French energy regulator focuses on natural gas zone merger to boost liquidity
French energy regulator CRE will launch a market consultation at the beginning of June on the major guidelines and measures necessary to improve liquidity within the country's natural gas market.
"Basically, the main aim is to understand the best way to reduce the number of France's balancing zones," CRE told ICIS on Thursday.
France currently has three balancing zones: GRTgazNord, GRTgazSud and TIGF. The current division of the French market has often been cited as the main obstacle to a significant increase in liquidity.
The market consultation will analyse different options, but will focus on which balancing zones to merge and how.
On the first aspect, the consultation will ask market participants to express their interest in a potential merger of: PEG Nord with PEG Sud; or PEG Sud with PEG TIGF; or all three of the balancing zones.
A merger of PEG Nord with PEG Sud has gathered the largest interest from market participants so far, CRE said.
There are two basic ways to improve liquidity in France and particularly in the PEG Sud area, CRE said. One way would be an increase in infrastructure investment, with France's main transmission system operator (TSO), GRTgaz, improving the physical connection between PEG Nord and PEG Sud.
Another way would involve a merger between PEG Nord and PEG Sud through market-based measures, as the study produced by consultancy group KEMA suggested in March see ESGM 14 March 2012).
But CRE believes that a third option - between full investment and pure market focus - is possible. This would reduce the heavy cost implicit in the infrastructure investments solution and, at the same time, reduce the risks connected with a purely market-based solution, which could potentially expose PEG Sud to higher price volatility and a strong dependence on LNG supply.
"The market consultation will look at all these short- and medium-term options. At the same time, CRE will continue to work on a long-term target for the French market, with the aim of understanding whether there will be incentives strong enough to create a single, unified gas market in France," a member of CRE's directorate said.
Following the market consultation, CRE plans to take a decision in July.
As to the merger between the high-calorific and low-calorific balancing zones at PEG Nord (see ESGM 24 April 2012), the French energy watchdog will take a final decision next week.
"The market consultation that we had launched has registered a good level of participation," CRE said. DB
Other Related Stories
