Oil and Gas: Gas Pricing and the Future of EU Gas Supply Agreements

At the EU summit today, the leaders of 28 EU member states are considering a proposal to give the EU Commission a central role in vetting and approving gas supply contracts across the EU. If approved, the proposals would have a profound impact on long-term gas sales into and potentially within the EU.

Forming part of the EU’s single “energy union” strategy, the proposal being debated would empower the EU Commission to (i) oversee commercial gas supply agreements before they are entered into by the parties; and (ii) block any such agreements if it considers the contractual gas price to be unfair or if it determines that any provisions of the agreements contravene EU law.

The highly controversial EU “energy union” is designed to bring additional transparency to the gas market within EU and allow for greater uniformity of gas prices across the EU, which, according to the EU Commission, will improve the security of gas and electricity supplies in the region. This proposal appears to be targeted at companies importing gas into the EU, which are facing EU competition/anti-trust probes in relation to the pricing of gas.

The proposal in question is being opposed by a number of member states, namely Hungary, the Czech Republic and Slovakia. Opponents to the “energy union” proposal have warned of potential damage to national democracies through infringement of national sovereignty and breaches of EU competition law and the World Trade Organisation Rules.

Further information on issues relating to gas pricing and competition issues are available from CMS upon request.