Eurogas views on the modification
of the Gas Directive
is the association representing the European gas wholesale, retail and distribution
sectors. Founded in 1990, its members are 43 companies and associations from 21 countries.
Eurogas represents the sectors towards the EU institutions and, as such, participates in the
Madrid Gas Regulatory Forum, the Gas Coordination Group, the Citizens Energy Forum and
other stakeholder groups.
Its members work together, analysing the impact of EU political and legislative initiatives on
their business and communicating their findings and suggestions to the EU stakeholders.
The association also provides statistics and forecasts on gas consumption. For this, the
association can draw on national data supplied by its member companies and associations.
© Eurogas 2018 – Position Paper no. 18PP002 www.eurogas.org
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Executive summary and proposal on the way forward
1. Eurogas has been at the forefront of efforts aiming at full and rapid implementation of the
Third Energy Package in all Member States and would therefore support a reasonable
extension of the Gas Directive, as far as such extension would contribute to security of
supply and the well-functioning of the market in the EU itself. The implementation of the
Third Energy Package should remain a priority.
2. Eurogas’ initial analysis suggests, however, that the Commission’s proposal will more likely
have adverse and detrimental effects in a number of areas.
3. The proposal establishes obstacles to existing
pipelines entering the EU, such as Medgaz
(Algeria-Spain), TransMed (Tunisia-Italy), Green Stream (Libya-Italy), Maghreb-Europe
Pipeline (Morocco-Spain) etc., thereby creating risks to security of supply in the EU, to
investment security for project developers and operators, as well as to wider trade and
geopolitical relations between the EU and third countries.
4. The risks to new
pipelines such as EastMed (Israel-Greece) or pipeline projects bringing gas
from the Caspian Region to the EU are similar.
5. In legal terms, application of the Gas Directive in the EEZ is to be carefully assessed against
potential incompatibilities with UNCLOS.
6. The sovereignty of Member States under Article 194(2) TFEU to determine its choice
between different energy sources and the general structure of its energy supply, without
prejudice to Article 192(2)(c), would be curtailed, just as the Member States would be
deprived of their currently existing possibility to negotiate bilateral Intergovernmental
Agreements with exporting third countries on their own.
7. Inconsistency in the Commission’s arguments underpinning the proposal further weakens
the points supporting it.
8. In light of these considerations, Eurogas recommends not progressing the proposal until its
impact has been fully assessed within a timeframe that allows stakeholder opinion to be
taken into account.
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1. The views that Eurogas expresses in this paper on the Commission’s proposal COM(660) of
8 November 2017 to amend Directive 2009/73/EC (Gas Directive) concerning common
rules for the internal market in natural gas should be considered in light of the following:
a) Eurogas has been at the forefront of efforts aiming at full and rapid implementation of
the Third Energy Package in all Member States.
b) To this end, Eurogas actively participates and is a recognised interlocutor in the Madrid
Gas Regulatory Forum, the London Citizens’ Energy Forum, the Copenhagen Energy
Infrastructure Forum, the Gas Coordination Group, the activities of the Council of
European Energy Regulators (CEER), the Agency for the Cooperation of Energy
Regulators (ACER), the European Network of Transmission System Operators for Gas
(ENTSOG), particularly the swift development of network codes, and has argued in all
its written and oral contributions in favour of a well-functioning internal energy
market, making proposals for its effective development.
c) Eurogas has also supported the voluntary extension of the acquis communautaire in
energy within the Energy Community.
d) Eurogas is of the opinion that a fully interconnected and well-functioning internal gas
market is the best way to ensure security of supply across the EU.
e) There should therefore be no doubt that Eurogas would support any reasonable
extension of the Gas Directive as far as such extension would contribute to overall
improved security of supply and the well-functioning of the market in the EU itself.
f) Eurogas is further of the opinion that the EU gas market has progressed in terms of
interconnection, increased competition, development of hubs, liquidity, and
diversification of supply routes and sources since the Third Energy Package was
adopted in 2009, and has demonstrated its robustness and resilience since then,
ensuring security of supply and, in many Member States, competitive prices.
g) However, this should not hide the fact that a number of Member States still needs to
make considerable progress in market opening, and a few missing links, including
reverse flow possibility, should be put in place.
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Initial analysis reveals a number of obstacles and barriers
Eurogas has examined the proposal and has identified numerous issues of significant
detrimental or undesired effects.
Concerns about detrimental effects of the proposal on the internal market
Regulatory uncertainty for existing pipelines and unreliable neighbourhood policy
2. Whilst the proposal provides for Member States to allow existing pipelines to derogate
from the Gas Directive, the conditions for such derogations are not set out. This creates a
situation of uncertainty for developers and users alike and potentially undermines
contractual rights and obligations.
3. More importantly, pipeline projects involving significant capital costs, their developers
need to be able to rely on stable conditions once such investments have been made. The
proposal contains two retroactive changes requiring a derogation, which may be lengthy
processes with an uncertain outcome.
