New gas plan is in the pipeline

Date: 26/06/1997

By Tim Jones

LUXEMBOURG will table new proposals to open Europe's gas markets up to competition following the Dutch presidency's failure to break the deadlock over how far liberalisation should go.

The government of the Grand Duchy, which takes over the running of EU business from the Netherlands next week, is drawing up a fresh compromise aimed at breathing life back into the stalled negotiations.

“It seemed there was no chance of getting an agreement on the basis of the Dutch compromise,” said Luxembourg Energy Minister Robert Goebbels this week.

Goebbels hopes to bridge the huge ideological gaps between the gas 'liberalisers' (the UK, Germany and the Netherlands) and the 'protectionists' (France, Belgium and the southern states) as early as possible in his presidency. But this will not come overnight.

“If there is a possibility of movement, it will be in September or October but not before,” he told European Voice. “I want to hold further bilateral contacts, particularly with those governments who have major problems, to find out where their bottom line is. If I think there is a reasonable chance of a compromise, I will call an additional Energy Council.”

Dutch Economic Affairs Minister Hans Wijers made a gas liberalisation deal a priority during his time in the chair, but his attempts failed because the two sides could not agree on how to manage the opening of the market and whether to allow long-term, fixed-price gas supply contracts in the free market.

These 'take or pay' contracts between national supply companies and gas producers allow the latter to set the overall volume of gas they will deliver for decades at fixed prices.

While this provides certainty for producers so they can sink capital into gas fields, 'liberal' member states fear these contracts will stitch up the EU market before it is even created.

“My personal belief is that it is necessary to have take or pay contracts in the future because, with the heavy investments the producers have to make, they need guarantees if they are going to do it,” said Goebbels.

The Dutch presidency's plans ran into problems because the French, Belgians, Italians, Spanish, Portuguese and Greeks all saw them as too ambitious.

The current proposal would allow big industries using more than 25 million cubic metres (m3) of gas to choose their suppliers from the start. This threshold would be cut to 10 million m3 five years later and to 1 million m3, or around 50&percent; of the national market, after a decade.

Goebbels has not yet decided which way to jump. “You can play with the thresholds, you can play with the eligible customers and timetables or you can have a combination of each,” he said. “We will have to see which works best.”

Despite the difficulties, Goebbels claims to have one advantage over Wijers. “We in Luxembourg are not producers and only small consumers so we have almost no national interest to defend. If we propose a compromise, it will be seen by my colleagues as that of an honest go-between,” he explained.