WRITTEN QUESTION E-0200/01

by Alexandros Alavanos (GUE/NGL) to the Commission

(1 February 2001)

Subject: Contracts to supply natural gas from third countries

Most EU Member States have signed contracts for the supply of natural gas from third countries which contain a take-or-pay clause. The effect of such clauses is to create prohibitive conditions for the entry of new suppliers of fresh sources of natural gas into the deregulated energy market in Europe and frequently to strengthen the dominant position of suppliers of natural gas. Are the above clauses compatible with the rules of competition in the European Union? Does the Commission intend to take any action in this area? If so, what action?

Answer given by Mr Monti on behalf of the Commission

(27 March 2001)

The Commission would first like to point out that contracts for the supply of natural gas from third countries are usually signed by companies, rather than by the Member States themselves. However, it is true that the role of the public authorities in this sector was often quite important prior to liberalisation. The take-or-pay clauses contained in a number of these contracts oblige the purchaser to pay for annual quantities of gas, whether or not they are actually taken up. However, in several cases, the take-or-pay obligation does not cover the full annual quantity contained in the contract and the price to be paid sometimes represents a variable percentage of the contract price. In addition, make-up and carry-forward clauses introduce a certain degree of flexibility in the gas charges to be paid.

The Community has already given its view of take-or-pay clauses in recital 30 to Parliament and Council Directive 98/30/EC of 22 June 1998 concerning common rules for the internal market in natural gas (the Gas Directive).(1) It recognised that long-term take-or-pay contracts are a market reality for securing Member States' gas supply. Furthermore, under Community law, a company experiencing serious economic and financial difficulties because of its take-or-pay commitments may be granted a temporary derogation from the principle of providing access to the system for third parties, a key element of the process of liberalising the internal market for natural gas, which is the purpose of the Directive (see

Article 25). However, the Directive specifies, also in recital 30, that any take-or-pay contracts entered into or renewed after its entry into force should be concluded prudently in order not to hamper a significant opening of the market. Moreover, Article 25(3) sets very strict criteria that are to be taken into account when granting temporary derogations, the first of which is the objective to achieve a competitive gas market.

As for the risk, highlighted by the Honourable Member, that the existence of take-or-pay clauses may prevent new suppliers from entering the European energy market, an exclusion effect would be likely to arise, rather than from take-or-pay clauses, from other clauses such as non-competition obligations, the duration of the supply contracts, or contracts reserving transportation capacity. However, such clauses cannot be considered to be intrinsically anti-competitive. Their potential anti-competitive effects must be assessed on a case-by-case basis, taking account in particular of the market power of the companies concerned and thus the degree of competition present on the relevant product market. If such clauses served to ensure that the supplier covered any new investments made in order to ensure supply, they could qualify for an exemption under Article 81(3) (formerly Article 85) of the EC Treaty.

In any event, the Commission is monitoring very closely the European gas sector as it moves towards an integrated and competitive market. In particular, the Directorate-General for Competition has instituted own-initiative proceedings in respect of clauses likely to restrict competition contained in certain contracts for the importation of natural gas. Since the investigation has not yet been completed, it would be inappropriate to provide further details at this stage.

(1) OJ L 204, 21.7.1998.