A first derogation, which can be issued by Member States under certain conditions, is
needed to derogate from the application of the Directive. As this derogation will be limited
in time, a second derogation, possibly in the shape of an intergovernmental agreement,
will be needed when the derogation expires.
4. Limiting the application of a derogation in time significantly impacts investment security
for project developers and operators of existing pipelines, as well as their legitimate
expectations at the time investment decisions have been made.
5. Retroactive changes also affect existing and future shippers and customers of the gas
transported that have already taken business decisions based on the existing conditions.
6. What is more, once a derogation has expired, an existing Intergovernmental Agreement
with a third country may need to be (re)negotiated with all risks of this not being
successful or beneficial.
7. Companies that are not or cannot be compliant with the Gas Directive after the derogation
has expired and before an Intergovernmental Agreement has been (re)negotiated, risk
hefty fines of up to 10% of global group turnover.
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8. Pipeline links exist between Member States and various third countries: This includes, for
example, Algeria-Spain (Medgaz Pipeline), Libya-Italy (Green Stream Pipeline), Morocco-
Spain (Maghreb-Europe Pipeline), Norway-Germany (Europipe I+II, Norpipe), Russia-
Germany (Nord Stream Pipeline), Tunisia-Italy (Transmed Pipeline) and the United
Kingdom (after Brexit). Except for the UK, the regulatory regimes for pipelines in place in
these countries differ widely from one another and from that of the EU.
Agreeing or adapting Intergovernmental Agreements to achieve greater compatibility with
the Gas Directive will prove cumbersome or even impossible.
Moreover, the EU changing the conditions for pipelines retroactively can be viewed very
negatively by the third countries concerned, which counted on the EU as a reliable partner,
and could affect the credibility of the European market with repercussions reaching far
beyond the pipeline and gas trade.
Increasing obstacles to existing pipelines entering the EU creates risks that jeopardise
security of supply and wider trade and geopolitical relations between the EU and third
Risk of delays or non-realisation of new pipeline projects
9. The impact of the modification of the Gas Directive on new pipeline projects is very similar.
From an investment security perspective, it appears questionable to treat completed
pipelines and pipelines under construction differently since project developers in both
cases made significant investments and can legitimately expect a stable legal framework.
10. Already without the modification, it takes several years until the financial, political,
regulatory and legal frameworks of a new pipeline project have been agreed amongst and
between the developers and the countries in which the pipeline will be laid. Pipelines in
the Middle East and the Caspian region could be affected, as well as future pipeline
projects in general which would increase security of supply and the diversification of
supply sources and routes.
Risk to investment security and procedures that are even longer than usual could delay, stop
or prevent new pipeline projects. Unequitable treatment of imported LNG and pipeline gas affecting diversity and competition
11. The extension of the application of the Gas Directive to pipelines to and from third
countries may lead to an advantage of imported LNG over imported pipeline gas since LNG
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regasification terminals in the EU, whilst partially also linked to exemptions, do not require
an agreement with third countries.
Unequitable treatment of LNG and pipeline gas risks having an impact both on the diversity
as well as competition in supplies.
Application of the proposal to the Exclusive Economic Zone (EEZ) and compatibility with the
United Nations Convention on the Law of the Sea (UNCLOS)
12. The Commission puts forward that “EU law in general applies in the territorial waters and
the exclusive economic zone of EU Member States”1.
Application of EU law in the EEZ should be carefully assessed against UNCLOS.
Loss of Member States’ sovereignty
13. The proposed extension of the application of the Gas Directive to pipelines from third
countries limits a Member State’s right, laid down in Article 194(2) TFEU, to determine its
choice between different energy sources and the general structure of its energy supply,
without prejudice to Article 192(2)(c) because the extended application could limit that
choice and structure.
14. Moreover, Intergovernmental Agreements fully or partially removing the extended
application of the Gas Directive would need to be negotiated by the EU. This follows from
the fact that the Gas Directive would now apply in an area that was previously not
regulated by the EU. In other words, if there is no derogation or it has run out (existing
pipelines) or there is no exemption (new pipelines), Member States will not be able to
deviate from EU law through a bilaterally negotiated Intergovernmental Agreement.
Currently a Member State can negotiate an Intergovernmental Agreement on its own and
it would at most impose certain provisions from the Gas Directive, which would otherwise
15. These two points affect investment security in Member States and could in the worst case
lead to investors giving up a project or a third country not agreeing to the new regulatory
regime or entering into an Intergovernmental Agreement with the EU.
1 COM(2017) 660 final of 8 November 2017, p. 2
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Member States’ sovereignty provided through Article 194(2) TFEU is affected twice:
1. with regard to their right to determine their choice between different energy
sources and the general structure of its energy supply, which could be limited
through the extended application of the Gas Directive;
2. with regard to the possibility to negotiate bilateral Intergovernmental Agreements
on their own.
