Dutch explore unity on gas

Date: 13/02/1997

By Tim Jones

THE Dutch government is considering radical new alternatives to bridge the ideological gaps between member states over how to open Europe's natural gas market to competition.

As they prepare for a meeting of top civil servants in The Hague next week, Dutch officials are trying to find ways to guarantee access to markets, define which customers should be allowed to choose between suppliers and establish how long-term supply contracts should be treated.

Meetings of the Council of Ministers' energy policy group have attempted to reach agreement on less contentious issues, but member states have refused to commit themselves until energy directors-general meet in The Hague next Thursday (20 February).

When they met in December, energy ministers remained far apart over who should be eligible to shop around for gas.

The draft directive allows big companies using more than 25 million cubic metres of gas a choice, but the UK wants this reduced to 3 million cubic metres so that smaller firms are caught in the net. The Dutch are toying with the idea of having no threshold figure at all.

“I am not sure we will define a figure,” said Stan Dessens, director-general for energy at the Dutch ministry of economic affairs. “It is true that by defining the threshold it will be clearer. Everybody is thinking in figures but, instead, it may be better to describe the type of customers that should be eligible.”

Attempting to square the circle by plumping for a middle ground between the minimalist British position and the maximalist French view could “lead to an insoluble situation”, he said. Opting for a definition of eligible customers would also clear up whether distribution companies should be so classified.

One of the biggest problems facing the Dutch is how to deal with the 'take or pay' contracts which dominate the industry, under which the big suppliers - such as the North Sea oil companies, Russian and Algerian producers - can lock their supplier-customers into long-term exclusive deals.

The 'liberal' camp, which includes the Dutch themselves, the UK, Germany and the European Commission, wants these contracts to be kept as short and flexible as possible. But countries with emerging natural gas markets extol their value in securing future income for production companies which are developing new fields.

The Dutch will propose transitional periods for countries dependent on these long-term pacts, as well as specifying how much of a national market can be covered by take or pay deals and even setting a maximum duration for contracts.

“We will use all these elements to seek a compromise,” said Dessens, who added that this would also mean coming up with a stricter definition of an emerging market. “For instance, is Spain still an emerging market or does this stop as soon as the dependence ratio for gas is more than 5&percent; or so?”

At the December ministerial meeting, the French government called for a third option in addition to the two already offered by the Irish presidency: 'negotiated third-party access' (TPA) under which producers, suppliers, and customers would negotiate the price of access to networks on a case-by-case basis; and 'regulated TPA', in which transmission and distribution charges would be published up-front.

Dessens does not believe such an option exists. “Maybe they could be convinced with some adaptations,” he said. “The 'single buyer' alternative is not seriously raised by anyone and there are not many alternatives to negotiated TPA and regulated TPA.”

He hopes that the UK government and British Gas, which have expressed their reservations about negotiated access if it is policed by a national agency too close to the domestic operator, will be won over.

“The disputes settlement authority will be the key to ensuring that there is serious negotiation,” he said. “As soon as you have a well organised appeals body with good access to the financial data of the transmission companies, then there will already be some opening of the market.”