site.btaEC Invites Comments on Gazprom Commitments Concerning Benefits for Bulgarian Gas Market

EC Invites Comments on Gazprom Commitments Concerning Benefits for Bulgarian Gas Market

Brussels, March 13 (BTA) - The European Commission (EC) invites comments from all interested parties on commitments submitted by Gazprom to address the Commission's competition concerns as regards gas markets in Central and Eastern Europe, the EC said in a press release on Monday. The commitments will enable cross-border gas flows at competitive prices.

The Commission's main concerns are that Gazprom isolated the Bulgarian gas market and may have been charging excessively high prices in Bulgaria compared to Western European benchmarks, especially liquid gas hubs.

Gazprom is a dominant player on the Bulgarian upstream wholesale gas market. The isolation of the Bulgarian gas market has been due in part to Gazprom's territorial restrictions contained in its gas supply contracts with Central and Eastern European customers. Another reason why there has been no free flow of gas across Bulgarian borders is that access gas infrastructure is not available and there is a lack of interconnection agreements with neighbouring countries at the existing interconnection points. Both could enable more diversified gas imports, reads the press release.

Nevertheless, the functioning of the Bulgarian gas market has shown some improvement in recent years. Following the initiation of the Commission's antitrust proceedings, Gazprom has removed the explicit export ban from all its Bulgarian supply contracts that have not expired in the meantime. Due to the fall in oil prices, the prices charged by Gazprom under its existing Bulgarian oil-indexed supply contract have also decreased. Furthermore, in recent months, the Bulgarian and Greek transmission system operators have agreed on a provisional interconnection agreement on the Greek-Bulgarian interconnection point, in order to enable reverse flows of gas from Greece to Bulgaria. However, the conclusion and implementation of a full interconnection agreement between Greece and Bulgaria is made difficult by certain provisions under Gazprom's supply contracts with both countries, as well as under its gas transport contract in Bulgaria.

Against this background, Gazprom's commitments provide a clear framework facilitating the free flow of gas across Bulgarian, and ensuring that Bulgarian customers could benefit from competitively priced gas now and in the future. They also actively integrate the Bulgarian gas market, including by removing the obstacles to a full interconnection agreement between Bulgaria and Greece described above.

In the course of its investigation, the Commission found that the inability to refer to prices at competitive gas hubs was one of the key drivers of higher prices in Central and Eastern Europe. Gazprom's commitments will allow Bulgarian customers to make sure that the price they will pay is competitive. They will be allowed to ask for a renegotiation of their gas price, if it diverges from Western European price benchmarks, including prices at competitive gas hubs. This will ensure that Bulgarian gas prices are closer linked to prices that are formed in parts of the EU where other sources of gas are available and prices are competitive. Such contractual price revisions will also become more frequent and their timing streamlined. And of course, a better integrated Central and Eastern European gas market, helped by Gazprom's commitments, is in itself a driver to ensure competitive prices.

Gazprom will commit not to seek damages from its Bulgarian partners following the termination of the South Stream project. Without prejudice to whether such claims would have been valid in the first place, this will give the Bulgarian companies concerned much needed business certainty, reads the press release.

Gazprom will remove, once and for all, any market segmentation clauses in its gas supply contracts with Central and Eastern European customers, including of course with Bulgarian customers. This will enable the free flow of gas within Central and Eastern Europe. Bulgarian customers will be able to both export and import gas to/from other EU gas markets without any restrictions resulting from Gazprom's supply contracts.

The provisions in Gazprom's supply and transport contracts on the monitoring and metering of gas in Bulgaria have contributed to isolate the Bulgarian gas market from the neighbouring EU gas markets. Gazprom has committed to make changes to the relevant contractual provisions to enable cross-border flows of gas into Bulgaria. The result would be to put the Bulgarian operator of the gas transmission infrastructure in control of the cross-border flows of gas and facilitate interconnection agreements between Bulgaria and its EU neighbours, in particular with Greece.

At the moment, Bulgarian customers are limited in their ability to seek alternative gas suppliers, because those suppliers do not have access to infrastructure which allows them to ship the re-sold gas to Bulgaria. Gazprom's commitment will enable gas from other parts of Central and Eastern Europe to be brought to Bulgaria under swap-like operations. It will enable Bulgarian customers to seek alternative gas suppliers, even before the connecting infrastructure becomes available.