Concrete steps are now being taken to realize the European Union’s (EU) long-awaited joint gas purchase ambitions. Will there be some form of European gas buyers consortium by spring 2023? Achieving the EU target to refill gas storage facilities by early autumn could further push the agenda. The rationale is that gas buying consortia can negotiate lower prices and ensure a more stable supply, especially in scarcity situations. According to the International Energy Agency, Europe will face a potential shortage of about 30 billion m2 in 2023. That is two-thirds of current consumption.
The new Council Regulation 2022/2576 of 19 December provides for joint purchases through a two-step process. The first is required, the second is optional. In a first step, gas purchasing companies must aggregate demand using dedicated EU-wide service providers selected through public procurement procedures. Member States should ensure that at least 15% of their storage filling requirements for next year are included in the demand aggregation process (about 13.5 billion cubic meters across the EU). Aggregation above 15% is arbitrary, but is based on the same mechanism. After matching supply and demand through this aggregation process, the second step is for some of these companies to voluntarily decide to form a gas purchasing consortium (or multiple regional consortia).
An ad-hoc steering committee, made up of national and European Commission officials, will assess whether the proposed gas purchase will enhance security of supply and respect the principle of solidarity (although EU competition rules and compatibility is not taken into account). Under Article 3 of the new Regulations, businesses are obliged to notify the Commission of important contractual information. The latter, on the advice of this Steering Committee, will assess whether the planned purchases may adversely affect the security of the EU’s internal energy markets or supply. It cannot prohibit the conclusion of contracts, but it can make recommendations to individual gas companies for further adjustments and joint purchases. Commercial information communicated shall be treated as confidential by the Commission and Steering Committee.
Background
On 18 October 2022, the European Commission (EC) launched a proposal for a Council Regulation to strengthen solidarity through better coordination of gas purchases, cross-border gas exchanges and credible price benchmarks.Negotiations between Member States proved to be complicated given that some governments supported the introduction of price caps on wholesale gas markets, while others, including Germany and the Netherlands, opposed it. A compromise on this issue allowed the Board to adopt new rules 2022/2576 This regulation will take effect the next day and will apply for one year.1
Progress to get the platform up and running has been slow so far.An initial voluntary initiative centered on the establishment of the EU Energy Platform on 7 April 2022 to ensure affordable EU energy supplies and phase out Russia’s reliance on gas. initiative [see here for summary of its first meeting] In the months that followed, five regional groups of national officials were formed to identify opportunities for common use of gas infrastructure, potential new suppliers, and assess gas demand and joint efforts in each region. We have developed an “action plan” for potential purchases. A dedicated Commission Task Force supported this process.
On January 25, EC Vice-President Maroš Shevchovic will invite representatives of major gas consumers, such as the ceramics, chemical and fertilizer industries, to discuss possible participation on the platform. The Ad Hoc Steering Board will be held again in early February.
legal pitfalls
Meanwhile, an Industry Advisory Group (IAG) has also been established to assist the Commission in providing an ‘industry dimension’. The agency is made up of representatives from about 27 energy companies. In 2022 he will meet three times. We recognize that consortium purchases serve the purpose of grouping smaller companies, often based in landlocked countries. For example, to facilitate access to LNG terminals. Small to absorb full cargo.
In addition to advising on various options for organizing joint purchases, the group explored legal issues. If a group buying consortium is formed, the most important issues to be resolved are finding agreement on liability (individual or shared) and commonality in member risk assessments.
In addition, the general conditions and processes by which consortia are assessed as compliant with EU competition rules are on the agenda of IAG. The European Commission’s Competition Department (DG Comp) has advised that although the burden of proof rests with the company, DG Comp can provide support to expedite this process in the form of informal discussions. DG Comp purportedly shows that in the case of group buying, the higher risk lies in the downstream market. The EC has frequently indicated that it would provide further guidance on these issues, and has also hinted at the possibility of broader exemptions from treaty rules, but no concrete measures have yet been put forward.
Conclusion
A new demand aggregation tool should be ready by spring 2023 to impact gas supplies for the next filling season (i.e. before winter 2023/2024). Demand aggregation is only mandated for 15% of domestic storage filling requirements, but the new rules impose broader notification obligations on the EU gas sector, even if this only relates to new contracts or tenders. is imposed. It is important to ensure that this information is treated with the utmost confidentiality. The joint purchase remains voluntary and so far there seems to be little appetite for EU companies to sign up for his EU-wide or regional consortium. Not only are collaborative platforms commercially unattractive for some players in the space, but the potential legal pitfalls (even if insurmountable) are definitely discouraging.
1. [https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2022.335.01.0001.01.ENG#d1e1119-1-1.]
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