it is expected to implement EU rules at interconnection points.

In a statement to ICIS, the Ukrainian transmission system operator, Ukrtransgaz, confirmed that Gazprom had rejected its proposal to bring the Orlovka-Isaccea 1 interconnection point in line with the requirements of the EU’s network codes.

“On the Ukrainian side, the interconnection point Orlovka-Isaccea 1 is still blocked by the existing contract between Naftogaz [the Ukrainian incumbent] and Gazprom until 2020. We plan to allow third party access at that point after the expiry of the transit contract in 2020.

“As far as we know, T1 is not subject to long-time booking by Gazprom in Bulgaria. For that reason, we do not see any legal obstacles to offering third party access from Bulgaria to Ukraine via Romania after 2019.”

Metering issues

There were also expectations that Gazprom would start providing data related to nominations and flows broken down by individual regional customers to Transgaz.

Under EU rules and when third party access applies at interconnection points, the supplier of gas should provide information related to nominations and flows broken down by individual off-takers to relevant grid operators.

The data provided by the gas supplier should match the measurements carried out by the grid operator which performs the transit.

However, ICIS understands that Gazprom continues to only send combined data to Transgaz, which may be an indication that the terms of the legacy contract apply at the Isaccea 1 point.

It is not known whether Transgaz has asked Gazprom to send the data as required under EU rules. Gazprom did not comment on this either.

In a statement to ICIS, Transgaz said measurements were carried out both at Isaccea and Negru Voda according to nominations made by contracting parties, namely Gazprom and Bulgargaz as the buyer of Russian gas. The results of the measurements were certified by the Russian, Ukrainian, Romanian and Bulgarian counterparties.