EU opens investigation into Qatar Petroleum over potentially restrictive gas contracts

Margrethe Vestager, EU Commissioner in charge of competition policy, during a recent press conference in Brussels / Berlaymont. (Copyright: EU, 2018 / Source: EC - Audiovisual Service / Photo: Jennifer Jacquemart)

Margrethe Vestager, EU Commissioner in charge of competition policy, during a recent press conference in Brussels / Berlaymont. (Copyright: EU, 2018 / Source: EC – Audiovisual Service / Photo: Jennifer Jacquemart)

Last week, the European Commission has announced it has opened a formal investigation against Qatar Petroleum over supply agreements that appeared to be restrictive for European buyers. In particular, the EU watchdog’s probe was launched to assess whether supply agreements between Qatar Petroleum, the bloc’s biggest sea-borne gas supplier, and European importers of liquefied natural gas (LNG), have hindered the free flow of gas within the European Economic Area, in breach of EU antitrust rules. The move follows the settlement of a seven-year antitrust case against Russian giant Gazprom last month, and it comes as part of a precise plan by the European Commission to remove restrictions in the EU gas market.

Background

Since a few years, LNG producers have come under increasing pressure to remove fixed destination clauses. The so-called destination clauses are a fixture of long-term LNG deals that anchor buyers to receiving shipments at a specific port, thereby preventing cargo diversions to other ports. The EU courts and previous Commission precedents have already applied the principle that contracts that restrict the territory into which the buyers can sell products have as their object the restriction of competition within the meaning of Article 101 TFEU.

Just a few weeks ago, the EU has wrapped up a seven-year probe into Russian giant Gazprom over potential market abuse, where the Commission has investigated territorial restrictions in the gas sector in the form of export bans and destination clauses. The Commission – under Article 102 TFEU – has established binding commitments on Gazprom that aim at enabling the free flow of gas at competitive prices in the Central and Eastern European gas markets.

Last week’s move

Last Thursday, the EU’s watchdog has decided to formally proceed against Qatar Petroleum as per Article 101, opening an official antitrust investigation. The probe into Qatar’s LNG deals follows detailed consultations between the European Commission and Japan’s Ministry of Economy, Trade and Industry during last year, aimed at exploring the impact of such curbs on gas market development and price transparency, as reported last week by Reuters.

In recent months, the Japanese government and other LNG importers have been calling for more flexible supply contracts without destination clauses, which prohibit importers from re-selling LNG. Japan is among the biggest LNG buyers in the world.

“Problematic restriction clauses”

“We have opened an investigation to look at whether there are problematic territorial restriction clauses in gas supply contracts with Qatar Petroleum”, Commissioner Margrethe Vestager, in charge of competition policy, announced last week. “Such clauses may harm competition and prevent consumers from enjoying the benefits of an integrated European energy market”, she added. “Energy should flow freely within Europe, regardless of where it comes from”, Commissioner Vestager also said.

In an official EU press release, the Commission has declared it is concerned that certain clauses contained in these agreements appear to, directly or indirectly, restrict the EEA importers’ freedom to sell the LNG in alternative destinations within the EEA. “For example, some contractual clauses prevent any diversion of cargoes to another destination or restrict the territories to which diversion can take place or the volumes that can be diverted”, the EU doc said. “As a result, these clauses may unduly limit the free flow of LNG sold by Qatar Petroleum in the EEA, segmenting the EU’s internal gas market”, the statement said.

Qatar giant

“Qatar Petroleum wishes to stress that it gives the highest importance to compliance with regulatory authorities in all geographical areas in which it operates”, the Qatar state owned petroleum company responded to the EU through an official release last week. “Qatar Petroleum looks forward to working with the European Commission to address any queries or concerns they may have in this regard”, the QP statement also said.

Qatar Petroleum is the largest supplier of LNG in Europe, accounting for around 40% of the EU’s overall LNG imports and significantly higher import shares in certain Member States. according to data from the International Group of LNG Importers, Qatar supplied 16.81 million tonnes of LNG last year, compared to 38.65 million tonnes in total. Nigeria and Algeria were the next biggest suppliers with just over 7 million tonnes. Qatar is the world’s biggest LNG producer.

