Warm response to gas proposal

Date: 11/09/1997

By Chris Johnstone

LUXEMBOURG plans to hold a special meeting of energy ministers on gas liberalisation next month, reflecting optimism that significant progress can be made on the complicated and controversial dossier.

Officials say the 27 October meeting will be held because of good feedback following the July release of its proposed framework for opening up the gas market to competition. “We have a feeling from delegations that at least there is a willingness to get an agreement,” said one.

The positive atmosphere continued this week as national energy experts leafed through the Luxembourg text, with another meeting scheduled for next Tuesday (16 September).

But significant hurdles remain, with France raising a series of major problems with the new text and especially its proposed treatment of 'take or pay' contracts - agreements under which gas companies sign long-term deals to take gas from producers with a commitment to pay at a fixed price whether they sell it on or not.

France says the text shows too many traces of Commission co-writing. In particular, it dislikes the proposal to give the latter the last word on whether governments can block gas customers from seeking new suppliers.

Under a previous Dutch plan, governments themselves were given the power to prevent large customers deserting their former suppliers. This clause was included to prevent too much disruption to the market and, in particular, to take or pay contracts.

France is particularly exposed on take or pay contracts since Gaz de France does not produce its own gas, a large proportion of its customers are industrial, and it is tied to long-term contracts with countries like Algeria and Russia. If the market is opened too quickly, France is worried that most of its major industrial customers could switch to alternative suppliers, leaving the former monopoly with decades of gas that it has paid for and cannot sell.

It also wants to change the current proposals on gas distribution, and says the framework for market opening goes too far too fast. But others say it does not go far enough.

One British concern is that the text does not address worries that sensitive information about rivals who use the companies' pipelines may be passed on.