Gas transportation tariffs may be lower and more transparent

27 april 2015

An expert discussion of problems of tariffing the transportation of gas by the transit pipelines in Russia took place at the Analytical Center. Possibilities of the alignment of corporate and regulated tariffs were discussed.

Today the gas transmission industry combines the  controlled tariff making for independent market participants and uncontrollable for the monopoly JSC "Gazprom". Although all the calculations are performed in accordance with the law and the methodology approved by the Federal Tax Service (FTS) of Russia in 2005, most experts believe that these tariffs can be considered economically justified in today's realities only with a number of conditions, and a number of amendments to the existing laws may be required.

"We need to ensure a single tariff at the domestic market, it is important for the state," said Alexander Kurdin, the Head of the Department for Strategic Studies in Energy of the Analytical Center. "Is this alignment possible and desirable, or it will require the reforming of the entire industry?"

At the beginning of the roundtable Igor Isayev, the Deputy Head of the FTS's Department of regulation of the oil and gas industries of Russia, talked about tariff making principles, and Vasily Smirnov, the Deputy Head of the Department of Economic Expertise, the Head of the Department of pricing at JSC "Gazprom", talked about the current monopoly tariff methodology. "The change of the intra-regulated tariffs, and vice versa, is associated with a number of serious difficulties," said Mr. Smirnov. "The current system is optimal and does not bring additional preferences to "Gazprom" as the main supplier of gas to the domestic market." According to him, on the contrary, the subsidizing of the independent gas suppliers occurs indirectly.

Oleg Ivanov, the Director of the Department of Planning, Performance Management and gas business development of the JSC "NK" Rosneft" has disagreed. "The calculation of tariffs is done in accordance with the law, but does the law encourage the development of an industry that is now in apparent stagnation?" asked the expert. "The tariff does not encourage monopoly to reduce costs. It is necessary to improve legislation in line with current realities and in order to stimulate the growth of transparency of the tariff making". According to him, a significant part of tariff's components is opaque now, and some of them, as, for example, the accounting for investment activities, are illegal.

In general, the situation of the imbalance and as a result of conflicts between "Gazprom" and independent suppliers was created in the industry. Therefore, the tariff making requires greater openness and revision of the model of the gas market. "We need to talk about some new market model, which has already developed," said Maxim Rothko, a leading adviser to the Office of Tax and Customs Tariff Policy of the Department of the oil and gas production and transportation of the Ministry of Energy. "However, while this process is going on, it makes sense to work on the transparency of the methodology used, as is done today in the FTS."

Experts also paid attention to the low transparency of the investment program of "Gazprom", the need to implement a long-term tariff and interests of independent producers, which is especially important in view of the future single market, when after 2025 producers from other countries, such as Kazakhstan, will come to Russia's market.

In general, a consolidated expert opinion was failed to achieve, and the consultations will continue.