European natural gas: market forces will bring about competition in any case

The purpose is to analyze the emergent commercial forces that promote increasing competition in the European natural gas market. The paper begins by describing the traditional market organization, along with its monopolistic elements and inflexibilities. It goes on to illuminate the destabilizing frustration among producers with fast growing supply potential, caused by the limited growth in demand under prevailing market arrangements. Two emergent commercial forces promoting competition are then dealt with. The first is the increasingly widespread effort by large consumers to procure gas on improved terms by circumventing the national transmission companies. The important role played by Wingas in this respect is reviewed in detail. The second is the impending impact of the Interconnector, a gas pipe between the UK and the continent, which becomes operational during 1998. The paper argues that these commercial developments are undermining existing monopolies and will bring about increasing competition, even if the formal regulatory regime stays intact. (C) 1999 Elsevier Science Ltd. All rights reserved.