World Gas Conference focuses on EU market opening

While Pierre Gadonneix, Chairman and CEO of Gaz de France, and Gary Neale, Chairman of the American Gas Association, both see a 'brilliant future' for natural gas in the new millennium, describing it as the 'energy of the 21st Century,' Gadonneix says the European Union's gas industry is facing 'major upheaval' in both cost and supply challenges.


NICE�While Pierre Gadonneix, Chairman and CEO of Gaz de France, and Gary Neale, Chairman of the American Gas Association, both see a "brilliant future" for natural gas in the new millennium, describing it as the "energy of the 21st Century," Gadonneix says the European Union's gas industry is facing "major upheaval" in both cost and supply challenges. Neale, on the other hand, bases his optimistic outlook on a study issued last year by the American Gas Foundation called "Fueling the Future: Natural Gas and New Technologies for a Cleaner 21st Century" (OGJ, Feb. 21, 2000, Newsletter).

The two executives expressed these views at the 21st World Gas Conference in Nice this week.

The EU market, according to Neale, can be likened to what the US market was 15 years ago, although the basics are different for Europe. The EU gas market will grow increasingly dependent on outside gas supplies after its opening, Neale predicts. He also suggests that the EU might take lessons from the experiences of the US market, which has already taken the plunge.

EU market opening
The arrival of US traders and maketers in Europe, poised to jump onto the newly liberalized EU market as soon as it opens Aug. 10, should drive liberalization even faster than expected, Neale believes. He sees an onslaught of "very aggressive and sophisticated" operators invading Europe's market and shaking it up as they develop trading and hedging, use LNG spot deliveries to serve the market, and undercut prices.

Suppliers might also play the EU market, as they do in the US. Enron Corp. and Duke Energy Corp. have already been lobbying eligible clients, said Neale, and will be followed by other aggressive operators anxious to take over this new liberalized market.

Utilities will do their best to counter the effect of this onslaught, which could also undermine long-term contracts, deemed necessary for Europe's secure gas supplies.

Gadonneix, for his part, is confident that Gaz de France, which has been preparing for deregulation over the last 2 years, is ready to face the new challenge. His uncertainties lie rather in the competition with oil. While both energies have equal costs in the upstream, says Gadonneix, the transport and infrastructure of natural gas could make all the difference unless new technology brings down these costs.

"The future is by no means predetermined, he warned. "Gas companies are facing a double challenge. Firstly, they must capitalize on past relations [with suppliers] to maintain a balance between gas supply and rapidly growing demand. Secondly, they must develop these relations with a view to responding more effectively to the legitimate demands of their customers for improved flexibility, services, and competitive pricing."

Meanwhile, it was announced at the World Gas Conference that a memorandum of understanding had been signed between the Gas Industry International Union and the International Centre for Gas Technology Information, the purpose of which is to pursue common aims such as information supply, communication services, and training opportunities. The organizations will also institute a forum dedicated to technological exchange for the worldwide gas industry.

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