Third EU energy package: bone of contention in EU – Russian relations. Is it possible to find Ariadne’s thread? Dr. A.Konoplyanik, Consultant to the Board, Gazprombank, Adviser to the Board, GPB Neftegas Services, Professor, Russian State Oil & Gas University n.a. acad.Gubkin Moderator’s introductory remarks to the panel debate at the VI Europe - Russia Forum, Sejm of Republic of Poland, Warsaw, Poland, 31 May - 1 June 2011

RUSSIA-EU GAS VALUE CHAIN (since 1968 till nowadays) EU-15 border

“Old” EU-15 “New” EU-27

EU-27 border

CIS

Russia Producer companies:

Small end-users:

Retail traders

• Households

Large end-users:

• Commercial users

• Power plants • Energy intensive industry plants

Wholesale traders (Importers):

- Gazprom - VIOC

• VIC

- Non-integrated companies

• Trading companies RF-EU gas supply LTC delivery points

LTC

LTC

Supply

Supply

(Retailers)

(Wholesale traders)

LTC = trade contracts

LTGEC RF view: Area at risk Export Supplies for future Russian transportation (Gazprom = Producer & Sole Exporter) contracts (both bundled & unbundled)

Production (Gazprom & other producers)

LTC = producer contracts (LTGEC Groningen type)

6th Europe-Russia Forum, Warsaw, Poland, 31.05-01.06.2011

Future organization of internal EU gas market acc. to 3rd Energy Package: radical change of wholesale market architecture - No single (homogenous)

internal EU gas market in the near future even as

economic model - All market areas to be organized as entry–exit zones with virtual hubs => Towards uniform capacity allocation mechanisms (“bundled products”) & gas pricing mechanisms (“liquid hubs”) - Definition of “wholesale market” as short/mid-term spot commodity market - From bundled supply & transportation LTC within single VICs to unbundled system with separated supply & transportation contracts within different entities => to balance (long-term & short-term) + (capacity & commodity) contracts within now separated C&C markets H ub A

H ub B

Pipelines-interconnectors between EU zones

Hub D H ub C Source: 17th Madrid Forum (Jan 2010), Energy Regulators EU MS 6th Europe-Russia Forum, Warsaw, Poland, 31.05-01.06.2011

Supplies to the EU from non-EU

RUSSIA-EU GAS VALUE CHAIN & Third EU Energy Package EU-15 border

“Old” EU-15 “New” EU-27 RetailEU traders Third Energy Wholesale traders (Importers): Large = end-users: Package reform of • VIC • Power internal EUplants wholesale • Trading companies • Energy tradeintensive …

Small end-users: • Households •Commercial users

EU-27 border

CIS … BUT indirect consequences for Russian LTGEC within EU territory

Russia Producer companies: -Gazprom -VIOC -Non-integrated companies

industry plants

RF-EU gas supply LTC delivery points LTC

LTC

Supply

Supply

(Retailers)

(Wholesale traders)

LTC = trade contracts

LTGEC RF view: Area at risk Export Supplies for future Russian (Gazprom = Producer & Sole Exporter) transportation contracts (both bundled & unbundled)

Production (Gazprom & other producers)

LTC = producer contracts (LTGEC Groningen type)

6th Europe-Russia Forum, Warsaw, Poland, 31.05-01.06.2011

Third EU Energy Package (gas) 3rd EU Gas Directive 73/EC/09 (on common rules in gas)

Regulation 713/2009 (ACER)

Regulation 715/2009 (access to NG networks)

Framework Guidelines

Network Codes

12

12

…

…

3 = Legally binding, entered into force 03.09.2009, BUT … (delays in transposition)

Gas Target Model

Work in progress

25 = Still need to be drafted and approved, then - legally binding (NC) or non-binding (FG + GTM), BUT … (delays in drafting) 6th Europe-Russia Forum, Warsaw, Poland, 31.05-01.06.2011

Third EU energy package: bone of contention in EU – Russian relations. Is it possible to find Ariadne’s thread? (Questions to the panel)

• What are, from your view, the expected benefits (challenges) of the 3rd EU Energy package for different participants within the cross-border gas value chain originated from Russia and destined for the EU? • What are, from your view, the expected problems and risks of achieving these benefits/challenges? How would you identify these risks for different parties within the cross-border gas value chain originated from Russia and destined for the EU? • What sort of potential mutually acceptable solutions of these problems do you see (if any) that will lead to minimization or dismantling of such risks? 6th Europe-Russia Forum, Warsaw, Poland, 31.05-01.06.2011

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