Gas: A consultation on concerns about gas prices and possible improvements
to market efficiency
Preface - Administrative details of consultation
You are invited to make comments on the issues and proposals in this consultation
paper. Specific questions are raised in the text, though you are welcome to make
comments on any other aspects.
Your response to this consultation exercise will be made publicly available
in whole or in part at the Department's discretion. If you do not wish all or
part of your response (including your identify) to be made public, you must state
in your response which parts you wish us to keep confidential. Where confidentiality
is not requested, responses may be made available to any enquirer, including enquirers
outside the UK, or published by any means, including on the internet.
The consultation criteria, which apply to all public consultations, are at
Annex 4.
Responses should be sent, preferably by email, by 28 February to:
Gas Issues Consultation
Department of Trade and Industry
Room 243
1 Victoria Street
LONDON
SW1H 0ET
Fax: 020 7215 5231
Email: Gas.Consultation@dti.gov.uk
Requests for additional hard copies of this consultation paper should be addressed
to:
Keith Khoo
Oil and Gas Directorate
Telephone: 020 7215 5065
Fax: 020 7215 5231
Email: keith.khoo@dti.gov.uk
Executive summary
1 The Government is committed to an efficient, competitive gas market from
wellhead to burner tip, to the economic exploitation of national oil and gas resources,
and to the competitiveness of the whole economy. It is prepared to consider making
changes to the existing regulatory framework if this is necessary to achieve these
objectives. Attention has focused on gas markets in the past year because of complaints
about the rise in gas prices.
2 Concerns have been expressed to the Department about the working of gas markets,
in particular, that the behaviour of various parties upstream and downstream may
be affecting the efficiency of gas markets and increasing the level and volatility
of wholesale gas prices. There are also concerns about the interaction of the
regulatory regimes for gas upstream and downstream.
3 The Department and OFT have sought evidence in response to complaints of
alleged anti-competitive behaviour, and where this has been found, e.g. around
the Belgian interconnector, have drawn it to the attention of the relevant competition
authority.
4 This consultation document is intended to provide a comprehensive opportunity
to establish the position on these and any other concerns. It sets out the main
concerns, together with comments, and invites further evidence and views on these
and any other concerns related to gas prices. If more evidence of anti-competitive
behaviour emerges, we will not hesitate to draw this to the attention of the relevant
competition authority.
5 The main concerns are:
a) upstream mergers have resulted in over-concentration of gas ownership
b) gas producers have limited gas production to influence prices
c) the lack of regulated third party access for offshore transportation and
ancillary infrastructure may result in inefficient utilisation of existing infrastructure
d) end of day or within day gaming skews the profile of gas delivery into the
NTS to influence Transco's behaviour and gas prices
e) gaming around the Belgian interconnector has manipulated prices
f) lack of liberalisation , principally outside the UK, results in oil:gas
indexation and various restrictive practices
g) vertical and horizontal integration of some gas producers, within and across
EU boundaries, has affected gas prices
h) some or all of the above combine to push up gas prices
6 The document also seeks views on proposals to improve the working of gas
markets through more publication of information, if necessary through new legislation.
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