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From my view, most of the blame towards the lack of "free flows" of gas can beput on the CEC itself after it forced Gazprom and its key trade partners to refrain fromdestination clauses in 2003 and in subsequent years. Lack of “free flows” is first of allthe result of a lack of the available infrastructure (pipelines-interconnectors, reversecapacities at the borders, underground gas storages, etc.). The mentioned factors arethe result of the weak investment stimulus for project financiers to invest mostly debtcapital (through the mechanisms of project financing) into development of gasinfrastructure within the framework of an unbundled EU energy market. Since 2003(after Second EU Energy Package came in force) development and regulation of thetrade flows (commodities markets), on the one hand, and of infrastructure (capacitiesmarkets), on the other hand, within the EU are carried out separately as opposed tobefore, when both of these segments (commodities and capacities) were developed andmanaged as a single economic complex within individual VICs.3.2 Risks for project financingAdditional risks and uncertainties for project financing of the infrastructure(aimed at preventing deficit of capacities to appear and thus to provide free flows ofgas) within the current framework of the unbundled EU gas markets are created by thefollowing factors:(i)(ii)(iii)(iv)mandatory third-party access to the gas transportation/transmissioninfrastructure (MTPA),accelerated introduction by regulatory measures of spot and exchangebasedpricing,implicit discrimination of LTGEC with oil-indexation mechanism, which arefavoured by project financiers as investment tools, andregulated transportation tariffs with restricted ceilings of rate of return oninvestment in infrastructure development at the extremely low level (5-6% and/or lower, like in Germany). This extends the payback period of25
such projects up to 20 years and makes all investments in theinfrastructure development of no interest for private business.And what does the notion "free flows" means in the scope of suchinvestigation? Does the CEC imply the following by its use:(1) “old” (existing) and “new” (incremental) multiple supplies/gas flows through“old” (existing) and “new” (incremental) multiple capacities/transportation routes, or(2) “old” and “new” multiple supplies/gas flows, but only with the use of existingtransportation capacities?Option (1) requires an enormous investment and long project lead-times and thuslacks immediate results in terms of additionally available capacities. Option (2), whichseems to be the preferred scenario for the DG COMP/CEC, means zero investment andzero lead-times , in other words - the immediate access, though to the existing andalready contracted infrastructure. The possible argumentation in favour of this secondoption by the Commission can be backed by calculations, made by the Institute ofEnergy Economics at the University of Cologne for the CEER (Council of EuropeanEnergy Regulators). They show that the average annual utilization rate of existingpipeline infrastructure in the EU is equal to 70%. 36 This figure is widely accepted byEuropean energy regulators and is interpreted in a way that there is no major need inincremental/new infrastructure. And that the absence of free flow of gas does not resultfrom inadequate, compared to market needs, infrastructure capacities, but due to itsimproper utilization by incumbents (by those who have developed and have beenhistorically using their transportation capacities). In other words, there is enoughtransportation capacities within the EU, it is fully contracted by incumbents, but notfully used in the most effective manner. This figure and all corresponding conclusionsare widely used today in Europe by the proponents of the Third Energy Package despitethe well justified concerns and action plans for developing interconnectors, etc.36 Stefan Lochner, Caroline Dieckhöner, PD Dr Dietmar Lindenberger (Institute of Energy Economics at theUniversity of Cologne). Model‐based Analysis of Infrastructure Projects and Market Integration in Europe withSpecial Focus on Security of Supply Scenarios. Final Report, May 201026
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Page 4 and 5: The CEC declared that the matter wi
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Page 48 and 49: In my view, such a soft adaptation
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Page 56 and 57: (Figure 11. LTGEC in Europe: indexa
Page 58 and 59: the Russian gas and large taxpayers
Page 60 and 61: many Europeans, but, and this is mo
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