Despite sanctions, WSJ reports EU ratifies increased Gazprom use of key gas pipeline

RT
Wed, 26 Oct 2016 15:59 UTC

© Grigoriy Sisoev / Sputnik

Brussels has given the green light to Russia's Gazprom to pump more gas through the Opal pipeline, reports the Wall Street Journal. Opal is an important connection to Russia's Nord Stream pipeline to Germany and the Czech Republic.

EU competition rules currently limit Gazprom's use of the Opal pipeline to half the line's capacity. The pipeline stretches about 470 kilometers from the German Baltic Sea coast to Brandov on the Czech-German border.

Having access to the full capacity of Opal is necessary for Russia's Nord Stream-2 pipeline that intends to double the volume of the existing Nord Stream pipeline. The new pipeline will be able to deliver up to 55 billion cubic meters of gas per year to Germany via the Baltic Sea bypassing Ukraine.

The deal may be regarded as Russia and the EU mending their business ties despite sanctions, analysts say.

According to the media, under the agreement approved on Tuesday, Gazprom retains its 50 percent exclusive capacity, but will have to give up 10 to 20 percent of the remaining capacity to competitors. The remaining 30 to 40 percent will be available for auction, and Gazprom will be able to participate.

"It is a little bit of a concession to the Russians, but it's not a Christmas gift," said the WSJ source.

The decision is likely to arouse discontent among the EU's eastern members that are opposed to Gazprom's domination of the European market and Kremlin's foreign policy.

"By supporting Nord Stream-2, the EU in effect gives succor to a regime whose aggression it seeks to punish through sanctions. This contradiction is unsustainable," Poland's Minister for European Affairs Konrad Szymanski wrote in the Financial Times on Monday.

EU Competition Commissioner Margrethe Vestager is meeting Gazprom Deputy Chairman Aleksandr Medvedev on Wednesday to discuss the matter.

Comment: This comes as a result of EU's biggest gas producer running out of reserves

The Netherlands is the EU's largest producer of natural gas, and has used 80 percent of its reserves, reports the local CBS statistics office. This leaves the EU with two options: buy more gas from Russia or increase liquefied natural gas (LNG) imports.

The Dutch budget has been affected by caps on extraction and plummeting wholesale prices. In 2015, gas accounted for only three percent of the country's revenue, and by 2013 the share was nine percent, the statistics office said. State income from gas dropped to €5.3 billion in 2015, when two years previously it was €15.4 billion, said the report.

The country relies heavily on the Groningen gas deposit that was discovered in 1959. With 940 billion cubic meters (bcm) of gas reserves, the Netherlands produced 52 billion bcm last year. By comparison, Russia's Nord Stream gas pipeline has a capacity of 55 bcm per year. At the current pace, the Netherlands may run out of gas in 17 years.

"In the last 10 years Europe managed to keep its imports flat with lower consumption. Now much lower Dutch production cannot be mitigated by much lower consumption - most of the drop has occurred already. That means we will need higher imports from Russia or liquefied natural gas," said energy expert Thierry Bros in an interview with Bloomberg.