Czech Minister of Industry and Trade Martin Kuba (Civic Democrat, ODS) has voiced his fears over the possible sale of the country’s main gas pipeline company Net4Gas but admitted he is virtually powerless to do anything about them.
The pipeline company, part of Czech gas company RWE Transgas, is high on the agenda of Germany energy giant RWE’s sale list to reduce its chronic debt burden. The domestic company confirmed at the start of the month that preparations for a sale are being stepped up with the Czech completion office fueling speculation further by confirming that it was drawing up an explanatory memorandum for would be buyers setting out its future plans to regulate the sector.
Kuba spelled out his concerns about the energy security implications of the possible sale of the pipeline operator at an energy conference in Prague on Tuesday. “The operator [of the pipeline] must be there for the long-term and not be some commercial opportunity for some fund owner or such like. They should, like RWE, have some long-term concept,” the minister said.
“We must declare that the ministry wants to conserve all the security attributes so that there is no sort of danger. That is the ministry’s view of this transaction,” he added. Net4Gas operates the main east-west pipeline bringing gas from the Czech Republic’s main supplier, Russia, as well as the Czech pipeline links that will connect with the Nord Stream pipeline bringing alternative Russian shipments under the Baltic Sea.
‘The operator [of the pipeline] must be there for the long-term and not be some commercial opportunity for some fund owner or such like.’
The Czech Republic relies on Russia for around 65-70 percent of its natural gas supplies. Worries have been raised that it would be a natural step for the main Russian exporter, Gazprom, to take an equity state in the pipeline network as well, giving a state-run Russian company control of a key piece of the country’s infrastructure. Fears have also expressed that a “Trojan horse” buyer could acquire Net4Gas for the sole purpose of resale onto the Russian gas export company.
Kuba admitted to Czech Position that whatever the fears, the ministry is legislatively virtually powerless to extract guarantees from RWE or impose them on a possible new owner. “That would be a difficult process,” he added.
Worried about the stable development of its pipeline network, the Czech government in 2002 put a long-term ban on RWE reselling the Czech gas company Transgas without its permission. But that ban expired in January 2010 and the Czech government has little leverage left on the pipeline’s owner.
RWE Transgas board member Tomáš Varcop told Czech Position on Tuesday that RWE would try to respect “Czech interests” regarding the possible sale, adding that the Czech governmnet would not, however, be playing any direct part in the transaction. Long-term gas shipment contracts will be part of the Net4Gas dowry to a purchaser, he added. A final decision from RWE on whether to offload Net4Gas had still to be taken, Varcop said.
Net4Gas’ possible sale comes as Russia diversifies its pipeline shipments of natural gas to Western Europe, with the recently completely Nord Stream to be followed by a South Stream pipeline. These will eventually carry around the same amount of gas that used to be shipped along the classic overland east-west routes, including the main Net4Gas pipeline coming through Slovakia and Ukraine. One of Russia’s main reasons for the new pipeline routes was to bypass Ukraine. But Net4Gas’ Jan Nehoda says Moscow and Kiev should eventually see that it makes sense to try and exploit this pipeline to the full. “Economics should triumph over otehr things and that path should be fully used,” he commented.
But uncertainty over the future of Net4Gas comes at an awkward time for RWE Transgas and the Czech natural gas sector. Both are currently pushing Kuba to take a more generous view of the future role that gas could play in Czech power production as domestic coal supplies dwindle.
Gas ambitions
Varcop called Tuesday for natural gas’ role in the Czech power mix to jump from around 18 percent now to 25 percent over the next decade, in part arguing that a dash for gas Czech-style could cut severe pollution problems in parts of the country, such as the industrialized northeast, and safeguard coal supplies for large heat and power plants which supply millions of Czechs with heating in large cities.
A long-term plan for the future Czech power production mix should be drawn up and presented to the Cabinet by Kuba by the end of June. He has already said that he counts in nuclear power producing half of the country’s electricity needs but the precise composition of the other half still appears to be in the balance in the national energy concept.
Coal compromise
The future of large centralized Czech heating plants is threatened by declining domestic coal supplies and sharply rising costs of the production coming to market and being secured in new long-term contracts. The industry minister said Tuesday that he will and force a dialogue between heating and mining companies so that both their interests are served. “All the players on the market must find a compromise,” Kuba said, adding that the ministry had some legislative power of its own to bring pressure to bear if they appeared reluctant.
One area where Kuba might have some leverage is the current limits on mining brown coal, or lignite, in the Czech Republic, although government coalition partner Public Affairs (VV) has opposed any changes to the existing geographical limits dating from the early 1990s. Kuba’s predecessor in the post Martin Kocourek (ODS) also backed mining beyond current limits, though insisted that mining companies had to get the agreement of local councils to do this.
See related article: Preparations for Net4Gas sale stepped up
