Russ Oil-Gas

October 10 2008 - Financial Times by Joshua Chaffin - European states will have the authority to determine whether to open their energy markets to foreign investment from companies such as Gazprom, according to a compromise agreement reached by European energy ministers on Friday. The agreement scales back the European Commission’s efforts to exercise greater oversight over foreign participation in the EU energy market. It is a particular victory for Germany, which receives 40 per cent of its gas from Russia and had objected to tighter restrictions. The Commission last year proposed rules to prevent foreign companies from acquiring generation or transmission companies in the EU unless their own countries opened their own markets to EU investment. That proposal was widely seen as a way to curb the rising influence of Gazprom, which had interrupted gas shipments to Europe amid pricing disputes with Ukraine. However, ministers agreed on Friday that each of the EU’s 27 member countries would decide whether to permit foreign investments in their territory. In so doing, member governments are to consider Europe’s energy security, and also take into account suggestions from the Commission. The compromise on the so-called “Gazprom clause” came amid a broader package of reforms intended to nudge the EU towards its long-term goal of creating a single energy market with robust competition. As part of that effort, ministers agreed to an amendment that would prevent large, integrated utilities such as Germany’s Eon from taking over transmission companies in countries that have already liberalised their energy markets. That agreement was a priority for the Netherlands, which has moved to “unbundle” its energy market by separating companies that handle electricity generation, transmission and distribution, and was concerned that its network could fall prey to larger competitors. In spite of a worsening economy and mounting financial crisis, several energy ministers also reiterated their commitments to meeting ambitious targets to reduce Europe’s greenhouse gas emissions by 20 per cent by 2020. “In spite of tough times, I think there’s a determination to meet our climate commitments,” said Ed Miliband, the UK’s newly appointed energy and climate change secretary. “I think that is encouraging.”