Decision of Polish anti-trust agency – no joint venture for Nord Stream 2

“It will not be possible to set up the company responsible for construction and operation of the Nord Stream 2 gas pipeline. The parties to the transaction have withdrawn the application in light of the objections raised by the President of the UOKiK”, the Poland’s Office of Competition and Consumer Protection said on Friday, August 12.

“In connection with proceedings ongoing since December 2015 UOKiK conducted an extensive market study, concerning among other things the views of firms in the natural gas sector in Poland on the envisaged concentration. The Energy Regulatory Office (URE) was also asked to give its views on the deal. UOKiK’s concerns were confirmed by the study. The intended concentration could lead to restriction of competition” – Poland’s anti-trust agency explains in its release.

It’s worth mentioning, that the Nord Stream 2 would run alongside the existing pipeline known as Nord Stream I, and threatens the pricing power of Poland’s new LNG terminal in Świnoujście. The terminal is operated by Polskie LNG, a subsidiary of Gaz-System, a Polish company.

The Polish authorities said that the pipeline, run by European companies already in the Polish market, would put too much of the gas market in the hands of foreign firms.

UOKiK further explains, that “Gazprom has a dominant position on the market when it comes to supplying gas to Poland, and the deal could strengthen further the company’s negotiating position with regard to users in Poland”.

– Withdrawal of the application means that the joint venture that was to construct the Nord Stream 2 gas pipeline cannot be formed by the six firms. This will stop the deal – UOKiK President Marek Niechciał clarified in the agency’s statement.

After the decision of UOKiK, on the same day, the request to withdraw the application was submitted by the six entities taking part in the intended transaction – PAO Gazprom from the Russian Federation, Uniper Global Commodities SE from Germany, ENGIE SA from France, OMV Nord Stream II Holding AG from Switzerland, Shell Exploration and Production (LXXI) B.V. from the Netherlands, and Wintershall Nederland B.V. from the Netherlands.

The joint venture was to handle the design, financing, construction, and operate the Nord Stream 2 gas pipeline, running from the Russian Baltic coast to an exit point near  Greifswald, Germany. The abovementioned applicants have decided to jointly withdraw their merger control notification from the Polish competition authority.

All the applicants believe that the project is crucial for the European energy system and each of them will therefore individually contemplate alternative ways to contribute to it. The applicants’ decision to withdraw the notification will not affect the continuation by Nord Stream 2 AG of the construction of the Nord Stream 2 pipelines as planned, including its scheduling – the entities stated in its joint press release.

Nord Stream 2 would ship an extra 55 billion cubic metres of gas a year to northern Germany through the Baltic Sea, doubling the capacity of the existing Nord Stream pipeline.

Germany has supported the project, but Poland and several other Central and Eastern European countries as well as the United States argue the proposed pipeline could ultimately limit supply routes and the energy security of the European Union. By hurting Ukraine’s efforts to reform its economy as bypassing the country it would deprive it of billions of dollars in gas transit fees.

According to the Nord Stream 2 AG, the decision of Polish anit-trust agency does not affect implementation of the project, which continues as planned. The company said, that decision only affects the acquisition of the existing project company’s shares by Gazprom’s Western partners. The current ownership of shares in Nord Stream 2 AG remains unchanged. The implementation schedule of the Nord Stream 2 project also remains unchanged. The prospective shareholders will continue their close cooperation and their mutual efforts towards strengthening the security of the European gas supply.

GL, rel (UOKiK, Nord Stream 2 AG)