BLUGAS-SNAM
PRESS RELEASE
PRESS RELEASE
Authority has fined ENI for noncompliance
At its meeting on 7 October 2004, pursuant to section 15(2) of the Competition Act the Competition Authority resolved that ENI S.A. had failed to comply with the resolution adopted on 21 November 2002 (relating to the "Snam-Blugas" case), and imposed an administrative fine of EUR 4,500,000.00 (four million five hundred thousand), because the company had delayed the presentation and implementation of measures to remove the breach, without justification, even after the commencement of the noncompliance proceedings.
In its measure 11421 of 21 November 2002, the Authority ruled that ENI had committed an objectively serious breach by its sale of gas to Italian operators under its own take or pay contracts (the so-called "innovative sales") in sufficient volumes to cover the whole residual quota which is due to third operators until 2007, guaranteeing, furthermore, that these volumes of gas would have priority and long-term access to the gas pipelines owned by its subsidiary, Snam Rete Gas S.p.A. In that same measure, the Authority gave ENI 90 days from the date of service to submit details of how it intended to remedy this breach.
In March 2003 ENI had initially proposed to increase the capacity of the international TAG oil pipelines (which imports Russian gas through Austria) and the TTPC pipelines (which imports Algerian gas through Tunisia) for the benefit of third operators, from 2008 onwards. Subsequently, ENI declared that this increase in capacity had become financially untenable because of a gas supply glut which might arise on the Italian market, precisely from that year onwards, if all the infrastructure work needed for it were completed.
In February 2004 ENI submitted new solutions. One particular proposal was to defer the upgrading of the international gas pipeline capacity for several years (2011 TAG, 2013 TTPC) if the simultaneous construction of at least two GNL regassing terminals by other parties had taken place, and offering gas for a total of four billion cubic metres over four years through border auction procedures.
Considering these measures to be inadequate to remedy the original breach, on 18 March 2004 the Authority resolved to commence noncompliance proceedings.
Following this measure, on 26 April 2004, ENI proposed to increase volumes of gas for sale up to an annual 2.3 billion cubic metres over a period of four years, totalling 9.2 billion cubic metres of natural gas throughout the same period. ENI also declared its readiness to allocate these gas volumes under a quota-based mechanism, and to set a price for the gas as close as possible to the international natural gas market price charged to independent operators.
The Competition Authority considered this latter measure adequate to remedy the breach found in November 2002.
As a result of its overall conduct, and without any reasonable justification, ENI had therefore delayed defining and implementing the steps needed to comply with the 21 November 2002 resolution. These steps were submitted a long time after the deadline indicated in that measure, and then only after the commencement of noncompliance proceedings. As a result of this delay, the abuse of a dominant position found in November 2002 was not removed until September 2004, following action taken by ENI. ENI's conduct after the discovery of the abuse of dominant position had been such that the breach had been allowed to continue, severely limiting the possibility of independent importers to place natural gas for sale on the Italian market, and had thereby continued to impede the process of liberalising the natural gas market.
Rome, 25 October 2004