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Complaint filed against LNG Law

Dec 12, 2012
From wire reports

VILNIUS - In a press release, Lietuvos Dujos (Lithuanian Gas) said that the company supports initiatives to diversify sources of natural gas supplies to Lithuania and the other Baltic States, reports ELTA. In particular, together with the Polish natural gas transmission system operator, it is making progress on the Gas Interconnection Poland-Lithuania project. Already in 2017 this interconnection may provide the Baltic States with access both to mainland Europe’s gas market and, via the Polish LNG Terminal, to the global LNG market. Clearly, however, any project for the diversification of natural gas supplies must be implemented in compliance with legislation and without distorting competition, it says.

But the Law of the Republic of Lithuania on the Liquefied Natural Gas (LNG) Terminal and its secondary legislation bluntly violate inter alia European Union law and severely restrict and distort competition, says the statement. Therefore, on Dec. 6, Lietuvos Dujos submitted a complaint to the European Commission requesting to initiate infringement proceedings, the company reported.

According to the company, among the LNG Law’s provisions violating the European Union law are that gas companies importing gas via gas transmission pipelines are required to procure in each calendar year at least 25 percent of their gas supplies through the LNG Terminal and at least another 25 percent by importing via transmission pipelines.
Also, Lietuvos Dujos say that the LNG law restricts the application of take-or-pay commitments in relation to contracts for gas imports into Lithuania through gas transmission pipelines (but not in relation to contracts for gas imports via the concrete LNG Terminal advantaged by the LNG Law).

Besides, it restricts the use of said LNG Terminal by entities of other EU member states.
Finally, Lietuvos Dujos claims, it provides for the inclusion of the LNG terminal project’s implementation and operating costs in the tariffs of gas transmission service (transportation via high pressure pipelines).

The provisions of the LNG Law violate not only the Treaty on the Functioning of the EU, which prohibits restrictions on trade between member states and regulates the issues of granting state aid, but also violate Gas Regulation No. 715/2009 and the Gas Directive 2009/73, which prohibit cross-subsidization between gas transmission and other activities, as well as prohibit restrictions on non-discriminatory access to the LNG Terminal and free trading in gas.
“Until today, state officials and the company appointed to implement the LNG terminal project repeatedly justified the competition distorting provisions of the LNG Law saying that these provisions prevent the current single external supplier to conclude new long-term contracts with Lithuanian gas importers, which would block the supply of LNG to Lithuania.

Such statements are at odds with reality: traditionally, Lithuanian gas supply companies sell gas to consumers under contracts concluded for a term of up to one year. All consumers are free to choose gas suppliers offering the best terms and conditions. Such consumer choices definitely do not depend on whether or not the supply company is bound by a long-term supply contract with an external supplier. The majority of large consumers, such as centralized district heating companies or electricity producing companies, are even required by law to arrange on an annual basis public procurement procedures, to select gas suppliers offering the best terms. Consequently, any new LNG supplier would immediately gain a large share of the market - provided its prices and other conditions are competitive. There is no need to impose any competition distorting measures like the mandatory purchase obligation. Such measures would only cause gas prices to go up,” said Joachim Hockertz, deputy general manager - director of commerce.

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