Experts about regulation of natural monopolies in gas transmission sector

6 may 2015

Experts of the Analytical Center considered in the new issue of the energy bulletin regulation of natural monopolies in the gas transmission sector, having paid special attention to problems of regulation of gas transportation through the main gas pipelines in Russia and European Union.

According to experts, the history of pipelines and pumping tariffs in Russia is mainly the problem of the country's size, its Soviet legacy and the inequality of regional development. "The main pipelines in the country and the majority of export pipelines were built in the Soviet Union, and the current commercial owners have got it with a fine pencil. Only the property tax connects them somehow "with past investments", experts believe. But according to the law, the cost of new pipes must be taken into account (along with amortization) in the tariff, and this increases the cost of gas for consumers, particularly in remote areas." Entering of the independent gas producers (IGP) to underground storage facilities and pipelines also creates problems when considering return on investment. The representatives of "Gazprom" complain that IGP would like to enter into export capacity (contracts) with its gas, but are not ready to take a share in the investment or social functions, experts say.

The European Union continues to create a unified legal and regulatory environment of the Third energy package - companies have to comply with its provisions. Code on tariff-making is to be adopted in the current year, and then we will evaluate how the Commission managed to create a "masterpiece" to regulate the functioning of the gas infrastructure, experts say.

Background of the I quarter of 2015, written by experts, is formed by relatively low oil prices (55-60 dollars/barrel), and falling demand for Russian gas with a mild winter and Ukrainian conflict. New topic of discussion and concern factor for the exporters of oil and gas is an agreement "5 + 1" with Iran and its future export expansion. Therefore, increasing the pressure on the market prices will inevitably lead to their decline. However, the extent and timing of the pressure are not clear. Exporters are not in a such financial state to afford a big advantage of offer or a price war. Complex maneuvers and agreements are required to avoid further financial losses at shifts in the markets, experts believe.

Also the paper reviews trends in the fuel and energy complex of Russia. Experts point out, that the key changes take place in the export of gas, where the decline continues from the second half of 2014, and the development of the oil and coal industries pass without significant changes.

Read more in the bulletin "Regulation of natural monopolies in the gas transmission sector."

Other issues of Energy Bulletin are available in the section of Publications.