Doris Leblond
OGJ Correspondent
PARIS, Apr. 24 -- The regulation of future LNG terminals will play a commanding role in the European Union's ability to attract LNG imports, reported an independent group of energy experts established by France's Energy Regulatory Commission (CRE).
This is crucial because the EU must raise its share of natural gas imports to 80% by 2030 from 50% in 2007 to meet future demand and offset declines in domestic gas production, the group reported. LNG is key to its supply security—increasing source diversification and enabling access to global gas reserves.
The main mission of the working group was to determine the most appropriate regulatory framework for new LNG projects so that world gas would come to Europe rather than to the US or Asia.
Regulatory approaches applied to LNG terminals and tariffs for associated services are part of the criteria that producing countries take into account when assessing the attractiveness of a given market, the study group reported.
The existing Montoir-de-Bretagne and Fos-Tonkin terminals, which account for 30% of the gas consumed in France, are subject to regulated third party access, with tariffs for their use set by the government on CRE's recommendation.
Five LNG terminal projects, expected to come on stream during 2012-15, could benefit from exemption from such third party access in application of an EU directive, the study group said.
It added that regulation of future LNG terminals in France should encourage investment so that France and the European Union will have sufficient regasification capacity, and it emphasized that operators must follow market rules in their relationship with clients.
To enable the smooth cohabitation of exempted and regulated terminals, regulations should not favor one regime over another, but encourage investment in both cases, the working group insists. Competition will be exercised on the offer of services and the price level, it added.
In the medium term, a better balance between capacity offer and demand will lead to an adjustment of the prices applied by the exempted terminals with regard to those of the regulated terminals. The same transparency and "Use it or lose it" requirements should be applied to both regulated and exempt terminals. These mechanisms should all be applied with flexibility and should be open to change, with dissuasive penalties provided.
Surplus capacity urged
Another strategy involves the amount of regasification capacity provided. Because the market is set to become a sellers' market dominated by gas producers and the strong development of arbitrage between destinations, importing countries are better off maintaining or developing surplus regasification capacity and surplus LNG terminals, the study group advised.
It said France offers many possibilities for hosting new LNG terminals because of its geographic situation and extended coastline.
The group said the priority for regulation should be to set up a stable framework favorable to investments in gas terminals because construction or extension of a terminal is a heavy industrial investment. In a European market open to competition, all projects should be considered within a private investment logic.
"Supply safety does not depend only on import capacities and regulation; transparency of infrastructure data also plays a prime role," concluded Colette Lewiner, president of the working group and vice-president at consultant CapGemini.