Shake the Russian monopoly

The process of separating Europe from the Russian gas monopoly is in full swing. Lithuania has become another European country that has begun buying LNG from a US supplier after Poland and the countries of southern Europe have done so. Russian monopolists are placed in a position of direct competition. Lithuanian Lietuvos Duju Tiekimas (LDT) has signed a contract with a US subsidiary, Cheniere Energy, to supply LNG directly from the state, Reuters reported, citing information from the Lithuanian state gas company. 

The agency says that the Baltic state for the first time buys directly American liquefied methane. The first quantities are expected to be delivered in the second half of August. With this deal, Lithuania is counting on a real diversification of natural gas supplies and a reduction in import dependency by the Russian gas monopoly Gazprom. According to the Lithuanian Ministry of Energy, the first tanker has already arrived at Klaipeda harbor where a liquefaction terminal natural gas. According to the ministry, supplies of US natural gas will help boost competition. The tanker has supplied 140,000 m3 of natural gas to Lithuania, a second tanker expected in September. Supply of US blue fuels will also be available for Estonia, which is also building a terminal since June this year.

After the Americans signed contracts with the Baltic republics, Gazprom's price for them fell by 50%, the ministry said. Liquefied shale gas from the United States continues to hit Europe's energy market. After gaining serious customers in southern Europe, now a country from the northern part of the continent, Poland, began to buy gas, LNG World news reported. The contract for shale gas delivery to Poland was concluded in April this year. This is the first supply of US gas to a country in Eastern Europe where Gazprom holds 80% of the market. As it is known, Warsaw has announced that it is giving up Russian natural gas in 2022 when the contract with Gazprom expires. US companies have declared readiness to build LNG terminals if there is a long-term supply contract with the country.

Russia is in a situation to re-negotiate prices, for the first time in history the monopoly has been effectively challenged. Additional headaches of Russian oligarchs are building a pipeline from Azerbaijan. Turkey and Azerbaijan are building a new 10 billion-dollar natural gas pipeline to supply blue-and-green gas from the Central Asian country to Turkey and subsequently to European Union (EU) consumers. The 1850 km long pipeline, known as the Trans-Anatolian Gas Pipeline (TANAP), should be completed in 2018 and aims to connect to the existing South Caucasus tube linking Turkey to Azerbaijan gas fields in Caspian Sea.

"Gazprom" often offer an opportunity to renegotiate prices

"Gazprom" offers the possibility of new contractual relations under which Bulgarian customers to pay a competitive price and request a renegotiation it, if it deviates from the reference prices in Western Europe, including the prices of competitive hub. Such price revisions in contracts should be able to do more often and to clarify in what moments are made. This should help gas prices in Bulgaria are more closely tied to those formed in EU markets where there are sources other than Russia and the prices competitive. These are some of the suggestions of "Gazprom" to the European Commission, which the company hopes to be terminated its operation of gas markets in Central and Eastern Europe. The Commission communicated to them on Monday and invited all interested parties to provide comments.  "The fact that the European Commission moved procedure is good news. As an interested party, we will have our position within two weeks," said deputy executive director of the gas distribution company "Overgas Inc." Svetoslav Ivanov, in which "Gazprom" still has nearly 50 % share.

Among these suggestions are more:

"Gazprom" undertakes not want benefits from Bulgarian partners in the "South Stream" because of the termination of the project. This does not affect whether those claims would be generally valid. This is the compromise proposed by the Russian company on suspicion of the commission that takes advantage of its dominant position on the market for supply of gas to gain advantages associated with access to gas infrastructure or control.

"Gazprom" proposes to remove all contractual barriers to the free transfer of gas in Bulgaria and 7 other countries and take concrete actions to better pricing and integration of these markets.

- Moreover, the company is committed to remove market segmentation to remove all direct and indirect contractual restrictions that prevent its customers to resell abroad purchased gas or resale make this economically unattractive to customers.

- "Gazprom" undertook to make changes in the relevant agreements, so as to provide Bulgarian operator of the gas transmission infrastructure control over cross-border flows of gas and facilitate the conclusion of agreements on interconnection between Bulgaria and its neighboring EU countries, more particularly Greece.

What next. If these proposals are acceptable to Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary and Slovakia, as well as anti-trust authorities in Brussels, commitments may be shaped in a decision legally binding on "Gazprom".

This means that the Russian side will most likely be discontinued anti-trust investigation, the commission - if the company violates its commitments - can impose a fine of up to 10% of the global turnover of the company without having to prove the existence of violation of EU antitrust rules. Commissioner policy competition Margrethe Vesteger said: "We believe that the commitments of" Gazprom "will allow unrestrained gas at competitive prices in Central and Eastern Europe. These commitments distract our concerns regarding competition and provide prospective decision in accordance with EU rules. in fact, they help to achieve better integration of the gas markets in the region. "

The Commission considers that the commitments of "Gazprom" meet its objectives in relation to each competition concern, namely by ensuring that:

- Restrictions on cross-border resale of gas finally removed; cross-border gas transmission to central and eastern European gas markets has eased

- Gas prices in Central and Eastern Europe reflect competitive pricing benchmarks

- "Gazprom" can not benefit from any advantage on gas infrastructure received from customers, taking advantage of its market position in the field of gas supply.

However, the Commission recalls that effective competition in the Central and Eastern European gas markets depends not only on the application of EU rules on competition and investment in the diversification of gas supply, targeted European and national legislation in the field of energy and proper application.

For Bulgaria suggestions of "Gazprom" affect another question - to allow customers in Hungary, Poland and Slovakia to request delivery of all contracted gas or part of it to the entry points in the Baltic States and Bulgaria. This will allow those customers to seek new business opportunities even before it was finished connecting gas infrastructure. Of "Gazprom" will be allowed to charge a fixed and transparent service fee corresponding to the fee that would be charged the company.