Evolution of gas pipeline regulation in Russia – Third party access, capacity allocation and transportation tariffs

Executive Summary

Russia has been reforming its domestic gas transportation regime since the mid-2000s and achieved significant progress through an introduction of legal unbundling, establishment of a legal/regulatory framework for non-discriminatory access and a new zonal tariff methodology. However the existing framework remains insufficiently developed both in scope (e.g. non-applicability to non-UGS systems, storage and LNG infrastructure) and content (e.g. significant room for discretion in choice of routes for third party gas and capacity allocation in the event of capacity deficit); the new draft framework, currently under discussion in government, aims to address these problems.

From the Russian state’s point of view, the aim of domestic gas market reform – including the reform of the gas transportation regime – is to establish a level playing field for Gazprom and non-Gazprom parties in order to ensure the optimal development of the domestic gas sector and the Russian economy as a whole, while preserving the country’s competitive position as an exporter to both European and Asian gas markets.

A new study by Katja Yafimava argues that at present, this aim is to be achieved by increasing direct government involvement and strengthened FTS (Federal Tariff Service) and FAS (Federal Antimonopoly Service) oversight. However, should these measures fail, then more radical measures such as abolition of the UGS system indivisibility principle, with subsequent Gazprom ownership unbundling and the state becoming the owner of both the UGS and non-UGS networks, might be required. In early 2015, however, this seems a ‘last resort’ measure which is not under consideration by the authorities.

By: Katja Yafimava

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