The British government has started talks with a number of oil and gas companies about construction of a gas pipeline between Britain and continental Europe.
The most likely route is across the English Channel to France. But at this stage it is not certain whether the line will export gas from the U.K. North Sea or import supplies through the continental transmission system.
John Wakeham, Britain's secretary of state for energy, said the gas pipeline link to continental Europe, combined with expansion of pipelines in the North Sea, is needed before gas can flow freely between Britain and the continent.
Wakeham, speaking at a World bank seminar on natural gas in eastern Europe, said solutions to challenges posed by Europe's future energy supply/demand equation could best be found through a more liberal market framework which would allow a free flow of gas into, out of, and across nations.
Wakeham's renewed commitment to free trade in gas came as National Power, Britain's biggest power generator, awaits British government approval for a contract to import gas from the Norwegian North Sea
BARRIER REMOVAL
Wakeham recalled that the International Energy Agency recently forecast a 60-70% increase in gas demand in western Europe and as much as 130% in eastern Europe by 2010.
European gas resources are centered in Netherlands, Norway, Germany, and Britain where substantial undeveloped gas reserves are expected to be tapped in coming years.
But if the gas market is to develop along the lines expected, supply sources far in excess of existing contracts will be needed, Wakeham said.
On the basis of location, reserves, and estimated costs, Russia and the new Commonwealth of Independent States, Algeria, and possibly Iran appear best placed to reinforce the main existing suppliers in western Europe.
"This would clearly require the kind of extensive investment program, market opening measures, and increased integration envisaged in the European Energy Charter," Wakeham said.
MARKETING VENTURE
In addition to National Power's 77.7 bcf/year power station import contract, Britain's commitment to free trade in gas will be tested by a joint marketing venture set up by British Petroleum Co. plc and Den norske stats oljselskap AS to sell Norwegian gas to the growing British industrial gas market.
The venture has acquired a third partner, Norsk Hydro AS, Oslo, which has taken a 16% interest in the joint company. Revised shareholdings in the group are BP 50%, Statoil 40%, and Norsk Hydro 10%.
Plans for the new venture, made up of three of the biggest gas producers in the North Sea, have been submitted to Britain's Office of Fair Trading and the European Community in Brussels. In addition, the group will need U.K. Department of Energy approval to import gas.
Norsk Hydro and Saga Petroleum were invited to the join the group, but Saga is pursuing its own international gas sales strategy.
Norsk Hydro's entry into the group coincides with a recent British Gas plc agreement to reduce its share of the industrial contract market to 407, from about 95%, opening the way for the growth of new marketing ventures.
BP-Statoil-Norsk Hydro is one of the groups involved in talks on the gas pipeline line to the continent.
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