Bosnia, report: Delays in gas market liberalization endangers the competition and market development

1. April 2013. / SEE Energy News

Although BiH took over many responsibilities by signing the Energy community treaty, because of absence of political agreement, very little was done especially in gas sector.

Secretary of Energy Association “threatened” to Ministry of External Trade and Economy Relations with launching the legal procedure because of being late with orders’ adoption and disrespect of arranged obligations. Secretary gave two months deadline for adopting the law for gas sector on national level a year after i.e. in January this year.

Deadline that Secretary of Energy Association gave is 24 March this year and it is almost certain that there won’t happen anything about the gas law on national level.

This body that gathers all countries in EU is willing to help BiH in making the draft of the gas law on national level if any political will exists – it is stated in the letter Secretary sent to the Ministry of External Trade and Economy Relations.

There is no Regulatory Agency in FBiH and no entity has appropriate rules for the network tariffs, procedures, market opening and technical regulative- it was underlined in the letter.

“Existence of these rules is not only crucial in cooperation in accordance with obligations BiH taken as a side from the accepted agreement. It is also crucial for legal regulatory safety which is necessary for attracting required investments in infrastructure like “Gas ring” of Energy Association- it is stressed in the letter.

Mirko Sarovic, Minister of External Trade and Economy Relations recently said that the agreement for Energy Association that one of the questions in front of BiH is answering to this association as soon as possible.

“Questions that concern operator of gas regulatory and questions about the gas law were the subject. If this is going to be one of the gas laws on BiH level or it will be the law that will take over a directive from 2009 depends on the authorities in RS and BiH. Ministry will deliver required answer to Energy Association in predicted term”, Sarovic said.

The law for gas on national level is exactly one of the biggest problems considering that there is no political will for solving this question and there are huge differences among entities in the context of legal regulative of gas sector and different interests almost excludes possibility of agreement about this subject.

FBiH, unlike RS, does not have gas law yet and it has done so little in this area. RS in the form of Regulatory Energy Commission has regulator while the job of regulator is completely unacceptable in FBiH from the view of EU.

Specificities of BiH Regulation and authorities don’t let the possibility of agreement in current policy conditions, considering that the energy area is responsibility of entities and RS slowly but surely becomes the part of South Stream Pipeline. “The need to respect specifications of every side of the contract during taking over of relevant acquisition is recognized in the article 3 of agreement for Energy Association”, it was said in RS Ministry of Industry, Energy and Mining, stressing that RS did a lot on realization of this contract and use of directives from this area in the former period.

RS adopted the Gas Law during 2007 which was mostly adjusted to EU directives at that moment- it is underlined in this Ministry.
“The law about changes and additions of the Gas Law was enforces in January this year and changes are in huge amount harmonized with Directive 2003/55EC and Directive 2009/73EC about the common rules of internal gas market”, it is said in RS Ministry of Industry, Energy and Mining.

They also stress that RS express readiness for harmonization of its obligations with adoption of the Law about changes and additions to the Gas Law.

RS has required capacity for fulfillment of all obligations and adoption of needed legislation and support of Energy Association Secretary in gas in BiH legislation procession, this support can only be advisory, it can’t make additional obligations to RS”, it is said in the Ministry adding that BiH, unlike RS, does not have the Gas Law yet.

EU officials have warned several times that BiH lags behind everyone when it comes to Energy Association Agreement and this problem becomes bigger and bigger as 2015 arrives i.e. deadline for procession of the third package.

Implementation of the third package brings to making the conditions for concurrent and functional market, consumer supply safety increase, use of modern technologies and increase of energy efficiency and protection of endangered consumers. This package should bring consumers to bigger safety and possibility to choose energy distributor but also protection of socially endangered population’s standards i.e. those who really need this protection.
Accepting the third package will make the access to international energy market easier. This market will start to function on joint principles after the implementation.

2,5 million EUR were determined for BiH within IPA project for helping energy market liberalization in accordance with EU directives and this project should start 2014.

BiH didn’t act in accordance with 2003/55EC and 1775/2005 directives when it comes to gas sector.
Directive 2003/55EC refers to the joint rules for internal gas market and members of Energy Association are in charge of this rule’s implementation in order to make competitive, safe and sustainable gas market where won’t be any discrimination among industrial subjects in view of their rights and responsibilities. This practically means that industrial subject which gained right to do all activities has certain responsibilities that are beyond its personal financial interest.

The directive has determined that member countries should establish body independent of industrial subjects that do energy activities in sector of natural gas.

Regulative 1775/2005 refers to network accession for natural gas transport and it has the subject of making indiscriminating principles for transport pipelines’ accession. This considers harmonization of principles for tariffs and methodology, especially the way of their calculation of pipelines’ accession.

BiH hasn’t passed any of the predicted acts from gas sector i.e. it didn’t make a regulator on BiH level as it had been expected, it didn’t enforced a law on state level and gas sector is being developed in interests of entities, not state as an entirety, which is most criticized of Energy Association.

One more problem of BiH is dependence of the one gas source because of which we pay third highest price in EU of 512,2 dollars per cubic meter, only Macedonia and Poland have little higher price.

Economy and interests are unappealing and after the Russian “Izvestina” published gas pricelist of Gasprom delivered to EU, prices of Russian gas are evidently highest for those countries which don’t have alternative choices.
BiH and Macedonia depend on Russian gas 100%, Bulgaria 90%, Poland over 60%. Gasprom sell the cheapest gas to Great Britain at 313 dollars’ price per cubic meter but its dependence of Russian gas is barely 10%.

Diversification of supply sources and tracks with new interconnections began to be reconsidered but these activities are in really early stage.

BiH got from European Investing Bank grant million EUR for making the Environmental Influence Performance Study and Study of Social Effect of constructing the pipeline “Slavonski Brod- Brod- Zenica” and with this project it will be a part of “Gas ring” of Energy Association.

This project was supported by state at the beginning but RS focused on the pipeline which is the part of South Stream because this project was too slow and uncertain.

RS did a lot in legislation area for the South Stream project realization. It established Corporation GAS RS recently.
It signed an understanding memorandum and it is completely determined to realization of this project which RS Government announced for the project of national significance.

Development of gas sector in BiH is at start in region. We have the least developed gas network and only one entering point for gas we get over Serbia. The pipeline “Srbija-Zvornik-Zenica” is 192 km long, and the exclusive importer is “BH gas” Company.
This company is owned by long-term agreements trough transit systems Ukraine, Hungary and Serbia and it is a property of FBiH.
There are a lot of companies in BiH, but they have much smaller capacities and their role is mostly reduced to direction of transmission systems like it was with the “Gapromet” from Pala case.

The biggest distribution Company is “Sarajevo gas” which supplies 94% of consumers. The next is “Zvornik stan” which owns low developed network with 2% of consumers.

BiH spends little more than 300 million cubic meter of gas annually which is much less than in European countries with reference to the population and territory.

Source Serbia Energy SEE desk

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