Ruhrgas chief says EC gas decontrol could cause supply shortages

By the OGJ Online Staff

LONDON, May 16 -- The chairman of the executive board of German gas company Ruhrgas AG Tuesday said European Commission proposals to establish a regulatory body for the gas market in European Union member states would likely lead to supply shortages rather than stable low prices.

Friedrich Späth, speaking his company's annual results presentation, said negotiated third-party access was the right model for gas market liberalization in Germany.

"The aim is to strengthen existing competition in an industry based on private enterprise," said Späth. "Regulated systems have until now failed to demonstrate their efficiency and superiority.

"Ultimately, they led to shortages and not consistently low prices," he added.

Späth noted that commercial access to storage facilities, market-oriented congestion management, and greater price transparency had now been built in the Associations Agreement on Third Party Access for Gas in Germany.

"Favorable tariffs and a simple fee system," he said, "would help achieve the desire for intensification of the TPA in the gas sector."

Germany, along with France, failed to meet the EC's August deadline for the partial deregulation of their respective national gas markets.

Späth said his company was answering Germany's own security of supply concerns by diversifying its international gas supplies. In 2000, Ruhrgas purchased 35% of its gas from Russia, 26% from Norway, 16% from the Netherlands, 6% from Denmark and the UK combined, while drawing 17% from indigenous sources.

Ruhrgas figures show Germany imports 80% of its gas.

Späth yesterday said plans to develop Ruhrgas into a more integrated European gas company had been helped by what he called Ruhrgas's "stable" results for 2000. The company posted a pre-tax profit of 595 million euros, up slightly on 1999's 577 million euros, despite pressure on margins brought on by stiffer gas-to-gas competition.

After adjustments, the company recorded net income for the year of 399 million euros, on par with its 1999 result of 398 million euros.

Ruhrgas's 2000 turnover climbed by 49% to 9.2 billion euros on the back of high energy prices, some 3.1 billion euros higher than in 1999, boosting the Ruhrgas Group's total turnover to 10.5 billion euros.

Group investments over the last year came in at 635 million euros, 70% of which went toward buying participating interests. Outside of acquisition in the industrial sector, Ruhrgas increased its stake in regional gas company both in Germany and abroad. The group's portfolio now includes 22 German and 17 foreign energy affiliates.