Watching the World

David Knott
London
[email protected]

At presstime, the European Union (EU) was still wondering whether or not to call a meeting of energy ministers on June 24 to hammer out a political agreement over its gas directive (OGJ, June 16, 1997, Newsletter).

The gas directive is expected to reduce the power of state firms that dominate several continental countries' gas industries and of private companies with virtual monopolies in some market sectors.

A liberalized Europe-wide gas market would be good for the private sector in general. New suppliers could enter the market, using new technology to give them an edge over existing suppliers.

Yet talking to equipment suppliers at the World Gas Conference in Copenhagen recently, I got the impression that a flood of new business is not anticipated when the directive eventually goes through.

Gerard Leger, vice president and general manager of Schlumberger Industries Electricity & Gas Management, Paris, expects that introduction of the directive will be followed by mergers among electricity and gas utilities.

Integration

Leger said of his division, which provides data collection and management systems that serve electricity, gas, and water industries, "As the companies integrate horizontally, we hope they will play into our hands."

While Schlumberger is already negotiating with a number of companies over development of equipment to meet new market requirements, Leger said a lean period will follow the directive.

"As a rule of thumb," said Leger, "deregulation leads to a slowdown of activities. The utilities have to get an understanding of the new rules before they begin once more to invest.

"At the moment, the U.K. market is at a low, after liberalization, while other European markets are going reasonably well because European gas suppliers are still expanding their infrastructure."

Conservative

Itron Inc., Spokane, Wash., is an international supplier of automatic meter reading equipment to utilities.

Klaus Huschke, Itron's senior vice-president of international operations, foresees a slow takeoff after liberalization.

"There will be a gradual expansion of business after the gas directive rather than an explosion," said Huschke. "Utilities are conservative, and their decision processes are orderly and analytical.

"It took the U.S. quite a while before we saw explosive change among gas utilities, which behaved more aggressively than electricity and water companies."

Huschke said private gas suppliers in the U.S. adapted quickly to using remote automatic meter reading. Now Itron is negotiating with a number of utilities in Europe, where meter reading is still labor-intensive.

One potential benefit of the gas directive for equipment manufacturers is seen as increasing standardization of gas supply equipment specifications, as cross-border projects flourish.

"Unity in specifications would be wonderful," said Huschke. "We could focus on adding extra capability to our products, rather than on having to make our products fit a wide number of specifications."