Commission settles competition case against Norwegian gas producers

United Kingdom

The European Commission has accepted commitments from Norwegian gas producers to cease joint sales and closed the case relating to the sale of Norwegian natural gas by the GFU.

The GFU case concerns joint sales of Norwegian natural gas which, since 1989, have been conducted through a single seller, the GFU (Gas Negotiation Committee).  The GFU had two permanent members, Statoil and Norsk Hydro, Norway’s largest gas producers, which were occasionally joined by other Norwegian gas producers. The GFU negotiated the terms of all supply contracts with buyers on behalf of all natural gas producers in Norway.

In June 2001 the Commission initiated formal proceedings against around 30 Norwegian gas companies arguing that the GFU scheme was incompatible with European competition law. The GFU scheme was promptly ended in June 2001, at least so far as EEA sales were concerned, by  a Royal decree from the Norwegian Government.  The gas companies and the Norwegian Government therefore argued that the Commission should halt its action.  They also argued that European competition law should not be applied, since the Norwegian gas producers had been compelled by the Norwegian Government to sell gas through the GFU system.

In subsequent negotiations between the Norwegian gas producers and the European Commission a distinction was made between (1) the permanent members of the GFU (Statoil and Norsk Hydro), (2) six corporate groups actually selling Norwegian gas through contracts negotiated by the GFU (ExxonMobil, Shell, TotalFinaElf, Conoco, Fortum and Agip) and (3) all other Norwegian gas producers against which formal proceedings had been opened.

(1)        Statoil and Norsk Hydro have agreed to end all joint marketing and sales activities unless these are compatible with European competition law (for existing contracts individual negotiations must take place when prices come up for review) and (2) to reserve certain gas volumes for new customers, i.e. those who in the past have not bought gas from Norwegian gas producers.  (Statoil has undertaken to make available 13 BCM of gas, and Norsk Hydro 2.2 BCM, during the period June 2001 to September 2005. External auditors will monitor these commitments.)

The Commission welcomed these commitments as they would contribute to the creation of a single market for gas in Europe by giving European gas purchasers a wider choice of Norwegian suppliers, thus facilitating the establishment of new supply relationships.  This should also have a positive impact on the European market structure, which is still characterised by dominant suppliers in almost all markets.

Finally, although not part of the GFU case, Statoil and Norsk Hydro also confirmed that they would not introduce territorial sales restrictions and/or use restrictions in their gas supply contracts.  Both types of clauses are considered incompatible with European competition law as they prevent the creation of a single market, but are considered necessary by certain market operators.  The Commission welcomed Statoil’s and Norsk Hydro’s position as it demonstrates that gas can indeed be marketed in the Community without these anti-competitive clauses.

(2)                 As regards the other Norwegian companies concerned by the GFU case, the Commission received commitments from ExxonMobil, Shell, TotalFinaElf, Conoco, Fortum and Agip to discontinue all joint marketing and sales activities similar to those given by Statoil and Norsk Hydro.

(3)                 For the remaining Norwegian gas producers the Commission decided to close the case on the assumption that they will sell Norwegian gas individually in the future.

It is interesting to note that Mr Monti and Commission Vice President Loyola de Palacio, who is in charge of energy matters, made a joint comment on settlement of the case.  They took the opportunity to stress that it will now also be essential to ensure that Norwegian gas can effectively be transported through the European gas pipelines.  They said: “The Commission will pursue any violations of internal market rules and competition rules regarding access of Norwegian gas to European pipelines with vigour.  We urge national authorities to do the same.

This is clearly an area to watch.

For further information please contact: Susan Hankey at susan.hankey@cms-cmck.com or on +44(0)20 7367 2960 or Judith Aldersey-Williams at judith.aldersey-williams@cms-cmck.com or on +44(0)1224 622002.