EU reaches deal on natural gas sales

The Associated Press

The European Commission said Oct. 6 it has reached a deal with Russia’s Gazprom and Italy’s Eni SpA to loosen restrictions on the sale of natural gas supplies in Europe.

Changes sought by the European Union’s head office were aimed at fostering competition in Europe’s gas market, and how it is bought and sold in the 15-nation bloc.

Under the settlement, Eni, Italy’s dominant gas company, will no longer be prevented from reselling the gas it buys from Gazprom abroad.

For its part, Gazprom, the world’s largest natural gas producer, will be free to sell gas to other customers in Italy, without having to seek Eni’s consent.

Eni also agreed to offer “significant volumes” of gas to customers outside Italy over five years. The move should benefit customers in neighboring Austria and Germany, where Eni and Energie Baden-Wuerttemberg AG recently took a controlling stake in the southern German gas company, GVS, by increasing liquidity in these markets.

Eni also must increase capacity in the Trans Austria Gasleitung, a pipeline transporting Russian natural gas to Italy via Austria, and ensure that rivals gain access at fair and transparent prices.

The deal, EU officials hope, will lead to similar deals in the gas market across the EU. It also puts pressure on Algeria’s Sonatrach to take similar steps and for Gazprom to amend its other agreements with German and Austrian gas companies.

“We hope that Gazprom will soon bring its contracts with a few other importers into line with EU law. We also encourage Sonatrach to follow the same path,” said EU Competition Commissioner Mario Monti.

The Commission opened an investigation in 2001 into how natural gas was being sold under so-called destination clauses. These agreements prevent buyers from reselling and are usually contained in long-term contracts.

Natural gas producers say these agreements, which run from 15 to 25 years, are the only way they can secure the massive investments needed to develop new gas fields.