France, Italy point to liberalized gas market limits, assess efforts made

By Doris Leblond
OGJ Correspondent

PARIS, Feb 9 -- The president of France's Commission de Régulation de l'Energie (CRE), Jean Syrota, in presenting the efforts that CRE has made so far to prepare France for the opening of its gas market to 453,000 more consumers July 1, warned that "the attractiveness and extent of the market has its limits."

Despite rules established to help new customers choose their supplier "in a simple and rapid manner in order to exercise competition and obtain the best service at the best price," Syrota reiterated the obstacles to a truly open market: Important is the small volumes, barely 5-10%, of natural gas left for free transactions in a European market that depends on long-term, take-or-pay contracts with just a few outside suppliers.

In France, this constraint is compounded by the lack of competition in the South where the infrastructure for gas imports is limited. Even in northern France, where most of the country's gas enters, there is no compatibility between natural gas from Holland and the gas from Norway and Russia.

In addition, there is no gas-powered electricity in France, making it difficult for a nonhistorical supplier to reach critical size. Historically, operators in France, as in other areas of Europe, are accustomed to dealing in terms of buyer consortiums and territorial monopolies.

CRE is dealing with these problems in a number of ways: It is encouraging investment in new LNG terminals and persuading Gaz de France to reduce the tariffs for small LNG imports. It will open gas storage capacity to new entrants by July and set up hubs, an effort illustrated by the joint declaration last July by regulators from Spain, France, and Portugal. CRE also is reducing the number of balancing points in the country and rationalizing the networks in the South, taking advantage of the recent agreement of Gaz de France and Total SA on their gas lines (OGJ Online, Dec. 5, 2003). It also is improving transparency on the available gas capacities, setting up points of exchange in France as a prelude to the emergence of North and South hubs, and introducing new and more-immediate measures, such as gas release initiatives, on the lines of what is being done in other European countries—the UK, Italy, Spain, Germany, and Austria.

However, Syrota pointed to a recent factor that could further dry up the independent natural gas offer on Europe's market. With Britain's spot prices higher than long-term gas contract prices, the flow of the Interconnector pipeline between Zeebrugge, Belgium, and Bacton, UK, increasingly is being reversed from the Continent to the UK. In addition, the US is absorbing most of the LNG cargoes, two trends that could reduce competition in Europe through depleting the availability of spot gas. Syrota said the "fundamentals are unfavorable over the next 3 years, as both British and American productions decline." New infrastructures scheduled to be on stream from 2007 would reverse the trend, but might also build up a gas bubble in Britain, Spain, and Italy," he warned.

Italy fully opened up its natural gas market Jan.1, 2003. In France this will only happen in 2007, although in a first step of its initiative, France opened markets to 1,200 industrial users in 2002.

Angelo Ferrari, general manager of Italy's Electricity and Gas Regulatory Commission (Autorità per l'energia elettrica e il gas) said he is pleased that a "clear framework aiming to encourage new investments" has been worked out and that retail gas distribution, which once involved 700 operators, is now less fragmented. He noted also that transmission and storage tariffs have dropped, while transmission and storage capacities have increased, and that the share of short-term contracts now exceeds 5%. Since 2000, transport and trade have been unbundled.

Ferrari pointed out at a recent conference in Paris that the limitations to a truly liberalized gas market in Italy are practically the same as in France: The long-term take-or-pay contracts are leaving little room for short-term trading, the import infrastructures are saturated and controlled by the dominant player ENI SPA, with priority access given to long-term contracts. Gas storage access is also reserved in priority to residential sector supplies. But of the 32% of the market won over by competition, about two thirds is occupied by the country's two main electric power companies, proving that in the opening up of the gas market, gas-fueled electric power has an important edge.

Comparing the gradual opening of France's gas market with Italy's already full opening, Ferrari was doubtful whether it would be possible to set up a hub between southern France and Italy any time in the near future. Such a hub, he said, might figure as a long-term project, however, spurring competition around that area.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected