Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Debate on gas contract secrecy overshadows EU quest for energy union

Published 03/18/2015, 05:50 AM
Updated 03/18/2015, 06:01 AM
© Reuters. Valves and pipelines are pictured at the Gaz-System gas distribution station in Gustorzyn, central Poland

© Reuters. Valves and pipelines are pictured at the Gaz-System gas distribution station in Gustorzyn, central Poland

By Barbara Lewis

BRUSSELS (Reuters) - A push to make gas contracts agreed with countries such as Russia more transparent has pitched Poland against Germany ahead of energy talks among European Union leaders on Thursday.

The Brussels summit is meant to advance progress towards a single energy union in which power and gas would flow freely across borders, reducing the bloc's reliance on Russian gas and countering Gazprom's (MM:GAZP) divide-and-rule tendency.

But the danger is the focus will be on a clash between Germany, which has negotiated successfully with Gazprom, and Poland, which pays higher prices, EU sources say.

They said Hungary, whose nuclear contract with Russia has led to objections from EU regulators, also has reservations.

A draft prepared for the summit, seen by Reuters, calls for greater transparency on the gas market by ensuring "all agreements with external suppliers that may affect EU energy security" conform to EU law. "Confidentiality of commercially sensitive information will be safeguarded," it says.

EU sources, speaking on condition of anonymity, made clear this would relate only to intergovernmental agreements.

These have involved gas-buying by East European governments or cover pipelines between nations, such as Russia's abandoned South Stream project, whose failure was linked to its non-compliance with EU law.

There are around 40 intergovernmental contracts, compared with some 300 commercial gas-supply contracts with companies, whose terms are closely guarded.

Gazprom, which supplies about a third of EU gas, is the target of an EU antitrust investigation for allegedly overcharging customers in Eastern Europe, thwarting rival suppliers and blocking the free flow of gas.

The prices Gazprom charges are not public. Industry estimates have found Poland pays $370 per thousand cubic meters compared with $310 for Germany.

Even with commercial deals excluded, EU diplomats said Germany was opposed and that more transparency could lead to the disclosure of sensitive data.

Poland, however, has support.

Claudio de Vincenti, Italy's deputy industry minister, told reporters he favored "an ex-ante interaction between the European Commission and member states" on energy contracts.

Other nations say EU executive involvement could lead to lower prices.

However, analyst Tim Boersma of the Brookings Institution in Washington said transparency alone would not solve the problem. "The focus should be on increasing competition, foremost by (infrastructure) investments to integrate markets," he said.

Cheaper oil , which has knock-on effects for gas prices, has improved the position of Poland's state-run PGNiG . The company is renegotiating with Gazprom, as are German utilities such as RWE (DE:RWEG).

© Reuters. Valves and pipelines are pictured at the Gaz-System gas distribution station in Gustorzyn, central Poland

Industry association IOGP, which represents oil and gas producers, welcomed EU diplomatic support in negotiations, but said the Commission "should not have a role in markets where contracts are agreed on a commercial basis".

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.