UK government plans remedy for soaring natural gas prices

March 22, 2001
UK Energy Minister Peter Hain Tuesday disclosed the government's strategy to deal with the problem of sharply rising natural gas prices in Britain. The strategy, he said, will involve collaborating with the European Commission to accelerate full gas market liberalization, improving the "functionig and design" of the market through greater access to data, and acting against anticompetitive behavior.


By the OGJ Online Staff


LONDON, Mar. 22�UK Energy Minister Peter Hain Tuesday set out the government's three-prong strategy to deal with the problem of sharply rising natural gas prices in Britain.

The strategy, he said, will involve collaborating with the European Commission to accelerate full gas market liberalization, improving the "functioning and design" of the market through greater access to information, and acting against anticompetitive behavior�especially related to the Interconnector gas pipeline that links Britain and the continent.

Earlier this year, a report for a government-industry task force said European natural gas prices were the most important factor influencing British gas prices and were indirectly responsible for a price spike last summer (OGJ Online, Feb. 6, 2001).

The study, by energy consultants ILEX PLC, examined the price increases last year. It said UK gas market dynamics have "changed significantly" since the opening of the UK-continental Interconnector gas pipeline in October 1998.

Hain, speaking at the launch of new studies into diversification opportunities for UK oil industry service companies, said the government plan aimed to remedy what he called the "disturbing" rise in gas prices over the last year.

"I am disturbed at the way wholesale prices have more than doubled since early 2000, undermining our wider policy for a competitive gas market," he said. "One of the main causes of the price increase is the lack of open markets in Europe and arbitrage across the Interconnector with oil related gas prices in Europe.

"Industry is hurting," he added. "It breeds suggestions about anticompetitive irregularities in the way the market is operating."

Hain underlined that the EC had launched an inquiry into anticompetitive practices associated with the operation of the Interconnector which would bring offending companies into line.

The operation of the Interconnector has been giving cause for concern for some time, so I am pleased that the commission are now looking into this," he said. "It will be a swift but thorough investigation. This should put all companies on notice that the government means business."