The European Community is considering policy changes that would end the near monopoly on Europe's high pressure gas transmission system held by a small number of merchant gas and pipeline companies.
EC is trying to assess the likely results of mandatory third party access to European gas pipelines and the European electrical power grid.
In response, European gas companies have warned that requiring such access would be a "risky experiment."
In a separate move, EC energy ministers also took another step toward opening the European gas network when they approved a directive that ends the right of governments and pipeline owners to block the transit of gas through national territory by a gas company from another community member.
The new rule, opposed by Germany and Netherlands, gives gas companies 12 months to negotiate transit arrangements. If agreement cannot be reached, an EC arbitration system will be available.
MANDATORY ACCESS
Through the newly formed Eurogas organization, gas companies said mandatory third party access could pose a threat to supply security and environmental protection.
Eurogas said interests of consumers would be better served by removing differences in taxes and environmental regulation among EC states and by strengthening the market related supply framework.
Continental Europe's merchant gas companies have guarded their pipeline networks through which they transport gas for sale to local distribution companies and large industrial users. The U.K. is the only major European country that has mandatory third party access.
A new breed of industrial gas companies is now using British Gas plc's transmission system to bring an element of competition to the U.K. industrial gas market. Third party access has helped stimulate the growth of gas as a power station fuel.
OPPOSING VIEWS
Eurogas criticisms of third party access came in an addendum to a report from an EC gas committee. Eurogas, a member of the committee along with consumer and industrial interests, believes the report failed to fully assess key issues.
Eurogas said preserving the current system in continental Europe is the only way to enable gas companies to aggregate volumes and bundle operations, the most efficient way of serving customers.
It also allows gas companies to secure a portfolio of long term take or pay contracts. In turn, this allows producers to plan and finance major projects in gas exploration and development.
This system would be undermined by third party access, Eurogas said. And short term price advantage to some large gas consumers would be at the expense of smaller consumers.
Consumers and industrial interests on the committee told EC ending gas companies' monopoly could lead to direct gas purchases by consumers or distribution companies. That might persuade some upstream companies with no downstream gas interests to increase their gas exploration and development efforts if they were no longer confined to selling to a small number of purchasers.
Consumer and industrial interests also told EC third party access would bring lower consumer prices through gas to gas competition and emergence of new sellers.
There was some measure of agreement between Eurogas and other members of the gas committee that third party access could shift market power in the direction of the limited number of external suppliers: Norway, the U.S.S.R., and Algeria.
Instead of a small number of major gas companies seeking to buy gas, producers could face a large number of smaller bidders competing against each other.
Third party access also would require new rules, particularly in transport charges and allocation of pipeline capacity. Other areas that might need rules are dealing with supply interruptions and access to gas storage capacity.
The committee said it is important to insure that third party access does not lead to regulation at the production level, which could discourage upstream activity.
There was general agreement on the committee that rules should be kept to a minimum, although there was a feeling this would not be possible.
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