Top-level talks with EU CommissionBrussels / Moscow. Representatives from the world’s largest gas producer, OAO Gazprom, and the German grid gas company WINGAS met on 30 March in Strasbourg for top-level talks with the Vice-President of the European Commission, Ms. Loyola de Palacio. Issues addressed included the requirements for the future energy policy and the security of supply of Europe’s energy. The very constructive dialogue is to be continued in the coming months.
During the extensive conversation with EU Commissioner de Palacio, Alexander Medvedev, Gazprom’s Board Member and Gazexport’s General Director, and Dr. Rainer Seele, Chairman of the Executive Board of WINGAS GmbH, presented essential cornerstones for a more investment-friendly energy policy in Europe.
Gazprom and WINGAS welcomed the efforts made by the European Union over the past few years to liberalise the national gas markets, thus creating a real European energy single market. However, they warned at the same time that the process of creating a single energy market is increasingly heading in a direction where the actual aim of liberalisation is drifting out of focus and where the fundamental market economy principles such as entrepreneurial freedom and protection of property are being annulled. In addition, this process conceals the danger that the proven cornerstones of the provision of energy – competitiveness, environmental compatibility, and security of supply – will be undermined through over-bureaucratisation.
According to estimates from the International Energy Agency (IEA), in light of the continually increasing use of natural gas in all of Europe, more than $200 billion will be needed by 2030 alone for new transport, storage and distribution structures. The prognosis also states that the same sum of money will also be needed for investments in new extraction sites and the construction of new production facilities. According to a consensus among all involved parties, the cooperation with Russia, which has the world’s largest secured natural gas reserves, plays a large role in securing the provision of energy to Europe.
WINGAS shareholder Gazprom stresses its role as a major gas supplier for Europe. 90 per cent of Europe’s proved gas reserves are located in Russia. In the past, Gazprom has played a key role in the creation of infrastructure for secure deliveries to Europe with multibillion investments and external finance.
Gazprom will take its investment decisions based on a competitive analysis of opportunities and risks for all possible markets. The Russian policy of growing prices in the domestic market, which stand for approximately 70 per cent of volumes sold, as well as rapidly growing markets in Asia and the United States, are Gazprom’s future foundation for an economically robust and more diversified sales portfolio. Temptations to lower gas prices at the EU border, that is at cost of the suppliers, will be short-sighted. It would increase risks for suppliers, and ultimately motivate them to seek alternative markets for their gas. For that purpose, other possibilities, e.g. in the retail area and from taxation, should be approached. For example, the taxes are ca. 1/3 of the end price of gas to customers in Germany.
Both Gazprom and WINGAS stressed individually the need for the implementation of and/or compliance with the following regulatory principles:
- A reliable framework has to be created on a European level, which benefits investment decisions, has long-term effects, and does not unsettle market participants through continuous changes and amendments. Especially in the current transition process of the European Gas market it is important that the European Policy makers shape the regulatory environment in a way that stimulates necessary investments for development of new fields, transportation and storage infrastructure, which are to be directed from Russia towards European market.
- In the past, huge investments in the development of a gas supply infrastructure have been made by companies from Europe and Russia without large-scale subsidies or state-guarantees. Investments of Gazprom in infrastructure of for example WINGAS were made based on confidence in stable and predictable conditions, accepting risks and creation tough competition. New regulatory initiatives like unbundling or tariff regulations have to ensure that the property of companies – that acted in good faith – is respected. Therefore, clear guidelines for the protection of ownership in the existing gas infrastructure are needed.
- The axiom that a natural gas customer can choose his own supplier will only become a reality if there is ample transport capacity. That is why the open construction of pipelines in Europe must be unobstructed in order to facilitate the competition in natural gas trading. It cannot be allowed that this right collapses in the face of bureaucratic hurdles in some countries, even within the European Union.
- Governmental investment obligations and conditions interfere with a company’s management autonomy and are impermissible – free enterprise and the free market will eradicate grievances (e.g. bottlenecks), if necessary.
Commenting on their discussion with Vice–President de Palacio, Mr. Medvedev and Dr. Seele declared:
„Investments in the natural gas sector are long-term and very capital intensive projects with a high degree of corporate risk. The companies that are ready and able to make investments of this magnitude, and shoulder the related risks, require a clear, economically sensible and long-term reliable framework for energy policy. Only through this will impulses for substantial and necessary new investments ,and forward-thinking corporate actions, be created. And only an investment-friendly context will enable companies to compete around the world for investment funds for large projects and win over capital providers.”
The Commissioner expressed interest in the issues raised by Gazprom and WINGAS, and recalled current legislation and Treaty rules governing energy policy and trans-european networks. In this context, she reiterated the Commission objectives to enhance competition and improve the EU security of energy supply. This will probably be the subject of further contacts between Gazprom and WINGAS and the European Commission in the near future.
OAO Gazprom is the largest natural gas group in the world. The concern employs just under 300,000 employees and has in its possession about one quarter of the world's secure natural gas reserves. Its pipeline system is more than 150,000 kilometres in length. Gazprom produces 94 percent of Russian natural gas. Thirty-three percent of the gas consumed in Germany comes from Russian deposits.
WINGAS GmbH is a joint-venture company of Wintershall AG (65 %) and Russia’s OAO Gazprom (35 %). Both partners have been active since 1990 in gas supply and deliver natural gas through what is now 2,000 kilometres of long-distance network to town and city works, major industrial concerns and regional gas supply companies in Germany and other European countries. Wintershall and Gazprom have to date invested more than 2.7 billion euros in developing the WINGAS gas pipeline system. The network links the major gas reserves in Siberia with the growing markets in western Europe, and also provides WINGAS with access to the developing European spot markets. With its natural gas reservoir at Rehden, which has a working gas volume in excess of four billion cubic metres, WINGAS possesses about one-fifth of the total storage capacity available in Germany. The natural gas storage facility at Rehden is the largest in western Europe.
For further press information please contact:
Mr. Michael Sasse, Head of Press, WINGAS GmbH
Fon: +49 561 301 3301, E-Mail: presse @ wingas.de