EC cautions Norwegian gas producers on anticompetition charge

By the OGJ Online Staff

LONDON, June 13 -- The European Commission Wednesday cautioned producers on the Norwegian Continent Shelf that the joint sale of gas through the soon-to-be-disbanded Gas Negotiation Committee (GFU) falls foul of the European Union competition rules on the ground that it fixes price and volumes sold.

Operators on the NCS, including Norsk Hydro AS, immediately contested the EC's "statement of objections," saying the EU had "no foundation for competition action" against the companies producing gas in the province.

The EC Wednesday sent the statement to Norwegian state-owned oil and gas company Statoil AS, as well as Hydro -- the standing members of the GFU -- warning of their alleged transgression of EU competition law. The GFU negotiates natural gas sales contracts with buyers on behalf of all the other gas producers in Norway, thereby fixing the "selling price, volumes, and all other trading conditions."

Hydro said the statement of objections was the "beginning of a process" and laid the groundwork for further action. The companies have 3 months to respond to the complaint.

According to the EC, the GFU companies, which included Saga Petroleum until it was merged into Statoil and Hydro last year, "must put an end to the joint selling of gas from Norway and eliminate the restrictive effects residing in the contracts concluded with third parties under the joint selling scheme."

The GFU has a number of longstanding, long-term gas supply contracts with various European operators.

"As the European gas market is progressively being liberalized, it is of paramount importance that producers sell their gas individually so that those customers that can already choose their supplier benefit from real choice and competitive prices," said the EC.

The EC welcomed the Norwegian government's recent decision to close the GFU, a move that will take full effect Jan. 1, 2002, as "a step in the right direction," but noted that the "abolition (was) not yet final." The GFU was suspended June 1 (OGJ Online, May 30, 2001).

"The commission's proceedings concern the behavior of Norwegian gas producers; its proceedings will continue until measures taken by the Norwegian government have been implemented by the companies in question and all objections of the Commission remedied," said the EC.

The Commission does not exclude to issue a statement of objections also to other Norwegian gas producers in the context of the GFU case in the near future.

Norwegian authorities discontinued GNC activities in the European Economic Area from June 1, until the Storting -- the country's parliament -- cleared plans to permanently abolish the committee.