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INVESTIGATION CONCLUDED INTO STORAGE OF NATURAL GAS


PRESS RELEASE



PRESS RELEASE

GAS: ANTITRUST AUTHORITY AND ENERGY AUTHORITY RECOMMEND SALE OF PART OF ENI'S STOCKS


To address critical factors and increase competition and security – Joint fact-finding investigation concluded
 

To increase competition and security in the Italian natural gas system, ENI should sell part of its stocks (these are anyway State concessions), in accordance with the model adopted to encourage liberalization in the electricity industry. This is one of the principal proposals to emerge from the “fact-finding investigation by the Italian Competition Authority and the Italian Electricity and Gas Authority into storage activities in the natural gas industry in Italy”. This is an industry which, in the view of the two Authorities, is still marked by “important critical factors” and needs “a significant increase in storage capacity, which is essential in order to improve energy security”.
These “critical factors”, even in the recent past, have required Government intervention to safeguard the national system, leading to higher charges for businesses and families (for example, containment of consumption by industrial customers and use of interruptible supply contracts, the obligation to maximise imports and use of sources other than gas for the production of electricity, thus overriding environmental rules).

The document points out that the upgrades so far carried out by the dominant operator, which by way of Stogit (now part of Snam Rete Gas) holds 97% of reserves, have been “absolutely marginal” and insufficient either to guarantee greater security in the national energy system or to ensure the flexibility needed by operators to compete effectively in the liberalized marketplace.
“The current lack of storage and delays in competition in the national gas market benefit ENI in that it has alternative means to achieve flexibility that are of greater size and lower cost than its competitors”, emphasize the Antitrust Authority and AEEG.

‘Rationing’ of storage and vulnerability of the system

One of the key points to come out of the investigation, as regards competition, is the “effective rationing of storage” that inhibits businesses which sell – or would like to sell – gas, in particular to industrial customers and electricity generators. The origins of this rationing were examined from the following points of view: the conduct of companies, particularly ENI, which dominates the entire gas industry; the overall scarcity of storage capacity and storage services, in particular for customers selling to electricity generators and industrial customers.

In order to make a positive impression on this situation, Antitrust and AEEG emphasize the need for interventions to “eliminate the barriers and distortions that impede the development of new storage capacity and to produce new rules for the balancing of access to and use of such storage capacity”.

Furthermore, the investigation report points out a number of critical factors that make the whole country system vulnerable. The most obvious of these have to do with satisfying peak daily gas demand in “unusual conditions” such as particularly severe cold snaps and situations that may be aggravated by events of a technical, commercial or political nature (like the Russia-Ukraine crisis) which may “limit import capacity”. In the view of the Antitrust Authority and the AEEG “such events must be given due consideration when evaluating the degree of security offered by the national system, with a view to steering its development”.

Sale of assets following the model used for the electricity market

In this context, one of the measures proposed for competitive ends is the sale by ENI to third parties “of subsets of assets” as has already been tested in the electricity market in order to encourage its liberalization. In the view of the Antitrust Authority and the AEEG, an operation of this kind in the storage sector, which is anyway subject to concessions from the State, could lead to various positive consequences such as: entry of new operators with the creation of several independent storage companies; reduction in the influence of the dominant operator in storage activities; greater and faster opening up to competitive developments; consequent development of new capacity. All this should be oriented to creating a ‘national hub’ for gas, as desired by the Government itself, that can also be an efficient resource for the wider European market.

The investigation by the Antitrust Authority and the Energy Authority was begun at the end of 2007 with the aim of looking into possible obstacles to the development of new storage capacity, evaluating any potential means of  flexibility as an alternative to storage and the ease of access to such means by new operators. The investigation also covered the legal and regulatory context so as to assess the impact of that context on competitive dynamics within the industry.

Their respective findings are to be found on the websites of the Antitrust Authority (www.agcm.it) and of the Energy Authority  (www.autorita.energia.it).


Rome, 3 June 2009



INVESTIGATION CONCLUDED INTO STORAGE OF NATURAL GAS