OGZPY PJSC Gazprom (PK)

BRUSSELS—The European Commission on Tuesday authorized Russia's PAO Gazprom to ship more gas through a key connector pipeline in Germany, two people familiar with the matter said, a sign that Russia and the European Union are mending their business relationships despite growing tensions over Moscow's bombing campaign in Syria.

Tuesday's deal on Gazprom's Opal pipeline comes as the commission nears a settlement of its antitrust charges against the company, on which a preliminary agreement could be announced as early as Friday, according to the people.

It shows that Russia and the EU are taking pragmatic steps to ease some of their business ties, especially on the energy front, where Russia remains the dominant supplier of natural gas for many of the bloc's member states.

But the agreement also carries risks, because it allows Gazprom to divert even more of its gas transit away from Ukraine, which is locked in a bloody conflict with pro-Russian separatists in its east and whose Crimea peninsula remains occupied by Russian forces. It also sends a conciliatory signal to the government of President Vladimir Putin, just days after EU leaders held off on imposing additional sanctions on Russia over its bombing of Aleppo, Syria.

Opal stretches some 470 kilometers (292 miles) from the German Baltic Sea coast to Brandov on the Czech-German border. It is the one link between Gazprom's Nord Stream pipeline, which ships gas directly from Russia to northern Germany, and Central and Eastern Europe, markets it the company can otherwise only reach via Ukraine.

Since its completion in 2011, Gazprom has been able to use just 50% of Opal's 36 billion cubic meter of annual capacity, because of EU rules that force the owners of pipelines to open their transmission networks to competing suppliers. The remaining 50% capacity of Opal have stood empty.

Under the agreement approved by the commission Tuesday, Gazprom gets to keep the 50% exclusive capacity it already has, but has to open up 10% to 20% of the remaining capacity to other suppliers, the people familiar with the deal said. The remaining 30% to 40% would be auctioned off, with Gazprom allowed to bid for these volumes, the people said.

"It is a little bit of a concession to the Russians, but it's not a Christmas gift," said one of the people.

With its decision Tuesday, the commission approved a preliminary agreement on Opal's use between Gazprom and Germany's network regulator, Bundesnetzagentur, while imposing some tighter conditions on the Russian company, the people said.

Gazprom and the Bundesnetzagentur had already agreed on the increased use of Opal in late 2013, but the commission never approved that deal. EU officials said at the time that they were unwilling to give improved market access to Gazprom after its 2014 invasion of Crimea and support of a violent separatist movement in eastern Ukraine.

The Opal agreement could be followed later this week by the resolution of an even bigger dispute between the EU and Gazprom. The EU's competition commissioner, Margrethe Vestager, is set to meet Gazprom's deputy chairman, Alexander Medvedev, Wednesday to discuss a potential settlement of antitrust charges. The commission last year accused the company of harming competition in the 28-country bloc, for instance by forbidding customers to resell gas bought from Gazprom and charging unfair prices. The Wall Street Journal reported earlier this month that the two sides were hoping to settle the case before the end of October.

Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

(END) Dow Jones Newswires

October 25, 2016 14:15 ET (18:15 GMT)

PJSC Gazprom (PK) (USOTC:OGZPY)
Historical Stock Chart
From Mar 2024 to Apr 2024

PJSC Gazprom (PK) (USOTC:OGZPY)
Historical Stock Chart
From Apr 2023 to Apr 2024