Gas supply monopoly challenged

TALLINN - The Estonian government announced that it plans to unbundle national energy company Eesti Gaas in an effort to break Gazprom’s hold over the country’s gas market. Eesti Gaas, which has a monopoly on natural gas transmission and sales in Estonia, is 37 percent owned by Russian Gazprom. Natural gas is imported into Estonia not only from Russia, but from the Incukalns’s underground gas storage in Latvia.

According to the Estonian government, the unbundling will bring lower gas prices in the long term. The company disputes this, saying instead that unbundling will not bring in new suppliers, reduce the prices, or reduce Gazprom’s importance in the market.

On July 28, the ruling coalition met and agreed to start developing a bill in September that would split the company’s transmission and sales divisions into separate companies. Prime Minister Andrus Ansip disclosed the government’s plan to re-nationalize the gas pipe network currently owned by Eesti Gaas.

“Estonia should also go ahead and decide to separate the transmission grids,” said the prime minister, referring to the one owned by Eesti Gaas. “In Estonia, the share of consumed natural gas in our primary energy balance is rather small. However, we cannot be satisfied with the knowledge that all of the gas consumed in Estonia – all of the natural gas – comes from one single supplier, from Gazprom,” he explained.
CEO of Eesti Gaas Raul Kotov said that the company’s network of gas pipes would cost 4 - 5 billion kroons (320.5 million euros).

Kotov insisted that European Union directives do not require the separation of sales and transmission ownership in Estonia, as the ruling coalition is using as a pretext for the legislation proposed on July 28. According to Kotov, the same exception has been given to Latvia and Finland. He asked why Estonia chooses to follow Lithuania’s example, and not Finland’s, who “have been showing themselves as smart managers in energetics.”

The Ministry of Economic Affairs and Communications has estimated that the value of the network is approximately 600 - 700 million kroons. “No one would sell the pipes at the price of 600 million kroons,” said Kotov.
“No negotiations have been held, frankly,” he said. “If the government does not consider it necessary to discuss the matter with us, we can only conclude that there is no respect for us,” Kotov added.

Those supporting the idea to nationalize the network of gas pipes hope to attract to Estonia a major liquefied natural gas terminal that would supply Estonia with gas that would come from outside Russia.
Ken-Marti Vaher, secretary of the Union Pro Patria and Res Publica, said that “Every thoughtful and effective step to curb monopolies is justified as the consumers are unprotected in the monopoly market.”
Vaher added that “Gazprom, the main owner of the gas network, is doing nothing to enable access to other gas networks, or to other suppliers.”