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NEGP requires exceptions from EU directives-Medvedev

01.01.70

The Northern Europe Gas Pipeline (NEGP) project requires exceptions from the European gas directives concerning access for other countries to the gas transport system in order to be profitable, Gazprom Deputy Chairman and head of Gazexport Alexander Medvedev said at the ninth Russian economic forum. Such exceptions were made for the BBL gas pipeline project, Interfax quoted him as saying.

Medvedev also mentioned the TAG gas pipeline project in which 140 companies gained access to the pipeline through a tender though only five of them had gas resources. The other 135 companies had no gas and approached Gazprom and other companies with proposals to resell gas. He said the cost of the gas was up to 50 percent of the premium on the price paid by the companies for access to transport capacity. Medvedev suggested passing that cost on to the customers, but said they would not be pleased with this. I would recommend reviewing the terms of that tender, he said.

He criticised the Energy Charter transit protocol and said it was dead in the water and did not reflect the real market conditions. We havent heard any reaction by the Energy Charter secretariat to the events of January surrounding supplies of gas to Europe through Ukraine, he said. Medvedev said the transit protocol should take into account the interests of gas producers, increase the responsibility of transit countries and outline the rules for distributing capacity.

The authorities in European Union countries have not ceased to covertly undermine the system of long-term contracts for gas supplies, he said. The European Union officially is not opposed to the long-term contracts but indirectly insists on the mandatory resale of some of the imported gas without considering the economic factors and consequences of this, he said.

Essentially this means the European Union is interfering in commercial activity of companies that have long-term obligations, artificially creating a surplus in a specific location and a shortage at the destination, he said.

Andris Piebalgs, the EUs energy commissioner, rejected Medvedevs claims that the international Energy Charter Treaty demanding free access to pipelines was stillborn. Piebalgs urged Russia to ratify the treaty, which entered into force in 1998, during its presidency of the G8 group of rich industrial nations, to prove its commitment to energy security, the Financial Times reported.

Interfax quoted Medvedev as saying the concept of long-term contracts was built on economic conditions of specific markets and these factors are considered in determining the amount and price for gas. The administrative actions of the EU to manage the gas market can only cause serious concern since we feel they present a threat to the stability of the European gas market and violate the entire gas security system in the region, he said.

He said there is no common European gas market and noted the substantial differences in the tax systems and the size of the gas markets and level of their development.

Medvedev said a mechanism must be created to guarantee capital investment in major gas projects to increase energy supply in Europe. He said Gazprom plans to develop the production and export of LNG as an additional means of improving energy security. Gazprom in September 2005 sent the first shipment of LNG to the American market and the first shipment to Britain in April 2006, he said. However, instead of supporting these shipments there was hysteria in the British press that the Vikings were at the gates and so on.

I hate to disappoint (them), but the Vikings have been in Britain since 1999, he said, adding that Gazprom Marketing and Trading has been working in the country since 1999 and has had no complaints.

Expert opinion

Halter Marek

02.12.06

Halter Marek
Le College de France
Olivier Giscard dEstaing

02.12.06

Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi

02.12.06

Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace

02.12.06

Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal

01.12.06

Peter I. Hajnal
Toronto University, G8 Research Group