Poland wins bid to reduce Russian control of EU gas pipeline

Stephanie Bodoni, Vanessa Dezem and Maciej Martewicz September 10, 2019

LUXEMBOURG (Bloomberg) - Poland won a European Union court ruling that limits Russia’s control of a key natural gas link.

The eastern European nation successfully challenged a European Commission decision from 2016 that allowed Gazprom PJSC to use most of the capacity on the Opal pipeline in Germany. That link in turn carries fuel from the Baltic Sea Nord Stream pipeline, a key part of the Moscow-based company’s plans to avoid shipping its fuel across Ukraine.

Russia supplies more than a third of Europe’s natural gas, with a lot of that flowing through Ukraine’s Soviet-era pipelines, which it says it may no longer need thanks in part to Nord Stream. The two sides and the EU are in negotiations to replace the current transit deal, which expires at the end of this year, and with less capacity available on Opal, Gazprom would be more reliant on alternative routes.

“The ruling keeps Poland’s and Ukraine’s energy security at a high level,” Polish Energy Minister Krzysztof Tchorzewski said in a speech to reporters. “Poland’s victory in this case reduces the likelihood of a serious gas crisis in Ukraine, which could also affect other countries in the region, including Poland.”

In 2016, the EU decided to open the previously unused part of Opal for competition, allowing Gazprom to keep half of the capacity of the link and use some additional volumes on market conditions. The decision was a “privilege” for the Russian exporter, Poland’s largest gas company PGNiG SA said on the occasion.

The EU General Court in Luxembourg on Tuesday overturned the 2016 decision, saying it had been “adopted in breach of the principle of energy solidarity.” The ruling can be appealed. According to the decision, the Russian exporter would need to allow other suppliers to use Opal’s capacity under “stringent EU market rules” to ensure non-discriminatory access to all gas companies.

The commission in Brussels didn’t immediately respond to a request for comment.

PGNiG in 2017 had a separate challenge also seeking an annulment of the EU decision rejected as inadmissible and is appealing this ruling.

Gazprom has been seeking full access to the pipeline, which has the capacity to transport 36 billion cubic meters of gas per year. The European Union decision effectively increased the capacity available to Gazprom to 80%, PGNiG said in 2016. Tuesday’s ruling will cut Gazprom’s Nord Stream flows by 12.4 billion cubic meters a year, PGNiG Chief Executive Officer Piotr Wozniak said Tuesday.

“The decision improves Ukraine’s negotiating position with Russia,” Wozniak said.

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