PARIS, Sept. 2 -- France's Energy Regulatory Commission (CRE) has set a Sept. 13, 2008, deadline for energy players to complete a consultation to gauge the importance of LNG terminals in France's natural gas system and determine how they should be regulated.
Four LNG receiving and regasification terminals are proposed in France in addition to the two GDF Suez terminals already operatingthe 7 billion cu m/year Fos Tonkin at Fos-sur-Mer on the Mediterranean and the 10 billion cu m/year Montoir-de-Bretagne on the Atlantic coast. A third terminal8.25 billion cu m/year Fos Cavaou owned by GDF Suez 69.7% and Total 30.3% is due on stream in first-half, 2009.
Access to these three is regulated and open to third parties. Utilization tariffs are set by the government on CRE's proposal.
Exemption, a new game
If the four proposed terminals come on stream during 2012-15 as scheduled, however, they could benefit from third party exemption provided by Article 22 of the EU 2003/55/CE directive.
Three of them are: Electricite de France's 9-10 billion cu m/year Dunkirk project; the Gaz de Normandie 9 billion cu m/year project at Antifer near Le Havre, to be co-owned by Poweo, Verbund, E.On, and local port company CIM; and Dutch LNG developer 4Gas' 6 billion cu m/year Pegaz at Le Verdon in southwestern France.
These three said they will proceed with their projects. The next stage will be to apply for administrative authorizations involving public investigations and the granting of construction permits, a process project operators hope will be completed before yearend 2009.
Shell has a feasibility study under way for the fourth project, Fos Faster on the Mediterranean coast that would have an initial 8 billion cu m/year capacity. It would come on stream in 2015 at the earliest.
The contribution of these privately-owned LNG terminals to the gas supply security of France and Europe will be long term, as they should remain active for at least 40 years from the time they are commissioned.
Working group input
An earlier CRE-commissioned independent group released its report Apr. 14 (OGJ, May 5, 2008, p. 43 ). Its principal recommendation was that regulation should create a favorable framework for investment, rendering France's market more attractive to suppliers than American and Asian markets in a competitive world that increasingly is becoming a sellers' market.
For regulated terminals this meant: Consider the long-term need for visibility expressed by capacity investors and subscribers. For exempted terminals: Define implementation of Article 22 using the European Good Practices Guide being drafted by the European Regulators Group for Electricity and Gas (ERGEG).
CRE wanted market player and expert input on certain issues: tariff principles for LNG terminals in the short term (2009-11); the need for tariff visibility for subscribers and investors to create new capacity in the LNG terminals; and the best means of implementing applications for third party access exemption, applying Article 22, which the working group considers a key measure for encouraging new investment. The final decision for exemption from third party access, however, belongs to the EU rather than to individual governments.
CRE has not indicated which recommendations it will adopt. An indication will surface when it proposes the tariff for access to the regulated Fos Cavaou terminal. The commissioning of Fos Cavaou likely will lead to a drop in subscriptions at the Fos Tonkin and Montoir terminals compared with 2006-07 levels, CRE said. The tariff in force at these terminals is already lower by 15% than the previous tariff because of the increase in capacity subscriptions.
CRE does not favor exemption applied to the extension of a regulated terminal; it fears the operator could use the exemption to bolster its market power. Such a limit could apply to GDF Suez' plansnot yet finalizedto increase the Montoir terminal capacity to 12.5 billion cu m by 2011 and to 16.5 billion cu m by 2014, from the current 10 billion cu m, through bids it has already requested.
Concerning its treatment for exemption requests, CRE said, "It will have to be proven that the positive effects on competition are not attainable on the basis of partial exemption." Each sponsor must specify the market on which its analysis is based, and must carry out a financial study on the project.
Saying the European market will not likely be fully integrated before 2012, when the first terminal projects are commissioned, CRE says it is "reasonable to consider the relevant market as, at most, the national market." Nevertheless, it said, companies should consider the congestion in gas transmission from France's northern zone and the progress of interconnection projects in northeastern France at Taisnieres and Obergailbach and on the borders with Spain (OGJ Online, July 3, 2008).
CRE also plans to limit the subscription share of a single company, including related companies, to 66% of the terminal's technical capacity. All projects, it said, will be examined according to the same criteria but will be analyzed on a case-by-case basis, taking into account the specificities of each project, such as the need for a project sponsor to set aside 10-15% of its capacities for short-term contracts with a maximum duration of 3 years.
Furthermore, it adds, CRE will ensure that no unused capacities are retained through, for instance, a "Use it or loose it" mechanism offered either by the operator or imposed by CRE on the basis of the mechanism in place by France's regulated LNG terminals. The same level of transparency required from regulated terminals will be required from exempted terminals.
On completion of the consultation, CRE said it would publish a summary of the contributions. Tariff and regulation propositions are expected to be made public at the end of October, CRE told OGJ.