EU Gas Market Liberalisation | Research | FTI Intelligence

EU Gas Market Liberalisation


EU Gas market liberalisation has been largely successful in Western Europe but how can it be squared with the need for security of supply?

The liberalisation of the gas market and the move towards a true market pricing model has been largely successful across Western Europe. But just as it has begun to bear fruit the European Commission and gas industry regulators are faced with a new problem – security of supply. How are regulators going to find a way of maintaining security of supply while not undoing the gains made from market liberalisation and integration over the last few years?

Prior to liberalisation, vertically integrated companies had a monopoly in the supply of gas in their national markets. They owned the transport networks within their markets and bought gas from the producers in Netherlands (Gas Terra) Norway (Statoil), Russia (Gazprom) and North Africa (Sonatrach) to supply those customers. Producers sold gas via long-term contracts, in which prices were set based on oil products and buyers had to ‘take-or-pay‘ minimum volumes but also had the flexibility to take additional volumes if required.

The liberalisation process in Europe focused on introducing competition by ensuring that energy companies are afforded effective fair and non-discriminatory access to the European gas transport networks. Unlike previous packages, the Third Energy Package sought to remove the incentives for the former incumbents to discriminate against new entrants. Hence the requirement to unbundle the operation of the transport networks from the supply and trading of gas. More detailed requirements were introduced to make the transport capacity available.

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