REVIEW: Gazprom sees take-or-pay, ship-or-pay, fines in new Network Code
MOSCOW. April 22 (Interfax) - Russian regulators and gas giant Gazprom announced this week that the sector will soon work out a new Network Code, a unified regulatory document of the government, that will set out the main conditions for gas transportation and supplies, as well as the general principles of how companies operate on the gas market.
Gazprom deputy CEO Valery Golubev disclosed the main premises of the future code in a presentation at the National Oil and Gas Forum. "We're prepared to take on the main work of developing the network code," he said.
Federal Anti-Monopoly Service (FAS) deputy director Anatoly Golomolzin said that the Exchange Committee is already preparing to discuss the draft code.
The code
Gazprom believes that gas prices and tariffs for gas transportation services should factor in economically justified expenses and include the necessary profit margin to finance the expansion of gas production infrastructure, gas pipeline networks and underground gas storage facilities. If gas transport tariffs are 'frozen,' the non-market impact on Gazprom increases.
The company is calling for "improving the methodology for determining tariffs for gas transport services [and] introduction of payment for the declared amount of transportation," or a ship-or-pay mechanism. It is proposing penalties for deviation from contractual obligations.
The company is also proposing a "transition from legislative stipulation of the unevenness of gas consumption by days of the month to the practice of entering into contracts with various amounts and durations, including with day-ahead supplies, the introduction of a system of commercial balancing of gas to resolve the problems of unbalanced volumes of gas deliveries and offtake to/from Gazprom's gas transport system and discrepancies between planned and actual destinations and amounts of transportation," the company said in a presentation that Interfax obtained from the organizers of the forum.
Gazprom proposes to encourage gas buyers and sellers to sell or buy excess or insufficient amounts of gas in organized trading. The reliability of the gas transport system is expected to increase thanks to a greater correspondence between its actual operation and planned parameters.
In regard to gas supplies, Gazprom is proposing to legislatively define a mechanism for selling gas on prepayment terms in order to tighten payment discipline; the possibility of entering into long-term contracts with consumers that include take-or-pay obligations; and the possibility of shutting off gas supplies to chronic delinquent payers.
Anti-crisis legacy
Many of the things that Gazprom is proposing to include in the Network Code already existed in the gas sector in the 2000s.
Gas was delivered primarily on the condition of full advance payment. However, after the 2008 crisis, the government approved a new payment schedule: 35% by the 18th of the current month, another 50% by the end of the month and the remainder by the 25th of the following month.
The government's package of anti-crisis measures also did away with the take-or-pay principle and introduced daily flexibility - the right of consumers to take 10% more than the contracted amount or 20% less on certain days of the month. Advocates of developing exchange trading have tried to have this measure repealed, as it eliminates incentives for gas consumers to go the exchange for additional volume, but so far unsuccessfully.