PRESS: Energy min sees no threat to N Stream-2 from EU directive

MOSCOW, Feb 27 (PRIME) -- The new amendments to the E.U. Gas Directive are no threat for the Nord Stream-2 natural gas pipeline, Russian Energy Minister Alexander Novak said in an interview to Gazeta.ru newswire published late on Tuesday.

The European Commission put forward amendments to the E.U. gas directive in 2017, suggesting applying the E.U. third energy package to all pipelines that run through the E.U. territory to and from third countries. The bills require non-discriminatory regulation of tariffs and provision of access of third parties to gas pumping.

This means that the pipelines must have an operator independent from Russian gas giant Gazprom, and third parties must receive access to the capacities but only Gazprom can supply gas to the Russian end of the pipeline and is the only company with the right for exports.

“We will track and monitor the situation. We need to see the final editions of these amendments first. Anyway, we think that they bear no threat to construction of the pipeline. Laying of the pipeline is going on on a daily basis on the bottom of the Baltic Sea. Even while we are talking, they are laying 5–6 kilometers of pipelines per day,” Novak said.

Germany softened the latest edition of the amendments by adding a clause saying that the package only covers the infrastructure in the territorial waters of the country where it runs. “Nevertheless, different discussions are taking place now and there is no final decision yet,” he said.

Russia insists that Nord Stream-2 is a commercial project, as Gazprom is building the pipeline in a consortium with other European companies. On the other hand, there is an opinion of some European states and the European Commission that it will increase the E.U. dependency on Russian gas while depriving Ukraine from a gas transit income, he said.

“In addition to that, there is the U.S. that is cynically pushing its liquefied gas to Europe, cynically making their ambassadors in many European countries exert pressure on these states through external economic channels in an absolutely cynical way, blackmailing these countries in many directions, including through provision of help,” he said.

The U.S. liquefied natural gas (LNG) is not a competitor for the Russian gas in Europe. “I see consumption of American LNG largely on the markets that don’t have pipeline gas. Pipeline gas is more competitive than liquefied gas if it is already supplied. LNG is more competitive if it is transported to farther than 3,000 kilometers, to regions where a pipeline is unprofitable,” he said.

Gas transit through Ukraine is the most expensive way for Russia to deliver the blue fuel to Europe. “The tariff that is set there is the highest that we have, it is 2–2.5 times higher than tariffs on other routes, like the Yamal–Europe or the Nord Stream-1,” he said.

The tariff is high as the Ukrainian gas transportation system was created about 50 years ago using old technologies, a high depreciation of fixed assets, and large losses of gas during transportation, he said.

OIL OUTPUT UNDER OPEC+ DEAL

Russia will reduce oil production by 228,000 barrels a day from the level of October 2018 at the end of March or in early April under an oil output reduction deal of OPEC and non-OPEC states, Novak said.

“We reached a reduction level of 90,000–100,000 barrels a day from the level of October 2018 as of February 1. Taking into account that our December output was higher than in October by about 50,000 barrels, contraction from the December output amounted to 140,000–150,000 barrels…I think that we will be able to reach the parameters set by the deal at the end of March or in early April,” he said.

Low temperatures of the Far North is responsible for the slow reduction. “It is impossible to close the valve and reduce production in one second technically. It is very dangerous to stop a well quickly in the winter, as there is a risk that it may not be relaunched in the future, turning this into an irreparable loss,” he said.

The current global prices are more acceptable for oil producers and consumers.

“We see a rather calm and stable situation on the market, where volatility is low and prices are more or less acceptable for both exporters and consumers. We think that stability is the result of the (OPEC+) deal in the first place,” he said.

DOMESTIC FUEL PRICES

He also said that gasoline prices in Russia would not grow by more than 4.3% in 2019. “I will reiterate that the inflation forecast of the Economic Development Ministry stands at 4.3% for 2019. These are the rates of growth for prices that we may see this year, but it will not be higher than that,” he said.

Prices grew fast at the beginning of the year due to an increase of VAT to 20% from 18%. The Russian government has instruments of tax regulation that allows it to maintain fuel price growth no faster than inflation, he added.

End