According to latest drafts seen by Europolitics,the European Commission is no longer proposing for itself wide-ranging powers in a new regulation on security of gas supply. The new regulation, repealing the existing directive, is scheduled for adoption by the Commission, on 16 July ⁽¹⁾. The powers now sought by the Commission are less controversial, but still include a new ‘anti-Gazprom clause’, whereby both member states and gas companies would have to reveal to the Commission agreements with the Russian gas giant, as well as with other companies, and long-term intergovernmental agreements. Member states no longer have to hand over powers allowing the Commission to force the release of gas from strategic gas storage. Member states, however, could still, in theory, be prevented by the Commission from hoarding stocks for their own nationals. The Commission still maintains that competent authorities designated by member states enable permanent reverse flow capabilities on all intra-EU gas interconnectors within two years.

The new proposal is a clear response to the Russian-Ukrainian gas crisis and the “unprecedented” disruption of gas supplies to Europe. Formulated as a regulation rather than a directive, the provisions would be directly applicable to member states, companies and customers. The aim is to reach a common minimum of security of supply standard and create incentives to build the necessary infrastructure and improve the level of preparedness in the event of a crisis. The Commission claims “detailed” consultations of interested parties, notably in the Gas Coordination Group.

EMERGENCY STOCKS

The bone of contention is certainly going to be the power over national stocks outlined in Articles 9 and 10. But the Commission no longer requires, in a European emergency, that member states release strategic gas storage. However, under Articles 9 and 10, competent authorities and companies shall not introduce measures that “unduly” restrict the flow of gas across borders. Finally, the Commission no longer “requires” but only “recommends” changes to member state emergency plans. These provisions, nonetheless, still touch the sensitive area of national sovereignty.

Whatever the (growing) risk of a repeat gas crisis between Ukraine and Russia, the Commission appears mindful in proposing weak provisions in the proposed gas regulation along the lines of the new oil stocks directive (see Europolitics 3772). In reaching political agreement, on 12 June, member states firmly rejected the idea of giving the Commission the ability to force member states to release oil stocks in an emergency. The Commission “should” only “recommend” release, and member states “should” only follow such a recommendation.

ANTI-GAZPROM CLAUSE

An ‘anti-Gazprom clause’ is also likely to annoy those member states closest to the Russian energy giant and to the Kremlin, notably Italy and Germany. Articles 12 and 13 would require that member states notify the Commission of all intergovernmental gas supply agreements with third countries dealing with security of gas supply. Companies, too, would have to notify the Commission of details, such as volume and contract duration (but not price) of all contracts, concluded with suppliers from third countries. The latest versions of the Commission’s proposals, however, do not contain a clause about fully respecting companies’ ‘confidentiality’. It is difficult to see how such a provision would sit alongside Gazprom’s infamous confidentiality clauses.

Under the infrastructure standards outlined in Article 6, the Commission is also seeking the power to force competent authorities designated by member states to enable permanent reverse flow capabilities on all intra-EU gas interconnectors within two years. Whilst increasing the reverse flow abilities of interconnectors is a sensible idea in countries like Austria, the Czech Republic, Slovenia and Germany, Finland and the Baltic countries may see little sense in investing in reverse capabilities to supply the Russian market.

Other weaknesses in the Commission’s proposal include the consultation mechanism. One example is the Energy Community, mentioned in the recitals alongside the EU member states. The proposed regulation misses the opportunity to integrate this strategic organisation into the Gas Coordination Group. With members concentrated in South-East Europe, the Energy Community, especially as Ukraine is negotiating accession, is in a unique position to help guarantee transit in the region. Nonetheless, the Energy Community, of which the EU is also a member and finances the majority of the budget, is not formally drawn in to any of the consultation mechanisms.

The annexes, too, contain inconsistencies. Whilst listing supply-side measures, such as increasing liquefied natural gas (LNG) capacity, little detail is given to fuel switching capabilities. One excellent alternative as a back-up fuel is liquefied petroleum gas (LPG). As a relatively clean-burning gaseous fuel with highly flexible supply routes, LPG-readiness and use could be promoted as a precautionary measure.

The document is available at www.europolitics.info > Search = 254663 

An ‘anti-Gazprom clause’ is also likely to annoy those member states closest to the Russian energy giant and to the Kremlin

Background

The current Directive 2004/67/EC has had positive effects. It established the Gas Coordination Group that brings together member states, gas industry and consumer representatives. Nonetheless, it remains a weak tool only defining a “major supply disruption” as the loss, or risk of loss, of 20% of gas imports from third countries to the EU over at least eight weeks. It sets a weak obligation for member states to ensure supplies for households are protected to an “appropriate” extent in cases of supply disruptions and extreme winter weather. So far, only eight member states have extended provision to SMEs and customers without fuel switching possibilities.

⁽¹⁾ The Commission also adopts, on 16 July, a review of Council Regulation 736/96 on notifying the Commission of projects of common interest in the petroleum, natural gas and electricity sectors.