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Gazprom loses out in ECJ ruling on OPAL pipeline

European Court of Justice orders Russian giant to adhere to terms of Third Energy Package gas market regulations in Europe

The European Court of Justice has ordered Russian state-controlled gas giant Gazprom to adhere to terms of so-called Third Energy Package gas market regulations in Europe and offer up to 50% of capacity of a pipeline in eastern Germany to third parties.

The court issued its judgment following an appeal from Poland’s PGNiG in December 2016 that protested against an earlier decision of the European Commission to permit Gazprom to book almost all capacity of Ostsee-Pipeline-Anbindungsleitung (OPAL) facility, saying that it threatens gas supplies to central and Eastern Europe.

The 440-kilometre OPAL, which is fed by Russian gas from the subsea Nord Stream gas pipeline in Germany, terminates in the Czech Republic where it connects to the existing gas grid.

"The General Court annuls the Commission decision approving the modification of the exemption regime for the operation of the OPAL gas pipeline," the European Court of Justice said in a statement.

"That decision was adopted in breach of the principle of energy solidarity."

Watchdog gives OPAL a free pass

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Under the Third Energy Package, Gazprom, as a gas supplier and controlling owner of OPAL, can only use 50% of the pipeline’s capacity, with the remaining transportation capacity to be offered to third parties in an effort to promote diversity of energy supplies in Europe.

This condition had put a cap on the volume of gas that Gazprom shipped to Europe via Nord Stream until October 2016 when Gazprom succeeded in obtaining its removal from the European Commission.

Gazprom is expected to appeal the court’s decision as it is another impediment to the company’s plan to secure alternative gas supply routes to Europe in anticipation of the halt of Russian gas transit flows to the region across Ukraine after 1 January 2020.

The Russian gas giant has repeatedly said that it wants a second subsea gas pipeline, Nord Stream 2, to start operations before the end of this year despite protests from Poland and Slovakia, and the lack of a building permit from Denmark.

Nord Stream and Nord Stream 2 will be capable of bringing over 110 billion cubic metres of Russian gas to Germany.

However, Gazprom will have to reduce its gas exports by 50% via Nord Stream to the annual equivalent of 28 Bcm to comply with the court’s decision.

According to the Third Energy Package, the monopoly could only use half of the transportation capacity of Nord Stream 2.

The gas giant also faces the increasing risk of failing to complete Nord Stream 2 by end of December because of the lack of the Danish permit, the scenario that Gazprom executives strongly insist is highly unlikely.

At a televised meeting between Gazprom chairman Alexei Miller and Russian President Vladimir Putin on Monday, Putin backed Miller’s plan to insist on Ukraine signing a new direct gas purchase agreement with Gazprom as a pre-condition for resumption of talks on continuing Russian gas transit flows.

A current 10-year gas transit agreement between Gazprom and Ukraine’s state gas importer and distributor Naftohaz Ukrainy expires on 1 January 2020.

European Commission-brokered talks between the two companies to discuss gas transit issues are scheduled for 19 September in Brussels.

Ukraine, which has accumulated over 18.5 Bcm of gas in storage via imports from Europe, said that the country is fully prepared to handle potential supply disruptions in the event of the halt of Russian gas transit flows this winter.

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