France details plan for opening gas markets

France's Council of Ministers today approved a draft law transposing into French law the European Union directive on gas market deregulation. As expected, the government was careful to accommodate its left-Communist wing and made no mention of opening up Gaz de France's equity to outsiders like Electricit�e France, TotalFinaElf SA, or other oil companies.


France's Council of Ministers today approved a draft law transposing into French law the European Union directive on gas market deregulation. As expected, the government was careful to accommodate the left wing-Communist contingent and made no mention of opening up Gaz de France's equity to outsiders like Electricit�e France, TotalFinaElf SA, or other oil companies.

State Secretary for Industry Christian Pierret insists that Gaz de France will remain state-owned and that it must devise its own strategy for developing its upstream business, as well as its European and worldwide base. Based on the recent data, the firm has annual sales of about 60 billion francs, profits of 2.7 billion, and cash flow of 10 billion. GdF is the fifth largest gas company in the EU but the only one without the backing of an oil group.

Market opening
Under the draft law, it would seem that GdF would reap all the disadvantages of the gas market opening and none of the advantages.

Initially, the opening�due to start in mid-August�will involve only 150 French corporations that consume more than 25 million cu m/year of natural gas each. These firms account for about 20% of French gas demand. In 2003, 300 corporations will be involved, and about 700 by 2008. This will cover a third of the market, and the usage threshold will be 5 million cu m/year per corporation.

The same eligibility threshold will be granted to gas distributors.

The minister was careful to point out that the opening to competition is not necessarily all bad news for GdF. The firm would, in turn, gain access to other EU gas markets.

The notion of Gaz de France's public service mission is upheld in the draft law: France's energy independence and its secure gas supplies must be supported throughout the market opening process, so that, as required, long-term take-or-pay contracts can be maintained. Ineligible and individual consumers must be treated in the same spirit of equality as they were previously, and they must enjoy an ever-extending gas network. Their gas prices will continue to be fixed by the authorities.

The market will be opened in a progressive and controlled manner, with the government determining the criteria for new suppliers. Suppliers will enjoy third-party access to the gas network or they will be able to acquire gas distribution lines.

Pierret pointed out, "France is the only EU country whose transport network is state-owned." So far, the state has granted distribution concessions to Gaz de France or its regional affiliates Gaz du Sud Ouest and Cie. Francaise du M�ane, in which TotalFinaElf has a large stake. The state will now abandon the concession regime in favor of periodically renewed authorizations against proper payment. The payment rate will be established by a special commission. In this way, Gaz de France and TotalFinaElf will have to buy back their concessions.

New gas distributors and suppliers will be able to purchase gas lines or build new ones, if they meet with the necessary approvals. On the other hand, there will be no third-party access to the underground gas storage facilities, which will continue to be controlled by the parties that developed them (GdF and TotalFinaElf). However, if and when capacities are available, an "open and fluid market" of this extra capacity will be possible. New entrants can, in any case, create their own gas storage facilities.

Finally, the market-opening strategy will protect France's labor force by maintaining the special and favored status of electricity and gas personnel.

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