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IFIEC Energy Forum 23 February 2006

IFIEC Energy Forum 23 February 2006. Oil & Gas Working Party Chairman: Jim Robertson. EC Sector Enquiry Preliminary Report Gas Markets. Barriers to a fully functioning internal energy market Market concentration Vertical foreclosure Lack of market integration Lack of transparency

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IFIEC Energy Forum 23 February 2006

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  1. IFIEC Energy Forum23 February 2006 Oil & Gas Working Party Chairman: Jim Robertson

  2. EC Sector Enquiry Preliminary ReportGas Markets Barriers to a fully functioning internal energy market • Market concentration • Vertical foreclosure • Lack of market integration • Lack of transparency • Price formation All five areas are concerns which the WP Oil & Gas has consistently put forward as problem areas

  3. (1) Market Concentration Inquiry Finding • At wholesale level markets maintain the high level of concentration that they had pre-liberalisation IFIEC agrees • The wholesale market is key to the whole market • A wholesale market which suffers from lack of liquidity and a high concentration of players is prone to manipulation

  4. (2) Vertical foreclosure (Nothing to do with re-possession of real estate! Though may-be it could be applied to making pipelines and infrastructure available to all market players!!) Inquiry finding • Lack of liquidity and limited access to infrastructure prevent new entrants IFIEC agrees • Long term contracts (legacy agreements) need to be unwound • Needs to be full legal unbundling of infrastructure • Regulators must only give exemptions for TPA to new projects in exceptional circumstances. It has become the norm to gain TPA. • Rigorous UIOLI rules need to apply on a sensible timescale e.g. 6 months (example: UK experience of Isle of Grain LNG slots)

  5. (3) Market Integration Inquiry finding • Cross-border sales do not presently exert any significant competitive pressure IFIEC response • Consider regulation to ‘encourage’ gas companies who operate in more than one member country to offer same terms and conditions in the different countries • We want a single market

  6. (4) Transparency Inquiry finding • There is a lack of reliable and timely information on the markets – normally the lifeblood of competition IFIEC response • From the start this has been a major obstacle. At every stage IFIEC has made clear the importance of access to information. • Under the voluntary GGPSSO (April 2005) information release was agreed on storage. Despite this in Winter 2005/06 most information is not being made available. • The major gas companies appear to regard information as power

  7. (5) Price Formation Inquiry finding • More effective and transparent price formation is needed in order to deliver the full advantages of market opening to consumers IFIEC agrees • Long term the formal link to oil products must be broken • The EU is surrounded by a sea of gas • There are diverse supplies from Norway, Russia, North Africa, and LNG from Nigeria, Trinidad, Middle East • We must not allow the security of supply debate to detract from the failure of the market to liberalise • Industrial consumers are being hit hard • Most risk has been moved from the gas companies to the end user

  8. Summary • The situation is now urgent • Radical steps are needed to catch up on the years of slow progress to minimise damage which has already been done to industry • The aim is a single market • Transparency of information is key. The balance between commercial confidentiality and the clear need for transparency has to shift to transparency • Large gas suppliers operating in several member countries must offer comparable terms and conditions to industrial consumers

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