Moscow, 19 November 2013

Transcription

1 Conclusions of the 8 th EU-Russia Gas Advisory Council Moscow, 19 November 2013 The eighth meeting of the EU-Russia Gas Advisory Council (GAC) took place on 19 November 2013, in Moscow, under the chairmanship of Klaus-Dieter Borchardt, representing the Directorate General for Energy of the European Commission, and A.B. Yanovsky and Y.L. Baron representing the Ministry of Energy of the Russian Federation, and with the participation of the co-speakers, J. Stern for the EU side and V. Feygin for the Russian side. Workstream 1: conclusions Workstream 1 Conclusions are based on the Conclusions of the Scenarios and Pricing Workshops, which took place on October 2013 in Brussels. The Scenarios Workshop A model was presented by a scenarios modelling team commissioned by the Russian side to develop and use model-based tools for comparative analysis of different energy scenarios. According to earlier discussions in the GAC, the modelling team provides their services to GAC in an unbiased and transparent manner. The model showed that demand for Russian gas supplies to Europe may not decline in any scenario by 2030 (apart from one where Russian gas imports are directly capped), if the targets are to be met. A number of points were raised by the Scenarios Workshop participants, which asked the modelling team to provide an explanation of its assumptions on inter alia import prices, capacity and CO2 constraints (see Notes from the Scenarios Workshop), in order to provide greater transparency to the outcomes. At the meeting, the modelling team addressed a number of these points, including: data on import prices and building renovation assumptions; inclusion of the Southern corridor (TAP, TANAP, etc.) capacity in the model; development of US LNG export capacity, tightening the 2015 demand trends to correct abnormally high demand (which resulted from the model using 2010 as its base year). The team stated their readiness to continue work on the model to further develop these and other issues, raised by Workshop participants including greater differentiation between CO2 sources, clarification of gas price assumptions, usage of gas in transportation sector during Importantly, in the view of the modelling team, the refinement of the methodology based on the Workshop s feedback, did not affect the model s main conclusion that imports of Russian gas do not decline in any of the scenarios. 1

2 The GAC concluded that further technical exchanges are necessary with deeper involvement of EU and Russian modelling experts as well as GAC members and experts in the broader gas sphere. Following those at least one more technical meeting and/or Scenarios Workshop with the participation of the modelling team will be necessary for further clarification of points noted above and for formulation (if possible) of win/win scenario(s), on the basis of which a High Road Paper setting out a mutually beneficial scenario(s) in relation to Russian gas deliveries to Europe, is to be drafted and presented at the 9 th GAC meeting in The Pricing Workshop The Pricing Workshop confirmed: the anticipated decrease in European gas demand during the 2010s (unless a compromise is reached on the recent pricing impasse ) not excluding that Russian gas could have a higher market share; a desire on EU and Russia sides to retain (and not abolish) commodity long-term contracts (LTCs) but little agreement to date though continued discussion as to how the key features of these LTCs will have to change to remain acceptable to both sides and; Europe s limited appetite for capacity LTCs and oil-indexed take-or-pay commodity LTCs and Gazprom s concern about contractual mismatch between capacity and commodity LTCs; the necessity of creating a framework which would allow to determine the value, and hence the price and most effective mechanism of providing flexibility. It is positive that this activity resulted in much broader discussion on the role of various types of contracts and their structure in the evolving gas market, and was in no way limited to narrow terms of pricing formulas. Significant disagreement remained on several issues, principally: the value of flexibility; the need for new capacity to deliver substantial gas volumes to Europe (e.g. South Stream and Nord Stream 3 and 4); the likelihood that hub prices would create sufficiently strong signals for long term investments; the reasons for the narrowing gap between hub-based and oil-linked prices; concerns of hub price manipulation; LNG market uncertainty in the 2010s; and the role of midstream utilities. Overall, the Scenarios Workshop was overly optimistic about European gas demand, while the Pricing Workshop was extremely pessimistic. However, pessimistic European gas demand scenarios were not necessarily incompatible with increased imports of Russian gas, and pricing and price levels is a key clarification requirement of the scenarios, which could have a significant impact on overall gas demand and imports of Russian gas. Nevertheless, significant differences of opinion remain on market uncertainty and pricing. The GAC concluded that a separate Gas Market Workshop is necessary which would build on work of previous pricing workshops, and would attempt to reach agreement on the remaining issues and/or confirm that no further agreement is possible, and suggest practical recommendations for the development of the High Road Paper. Realistically speaking, the High 2

