Brussels monitoring Gazprom for uncompetitive behaviour

The European Commission is monitoring Russian gas producer Gazprom as MEPs questioned energy commissioner Kadri Simson on Tuesday evening about anti-competitive behaviours that were sending gas prices soaring.

Brussels has opened an investigation into possible anti-competitive behavior by Gazprom in the gas market.

Germany has now decided not to proceed with the certification process of Nord Stream 2, a project ultimately controlled by Gazprom, in the wake of the Russian invasion.

Simson said the good news was that mild weather and increased LPG (liquid petroleum gas) supplies, Europe could expect to be “on the safe side” for the 2022 winter.

Simson said Brussels wanted reach full independence from Russian gas before the end of this decade. “We remain firmly on the same course of the green deal but we aim to move much faster. On renewables we must roll out renewable electricity in the sectors where gas dominates, this means insulating homes, installing heat pumps, solar PV’s and speeding up the completion of wind parks, solar power plants across the EU.”

The share of Russian pipeline gas in EU gas imports was 41% in the third quarter of 2021. Russia is by far the largest exporter of oil, natural gas and coal to the EU, in fact such exports account for a third of Russia’s budget.

Already before the crisis, natural gas prices had increased significantly. The current crisis is likely to have a major impact on price levels in Europe and the world.

MEPs put questions to Simson on possible anti-competitive behaviours that had contributed to hikes in gas prices, during the Strasbourg plenary.

Cristian-Silviu Bușoi (EPP), said rising energy prices were largely due to a myriad of factors beyond the current Russian aggression in Ukraine. “What is clear is that we are certainly more vulnerable now, than we were a year ago.”

He cited factor such as sudden increases in demand in Asia, decrease of natural gas production in the EU, the price of carbon credits rising within the EU’s emission trading system, but especially “the game that Gazprom was playing to increase profits and the dependence of some EU countries on its resources.”

Gas prices peaked in December 2021 at 4.5 times the January 2021 prices, exacerbated by the pandemic and geopolitical tensions, combined with lower than expected gas imports from Russia.

Europe: the energy picture

The European Union’s dependence on energy imports has increased in recent years due to lower domestic production of non-renewable energy such as coal, gas, oil and nuclear; combined with stable energy demand.

In 2020, the EU imported well over half (57.5%) of its energy, ranging from 97.6% for Malta to 10.5% in Estonia. In terms of energy source, 97% of oil and petroleum products, 83.6% of natural gas, and 35.8% of solid fossil fuels were not produced by the EU, but had to be imported.

Natural gas prices in Europe rose considerably during the second half of 2021, already well before the current crisis in Ukraine, not least due to a strong surge in post-pandemic demand. On 21 December 2021, prices reached a peak of €180 per megawatt-hour, having hovered below €50 per megawatt-hour throughout the summer. This came in the wake of comparatively low levels of natural gas storage.

With the Green Deal, the EU has already implicitly taken steps to reduce this dependency – albeit over a long period, stretching at least until 2050, when the EU wants to be climate-neutral, as set out in the 2021 European Climate Law.

However natural gas in particular is often regarded as a necessary source of energy for the transition period, thanks to its being cleaner than coal and its ability to provide a flexible buffer in case of a shortfall in renewable energy due to lack of sunshine or wind.