The Energy Community: Same Rules for All

At the Gas Dialogues event Natural Gas: The Perspectives for Central and South Eastern Europe, Andrius Simkus, Gas Expert, Energy Community Secretariat, pointed out the huge challenges for Russia to overcome in its push for the building of South Stream. “Those challenges are pretty much similar for the European Union and for each member state as well: proper regulatory framework, market opening, development and integration of the market, ensuring 3rd party access and enhancing security of supply.

“As an idea and as a virtue, we shouldn't put ourselves in the situation that we sign a contract with our strategic partner and then we will negotiate; no one negotiates after the contract is signed. We have to understand that we here in Europe have common rules, common energy policy, and it will be common as much as the member states will talk in a common voice,” said Mr. Simkus, who said such sentiment involved defending the very idea of the European Union and its system.

He encouraged decision makers and speakers to discuss the issue of South Stream without sacrificing the common interests of Europe for the interests of specific member states. “Every partner has to have equal conditions and equal rules should be applied,” he said.

Located in Vienna, Mr. Simkus explained that the Energy Community covered the Balkan countries, Moldova and Ukraine, the last of which had involved a lot of work in recent times; Georgia was set to be a member at the beginning of next year. The Community's key aims, he said, emphasized the development of infrastructure in electricity and natural gas, the development of legal and regulatory and legal framework and ensuring the security of supply in the region. He said the Energy Community was not building infrastructure, but assisting contracting parties at the expert level to help them meet their pre EU accession commitments.

He stated, “When we are talking about European security of supply we should not only concentrate on the European Union as such. These countries which are now members do belong to geographical Europe and they do belong to the future European Union as well.”

As a lawyer, he said he would address the legal aspects, specifically the 3rd Energy Package's Internal Market Directive and access to the cross-border networks natural gas regulation, whose deadline for full transposition by the Energy Community's contracting parties, he said, was 1 January 2015, while full implementation was set for January 2016.

Mr. Simkus outlined the Community's main objectives, including a stable legal and regulatory framework, which he said was a key condition for new investments to come to member countries, for infrastructure to be developed and for those economies to grow.

There was no more effective mechanism in the natural gas sector, he opined, than liberalized, competitive and open markets for end-consumers to benefit from different, diversified supplies in specific market areas. The unbundling of transmission system operators was also crucial and also an issue for the contracting partners, while empowering national regulatory authorities to be effective and independent to take timely decisions, regulating natural gas issues, monitoring market participants and to undertake legal enforcement mechanisms. The fifth factor, he said, was ensuring efficient and non discriminatory 3rd party access.

He commented, “3rd party access means everyone that wants to participate in the market has to have access to the infrastructure – there is no other definition of 3rd party access.”

While he acknowledged that participants in Vienna had been talking about an exemption for 3rd party access, specifically for the South Stream pipeline project, Mr. Simkus said there was no use in pretending that the European Union was taking specific measures against Russia in dealing with the exemptions for European infrastructure.

“The exemption mechanism is clearly written in the Directive, there is the European Commission's interpretive help in how this exemption should be done, and there is already quite a significant legal practice and economic practice of the European Commission how these actions should be evaluated and how they are given,” he explained.

“In this regard,” he added, “we cannot see any different treatment vis a vis Russia compared to other partners of the European Union for importing energy or energy sources or acting in the market.”

In terms of developments in the natural gas infrastructure, Mr. Simkus showed the demand foreceast up to 2040. “The main trend, not going in to detail, is that the demand for natural gas is forecast to increase significantly for all of our contracting parties.”

Although the many of the Energy Community members in southern Europe had very small markets, one of the key issues he said was diversification of the fuels used to produce power and which were consumed for daily energy needs. “Natural gas has a constantly increasing role, so the consumption in the coming years it will increase in the entire region and infrastructural developments is currently one of the issues mainly at stake,” he explained.

Mr. Simkus named some of the projects of common interest, including interconnectors and pipelines to be constructed. “The most significant of these, of course, are the Ionic-Adriatic Pipeline, crossing from Croatia to Montenegro and Albania, probably a little piece of Bosnia-Hercegovina as well, and the Trans Adriatic Pipeline (TAP) coming from Italy to Albania.”

These, he said, would facilitate increased supplies of natural gas to meet the increased demand.

He also spoke briefly of several national and regional initiatives like the Balkan Gas Ring, whose purpose was also to increase the security and reliability of sources of gas.

Despite what he termed a “beautiful map,” Mr. Simkus said there were not so many different scenarios for ensuring the natural gas demand in the region. “So Russia, naturally, will be for the long-term one of the key importers for the region as well.”

Pointing to two LNG terminals, in Albania and in Croatia, which he said would be sources to diversify the natural gas supplies in the region, adding: “But this is not something too significant to avoid the growing importance of Russia.”

Drew Leifheit is Natural Gas Europe's New Media Specialist.