3 Road Paper will attempt to reconcile the remaining differences of opinion (as demonstrated by both Scenarios and Pricing Workshops), but may not be able to address all the existing concerns and resolve all the differences. This work may also contribute to outlining the scope of further common work until 2020 as set out in the Gas Section of the EU-Russia Energy Cooperation Roadmap. Workstreams 2 & 3: conclusions The Workstreams 2 and 3 Conclusions summarised the answers provided by Workstreams 2 and 3 Chairs (Boltz/Konoplyanik and Kamphues/Shtilkind) on the Six Questions posed by the 7 th GAC and its Co-Chairs (Stern/Feygin) in January 2013 (see the 7 th GAC meeting Conclusions): 1 1) Can the delivery points in existing and new contacts be preserved? 2 For existing LTSCs the response is Yes, until those contracts need to be renewed or extended. For new long-term supply contracts, the response is that the delivery point cannot be at the border/flange (and corresponding transportation contracts must be in place which reflect bundling provisions, new tariff methodology etc), but the delivery point can be anywhere in a zone (other than the border/flange) agreed between the contractual parties; 2) Can assurance be provided of sufficient capacity availability for deliveries under existing supply contracts? In principle Yes but this is not guaranteed [no change from the 7 th GAC meeting]; 3) Is the Gas Dispatching Service (GDS) compatible with the Third Package? In principle Yes but further analysis will be necessary in the context of this activity to be a joint project between the EU and Russia in order to remove contradictions and possible conflicts; 4) Are Coordinated Open Seasons compatible with the Third Package? In principle Yes and are proposed to be used in prospective EU legislation; details remain to be worked out in the capacity allocation management network code (CAM-NC) amendment; 1 The Co-Speakers made a request addressed to the GAC and to WS2 and 3 Co-Chairs to comment on these answers stressing that should no comment be received, these answers will be considered final. 2 Question 1 was slightly amended from the 7 th GAC meeting. 3

4 5) What will be the investment regime and regulatory treatment for incremental and new capacity? Broadly clear (on the basis of the ACER Guidance Paper on Incremental and New Capacity 3 ) but will be further detailed in the CAM-NC amendment development process led by ENTSOG in The Russian side stated that though proposed COS mechanism is accepted in principle, further clarity was needed in particular relating to the process for allocating new capacity. Subsequent discussions with GAC involvement on the Strawman case study will focus, in addition to above mentioned issues, on the TSOs cross-border coordination issues and financeability of new capacity projects and should be coordinated with or undertaken within the ENTSOG process; 6) Can new Russian cross-border transportation projects be considered within the PCI (Projects of Common Interest) framework and could a PCI treatment be awarded to those Russian projects that will be considered PMI (Projects of Mutual Interest)? The first list of PCI projects has been published no Russian projects were included; the next list of PCI projects will be selected in Eligibility criteria do not exclude projects on the basis of the promoters origin, therefore Russian projects will be eligible as long as they comply with selection criteria. A PMI framework needs to be established first before a link to PCIs can be determined. The 9 th GAC meeting: timings & tasks The 9 th GAC meeting will be held when all three Workstreams are sufficiently welladvanced on their work plans (see below) this is likely to be in April/May 2014 in Vienna; By early December 2013, Chairs of all three Workstreams should circulate a schedule of meetings for achieving the tasks set by the GAC in respect of the following work plans for: Workstream 1: - Scenario work plan: to continue and intensify the expert exchanges on the scenario work commissioned by the Russian side, to hold at least one Scenarios workshop, 3 e%20on%20nc%20cam%20amendments%20%28final%29.pdf 4

5 answering the remaining questions and developing a win/win scenario(s) on the basis of which the High Road Paper with mutually beneficial outcomes for the EU and Russia, is to be drafted by the 9 th GAC meeting; - Market work plan: to hold a Gas Market Workshop, which could include discussions on gas demand in the power sector and capacity charges, the evolution of hubs as a price reference, subsidies, market manipulation/competition issues, European competitiveness issues, and suggest practical recommendations for the High Road Paper. Workstream 2: Coordinated Open Seasons work: in coordination with, or as part of, the CAM-NC amendment process, to continue work on the "Strawman" case study focussing in particular on financeability and TSO cross border coordination. Workstream 3: Early Warning System work: to continue work on Early Warning System issues in the short term; Gas Dispatching Service work: to continue work on Gas Dispatching Service in the medium/longer term. It was agreed that in order to further increase public awareness of the GAC work, the European Commission and the Ministry of Energy of the Russian Federation will publish the GAC conclusions as well as relevant presentations and documents from its Workstream meetings on their corresponding web-sites. There was also support for the IEF initiative of publishing the GAC/WSs documents on its web-site. GAC co-speaker from the EU side GAC co-speaker from the RF side J. Stern V. Feygin 5