The European Commission has approved under the EU Merger Regulation the acquisition of the...
The European Commission 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 commitments will enable cross-border gas flows at competitive prices.
For more details, also on the next steps in the investigation, please see the press release.
How the commitments would benefit the Czech gas market
The Commission's main concern is that Gazprom isolated the Czech gas market by preventing the free flow of gas across borders. This isolation resulted mainly from Gazprom's export prohibition contained in its gas supply and transport contracts with Czech customers.
The functioning of the Czech gas market has improved in recent years. First, the Czech gas market has become better connected with Western Europe as of 2012. The development of gas interconnectors allowed for reverse gas flows from Western Europe to the Czech Republic. This means that Gazprom's Czech customers could get access to Western European liquid and competitive gas hubs. The emergence of this alternative source of supply forced Gazprom to adjust its prices by introducing references to hub prices, bringing them back into line with competitive Western European prices. This is the reason why the Commission did not raise concerns of excessive prices in the Czech Republic. Second, Gazprom and its Czech customer agreed to mutually suspend the supply contract as of 1 March 2014, meaning territorial restrictions are not currently in force in practice.
Despite those major developments, Gazprom is still a dominant player on the Czech upstream wholesale gas market and Czech customers continue to buy gas from Gazprom. There continue to be barriers to the free flow of gas across Czech borders due to Gazprom's territorial restrictions contained in its gas supply contract with other Central and Eastern European customers, and Gazprom could still undermine the possibility for Czech customers to re-sell gas to other countries.
In this context, Gazprom's commitments provide a clear framework to enable the free flow of gas across Czech borders at competitive prices. In particular, Gazprom will remove, once and for all, any market segmentation clauses in its gas supply contracts with Central and Eastern European customers. This includes of course the Czech supply contract, if the parties decided to lift the suspension. This will enable the free flow of gas within Central and Eastern Europe. Czech 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.
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