Romania's Transgaz confirms no EU rules at key interconnection point because of Gazprom

05 July 2018 15:56 Source:ICIS

LONDON (ICIS)--Romanian gas transmission system operator Transgaz has confirmed that it has been unable to apply a requirement of the European network code at a key interconnection point after Russia’s Gazprom threatened to cut supplies to Eastern Europe ahead of winter.


Background

Responding to an extensive investigation carried out by ICIS last month, Transgaz admitted that it had “faced difficulties” in implementing the European gas day as required by the European network code and Order 34 of 2016 by the Romanian regulator ANRE.

The EU gas day should have been applied at the Orlovka-Isaccea 1 interconnection point along the Trans-Balkan 1 (T1) pipeline on the Romanian-Ukrainian border, after a legacy contract expired at that point and the old terms should have been replaced by new EU rules.

The investigation showed that Gazprom requested that Transgaz apply the Russian gas day, rather than the European gas day, for the delivery of gas to regional countries. This complicated the implementation of EU regulations and ultimately the introduction of third party access on a key transport route.


‘Forced to abandon’

In a statement to ICIS, Transgaz said: “We confirm that at the time, Gazprom Export [a subsidiary of Gazprom] envisaged the curtailment of supplies at the Isaccea 1 interconnection point if the [Russian] gas day was not respected.

“To avoid jeopardising the security of supply to Bulgaria, Transgaz was forced to abandon the implementation of the EU gas day at the Isaccea 1/Orlovka interconnection point. Transgaz kept the European Commission informed of the situation that occurred.”

Transgaz admitted that although the two interconnection points Orlovka-Isaccea 1 and Negru Voda 1-Kardam are located along the same T1 line which transits Romania, different gas days apply.

It said that the European gas day, which starts at 05:00 UTC during winter and 04:00 UTC in summer, only applies at the Negru Voda1-Kardam interconnection point with Bulgaria after another legacy transit contract with Bulgarian incumbent Bulgargaz expired in 2016.

However, this is not the case at Orlovka-Isaccea 1 where the Russian gas day applies and which starts at 06:00 UTC in winter and 05:00 UTC in summer.

“At Orlovka-Isaccea 1 we cannot apply the same definition of the gas day [as at Negru Voda 1-Kardam] because of current commercial conditions related to the delivery of gas by Gazprom to Bulgargaz via Isaccea 1.”

Gazprom did not comment by publication time.


Commercial data

Transgaz did not explain what the conditions related to, but the ICIS investigation revealed that Gazprom was expected to provide data linked to nominations and flows broken down by individual customers to Transgaz once the legacy contracts expired.

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.


Closed system

In its defence, Transgaz argued that the launch of third party access and the allocation of capacity at the two interconnection points via auctions as required by the EU’s network codes was not possible because T1 was not connected to the internal Romanian transmission system. It describes T1 as a “closed system.”

Bulgargaz currently has a 2.9bcm/year supply contract with Gazprom Export along T1 until 2022, but there is at least another 2bcm/year spare capacity that, at least theoretically, could be used by third parties along this pipeline.

However, given current circumstances, capacity auctions could only be organised at the Negru Voda 1-Kardam interconnection point and the companies, which won capacity here were allocated similar capacities at the Orlovka-Isaccea 1 interconnection point.

Transgaz said that since 2016, two companies had taken part in auctions obtained capacity along this stretch of T1, although it did not name them. Multiple sources told ICIS that these may have included Gazprom or Gazprom-affiliated companies.


Contractual congestion

Transgaz also responded to claims made in a report by ACER at the end of May, and quoted in the ICIS investigation. The study by the Agency for the Cooperation of Energy Regulators (ACER) noted that the Negru Voda 1–Kardam interconnection point remained congested and no interruptible capacity was available.

Transgaz said backhaul capacity was “temporarily suspended” at this interconnection point because it was not possible to offer a similar service at the Isaccea1-Orlovka point.

An ACER source had said that Transgaz could still use long-term use-it-or-lose-it (LT UIOLI) or firm day-ahead use-it-or-lose-it (FD UIOLI) mechanisms to clear the congestion. These are basic mechanisms stipulated by EU network codes to clear contractual congestions.

Transgaz did not address an ICIS question as to why it did not apply the two instruments at the interconnection points.


Ukrainian contract

Instead, it said it could not apply backhaul along the T1 because Ukrainian counterpart Ukrtransgaz could not fulfil its responsibilities, which arise from an interconnection agreement signed by the two operators in 2016.

Ukrtransgaz told ICIS in a previous statement that it had fought to bring the Orlovka-Isaccea 1 interconnection point in line with the requirements of the EU network codes, but Gazprom had rejected its proposal.

It explained that on the Ukrainian side, the interconnection point was still blocked by an existing contract between Ukrainian incumbent Naftogaz and Gazprom until 2020.







By Aura Sabadus