David KnottEuropean Union gas companies can succeed in the forthcoming deregulated market, but not without changing both their structures and their cultures.
This is the view of management consultant Pricewaterhouse Coopers, London, which polled 35 major gas supply, transportation, and distribution companies about their expectations for the EU gas business.
The EU agreed to open roughly one third of the EU gas supply market to competition, much to the disappointment of the U.K., which liberalized its own market and pushed others to follow (OGJ, Dec. 15, 1997, p. 22).
Pricewaterhouse Coopers said it received responses from senior executives of gas companies in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, the Netherlands, Portugal, Spain, Sweden, and the U.K.
Roughly 75% of the respondents said they feel their current focus on safety, security of supply, engineering excellence, long-term investment, and the environment is threatened by the directive.
ObstaclesEU countries are required to open 20% of their gas markets to competition by 2000, apart from Portugal, Greece, and Finland, which have extra time.
Surprisingly, Pricewaterhouse Coopers noted that 83% of businesses expected their businesses to be affected by the liberalization, yet more than half admitted to being not adequately prepared to meet the challenge.
The consultant said that many companies are adopting a "wait and see" approach, because they are unable to predict the dynamics of the European gas market as the customer base becomes more sophisticated.
The agreement to open the EU gas market only partially was a compromise brought about by the reluctance of a number of powerful gas companies to accept the arguments in favor of competition.
The arguments against full opening of the EU gas market-long-term supply contracts, take-or-pay contracts, and third party access to pipelines-are now seen as the issues most likely to slow the progress of partial opening.
New skillsMark Gardiner, European head of utilities at Pricewaterhouse Coopers, said competition will force companies to cut costs and increase shareholder value.
"They will be forced to focus on a number of new competencies," said Gardiner. "Traditionally, companies operating in their domestic market have focused on engineering and technical excellence."
The report suggests many of the key gas players are still in denial: 62% view international competition as a threat; 62% see customer pressure as a key market driver but expect only customers to benefit from competition.
"In order to survive in a cross-border environment," said Gardiner, "gas suppliers must quickly adopt business strategies to maintain or develop their market share. This will translate into a demand for new skills and greater investment in areas such as supply management and energy trading."
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