Risks ahead

If proven by EU investigators, such antitrust practices may breach EU antitrust rules, specifically on anticompetitive agreements between companies and/or on the abuse of a dominant market position, as per article 101 TFEU and 102 respectively. The Financial Times reported last week that, according to Trevor Sikorski, head of natural gas and carbon at consultants Energy Aspects, Qatar Petroleum could face fines of up to 10 per cent of its global turnover. “The more likely outcome is they agree to remove all restrictive destination clauses in their supply agreements with European buyers”, Reuters quoted Mr. Sikorski as saying.

“The Commission will now carry out its in-depth investigation as a matter of priority”, the EU’s watchdog said in its official statement last week. “An opening by the Commission of a formal investigation does not prejudge its outcome”, the release specified.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

To realise the full potential of AI, we must regulate it differently

High-technology manufacturing saves the EU industry

What next after more sanctions against Russia, will the Ukrainian civil war end?

European Banking Union: Like the issue of a Eurobond?

Fears for food security and the future of farming families, as Fall Armyworm spreads to Asia

YO!FEST ENGAGES 8,000 YOUNG EUROPEANS IN FUTURE OF EU

Terror attacks strike people ‘from all walks of life, the UN included’

‘12 million’ stateless people globally, warns UNHCR chief in call to States for decisive action

The battle for the 2016 EU Budget to shake the Union; Commission and Parliament vs. Germany

Humanitarian emergency in Venezuela was central debate of the EuroLat plenary

UN welcomes ‘milestone’ release of 833 Nigerian children from anti-Boko Haram force

Parliament seals 2014 EU budget and the spending ceiling until 2020

Sub10 Systems @ MWC14: Bridging the Ethernet of the Future

When it comes to envirotech adoption, NGOs can lead us out of the woods

Ercom, cutting-edge Telco solutions from Europe

IMF: The global economy keeps growing except Eurozone

A voice from Syria: the positive prospect of clinical research despite the excruciating circumstances

Who cares about the unity of Ukraine?

COP21 Breaking News_12 December: The New Draft Agreement!

At last a good price for the Greek debt!

Eritrea sanctions lifted amid growing rapprochement with Ethiopia: Security Council

‘Concerted effort’ must be made to help 600 million-plus adolescent girls realize full potential: Guterres

Climate change and health: a much needed multidisciplinary approach

Banks must take bold action to fight climate change. This is how they can do it

EU revengefully shows no mercy to Cameron by demanding a fast and sloppy Brexit now

Budget MEPs approve €34m in EU aid to Greece, Poland, Lithuania and Bulgaria

The refugee crisis brings to light EU’s most horrible flaws and nightmares

European Business Summit 2013: Where Business and Politics shape the future

Yellen and Draghi tell Trump and markets not to expedite the next crisis

Greece’s Tsipras: Risking country and Eurozone or securing an extra argument for creditors?

Why is the World Health Organisation so much needed?

Reintegrating former rebels into civilian life a ‘serious concern’ in Colombia: UN Mission chief

ECB to support only banks not Peoples

UN chief welcomes start of Church-mediated national dialogue in Nicaragua

Commission proposes fishing opportunities in the Atlantic and North Sea for 2019

Gender inequality in the medicine field: two commonly issues

The US-Mexico trade deal a threat for others, Trump to single out China, Europe

Public health through universal health coverage can help to attain many SDGs

France is building a village for people with Alzheimer’s

A new bioeconomy strategy for a sustainable Europe

MWC 2016 LIVE: Freemium MVNO model a success, claims FreedomPop head

SMEs and micro firms sinking together with south Eurozone

4 ways 3D printing can revolutionize manufacturing

Human Rights: breaches in Cambodia, Uganda and Myanmar

China’s 13th Five Year Plan and the opportunities for Europe

Doctors vs. Industry 4.0: who will win?

Governments can fight corruption by joining the digital payment revolution

1 million citizens try to create a new EU institution

ECB with an iron hand disciplines the smaller Eurozone member states; latest victim: Greece

UN urges protection of indigenous peoples’ rights during migration

There is a way for Eurozone to reach a sustainable growth path

EU presses India for a free trade agreement

NEC @ European Business Summit 2014: The Digitally Enabled Grid

UK keeps its Brexit plan secret or there is no strategy at all whatsoever?

Alarming level of reprisals against activists, human rights defenders, and victims – new UN report

What if Trump wins the November election and Renzi loses the December referendum?

Germany may have a stable and more cooperative government

UN forum spotlights cities, where struggle for sustainability ‘will be won or lost’

The West castigates Turkey’s Erdogan for the ruthless political cleansing

Does the Greek deal strengthen the Eurozone? Markets react cautiously

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s