Concerns about lack of informed decision-making
No prior impact assessment despite preceding political differences
16. Eurogas members are surprised that the Commission argues that no impact assessment
was necessary, given:
a) the strong political discussion that the Nord Stream 2 pipeline project generated
amongst Member States and between the EU and the Russian Federation;
b) the “conflict of laws” that the Commission itself anticipates;
c) the recognised need for Intergovernmental Agreements with third countries and likely
wider trade and geopolitical consequences;
d) the strong impact that the amendment would have on existing and new pipelines, as
Deadline for post-publication consultation lies after the deadline for amendments in the
17. Eurogas members are worried that the Commission conducted no consultation with the
stakeholders immediately concerned by the proposals prior to the publication of the
proposal, and launched a public consultation about one month after
The deadline for response to this consultation is 31 January 2018, which is challenging
given that the consultation was launched on 6 December 2017 and seasonal holidays will
make it difficult to respond in time.
More importantly, the usefulness of the consultation is put into question by the following
circumstances which – contrary to the principles of better regulation – effectively prevent
stakeholder feedback to be fully taken into account by the EU institutions:
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a) In its press release of 8 November 2017, the Commission called on the co-legislators
“to work closely together to ensure the swift adoption and implementation of these
b) Consequently, the European Parliament committee in charge (ITRE) held a first
exchange of views on 28 November 2017 and has set the timetable of its work in such
a way that amendments to the Commission’s proposal need to be submitted by
16 January 2018 to be voted in committee on 21 February and in plenary on 28
February in a single reading. This means that Members of the European Parliament
could not benefit from the outcome of the consultation.
c) Discussions in Council have also commenced and can be expected to be considerably
advanced by the time the consultation has closed and its outcome has been published.
The preliminary analysis that Eurogas performed shows that the implications of the proposal
are much more complex than the Commission assumed. An impact assessment and prior
consultation of stakeholders would therefore have been advisable.
Lack of analysis of the benefit to the implementation of the Third Package in
18. The Commission puts forward that the proposed amendment to the Gas Directive is
“necessary to achieve the purpose of an integrated EU gas market” and “is strictly oriented
on what is indispensable to achieve the necessary progress for the internal market”.3
However, the Commission neither sets out in what way the proposal would support the
missing implementation of the Third Energy Package in Member States, nor the impact on
that implementation arising from the current non-application of the Gas Directive to
pipelines to and from third countries.
For instance, the Commission’s proposal raises the question what would be the benefit of
an external pipeline that is fully compliant with the Gas Directive, if it passes through
Member States that are not and, for example, do not fully offer the opportunity to the
shippers using the pipeline to sell the gas in these Member States.
In light of these considerations, it is appropriate to assess whether the proposal, indeed,
benefits the internal market.
3 COM(2017) 660 final of 8 November 2017, p. 4
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Lack of consistency in the arguments of the Commission
Need for a legislative approach
19. The Commission concludes that “legislative action is henceforth required in order to define
and specify in an explicit and coherent manner the regulatory framework applicable to all
gas pipelines to and from third countries”.4
However, the proposal recognises the continued need for international agreements
negotiated on a case-by-case basis. By nature, negotiations with diverse third countries on
a case-by-case basis render it unlikely that the rules under which (competing) import
pipelines operate will be coherent and identical.
Question of what affects security of supply more: Non-application of the Gas Directive to
external pipelines or lack of its implementation in Member States
20. The Commission further puts forward that “pipelines to and from third countries are in
most cases of a capacity which is capable of impacting the internal market and security of
supply in several Member States”5. However, this is foremost the case because the EU
internal market is not yet fully interconnected and the Third Energy Package not yet fully
Commission’s expectation of rising requests for derogation raises doubts about the usefulness
of the proposal
21. The proposal provides for derogations for existing pipelines and exemptions for new
pipelines. With regard to existing pipelines, the Commission justifies this approach with
complex legal structures already in place which may require a case-specific approach.6
This argument applies to existing and new pipelines alike and justifies the non-application
of the Gas Directive to pipelines to and from third countries more than it enhances the
need for its application.
Indeed, the Commission anticipates that “the number of requests for derogations might
increase, which implies requirements for engagement at administrative level on the part of
national regulatory authorities and the Commission in taking additional exemption
4 COM(2017) 660 final of 8 November 2017, p. 2
5 COM(2017) 660 final of 8 November 2017, p. 3
6 COM(2017) 660 final of 8 November 2017, p. 4
7 COM(2017) 660 final of 8 November 2017, p. 4
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In light of the preliminary analysis set out above, Eurogas is of the opinion that it is of
paramount importance to security of supply and a well-functioning internal gas market in the
EU that the effects of extending the application of the Gas Directive to pipelines to and from
third countries is more thoroughly analysed in a full impact assessment before the proposal is
further pursued. The timeframe of that assessment should be such that stakeholder opinion
can be taken into account.
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