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EU and Russia Energy Trade: Impact of WTO, Transit and Integrated Economic

Areas (introductory remarks of the session’s chair)

A.Konoplyanik

First Groningen Moscow Conference on EU-Russian Energy Law “Legal Aspects of Guaranteeing EU-Russian Security of Energy Demand and Supply”, Groningen, The Netherland, 30-31 May

2013

Retail supplies

Wholesale supplies

LTC LTCLTGEC

EU-25/27 border

CIS Russia

Production

“Old” EU-12/15

Since 2004/07

Russia-EU cross-border gas supply chain

EU-12/15 border

Till 2004

“New” EU-25/27

COMECON U S S R

Export Supplies

A.Konoplyanik, Groningen, Transit Session, 31.05.20132

CB A

Barents Sea

N orth Sea

Bratstvo(B rothe rh ood)

F IN L A N DS W E D E N

N O R W A Y

G E R M A N Y

F R A N C E A U S T R IAS W IT ZE R LA N D R O M A N IA

K A ZA K H S TA NM O LD O VA

B E LA R U S

L IT H U A N IA

L A TV IA

E S TO N IA

PO LA N D

C Z EC H RE P .SL O V A K RE P .

H U N G A R Y

D E N M A R K

B E LG IU M

UKN E TH E R L A N D S

R USS IA

RUSSIA

M o scow

HelsinkiStockholm

M insk

Kiev

Wa rsaw

M urm ansk

St. Petersburg

Arkhangelsk

Yelets

Ukhta

GreifswaldRostock

Lub eck

Taz Gulf

Kara Sea

BalticSea

Torzhok

Ur

al

s

M

ou

nt

ai

ns

U K R A IN E

1E xis ting Large-D iam e ter P ipe line

P lanned La rge-D iam eter P ipe line

P roduc ing G as F ield

U ndeve loped G as F ield

S h to k m ano v sk o ye f ie ld : to b e de v e lop ed a s o f 200 7 ; m ay requ ire

1 -3 la rg e -d iam ete r p ipe line s

Ya m a l pe n in su la f ie ld s: to b e de v e lop ed a fte r 201 5 ; m ay requ ireup to 6 -7 la rg e -d iam e te r p ipe line s

Z ap o ly a rn oy e f ie ld :E x p lo ita t ion be ga nla te O c to ber 2 001to s upp ly g as fo r

“B lue Stre am ”

al-2O renb urg

K a rac h aga nak

K h ara m pur

U re ngo y

Z ap o ly a rn oy e

Ya m burg

M ed v ez h ’y e

S h to k m ano v sk o ye

N orw eg ianS ea

АC B

Map source - IEA

RUSSIAN GAS EXPORT TO EUROPE: ON-BORDER SALES AND TRANSIT SEGMENTS

Soviet/Russian LTGEC to EU:A, B, C – points of change of ownership for gas and/or pipeline;C – delivery points to EU

A.Konoplyanik, Groningen, Transit Session, 31.05.2013 3

FranceSwitzerl.

ItalyTurkey

GermanyAustriaGreece

PolandSlovakiaCzech R.Hungary RomaniaBulgariaBaltic St.

BelarusUkraine Moldova

Russia

RF

USSR

COMECON

А

В

С

EC – 25/27

EC – 15

Italic – non-EU countries; New EU accession states: underlined – since 01.05.2004, underlined + italic – since 1.01.2007; bold – non-EU members of Energy Community Treaty ; A, B, C – points of change of ownership for Russian gas and/or pipeline on its way to Europe

Russian Gas Supplies to Europe: Zones of New Risks for Existing Transit Supplies Within Russia/Gazprom Area of Responsibility

New Risks 2 zone

New Risks 1 zone

Direction of Russian gas flow to Europe

Zones of new risks


EU internal gas market architecture according to Third EU Energy Package

(entry-exit zones with virtual trading points/hubs)

Hub AHub B

Hub CHub D

Hub AHub B

Hub CHub D

-

Supplies to the EU from non-EUPipelines-interconnectors between EU zones

Source: 17th Madrid Forum (Jan 2010), Energy Regulators of EU Member States

5A.Konoplyanik, Groningen, Transit Session, 31.05.2013 5

Long Distance Capacity bookings in the EU Regulatory Framework (appeared in GTM in result

of Consultations)

Whether Auctions are the

best effective systemic solution?

Yes, this is a given

legal reality to be dealt with by

any actor at the EU market, but …

3A.Konoplyanik, Groningen, Transit Session, 31.05.2013

Contractual Mismatch Problem: major risk for contract parties in unbundled gas market

Supply contract: D + V

Transportation contract: D + V

Transit contract: D + V

or

Contractual mismatch == ΔD + ΔV

Duration (D)

Contractual mismatch: between duration/volumes (D/V) of long term supply/delivery contract (LTGEC; CP1-CP2) and transit/ transportation contract (CP1-CP3); the latter is integral part to fulfill the delivery contract => risk non-renewal transit/ transportation contract => risk non-fulfillment supply/delivery contract.Core issue: guarantee of access to/creation of adequate transportation capacity for volume/duration of long term contracts

CP 1

CP 1 CP 3

CP 2

Vol

ume

(V)

Commodities market

Capacities market

A.Konoplyanik, Groningen, Transit Session, 31.05.20137

Thank you for your attention

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