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Brussels, 3 rd December 2009

Antitrust: Commission accepts commitments by GDF Suez to boost competition in French gas market – frequently asked questions

(see also IP/09/1872 )

What is a commitment decision?

A "commitment decision" is a Decision based on Article 9 of Regulation 1/2003 on the implementation of EU competition rules. Such a decision does not conclude that there has been an infringement of the competition rules, but it legally binds the company concerned to the commitments it has offered, and ends the Commission's investigation. If the company concerned were to break its commitments, the Commission could impose a fine of up to 10 percent of the company’s annual turnover without having to prove any violation of the EC Treaty's competition rules.

What are the main elements of GDF Suez's commitments?

Under the commitments, GDF Suez will rapidly release a large share of its long-term reservations of gas import capacity into France, amounting to about 10% of the total long-term import capacity. GDF Suez will then continue to reduce its share of these reservations to below 50% by 1 October 2014. These commitments should have a major structural impact on the possibility for other companies of competing on the French market, to the benefit of domestic and industrial gas consumers.

What were the Commission’s competition concerns?

The Commission was concerned that GDF Suez's long-term reservations for most of France's gas import capacity, as well as its behaviour relating to investment and capacity allocation at two liquefied natural gas import terminals in France, might have infringed EU rules on the abuse of a dominant position (Article 102 of the Treaty on the Functioning of the European Union), by largely closing off access to the French gas market to other potential gas suppliers.

What are the implications of the decision for security of supply in France?

The easier that gas can flow freely within the EU, the less any individual country will suffer security of supply problems. The commitments are therefore an excellent solution for the free flow of gas into France and in the EU in general. They will help markets to integrate in Europe and will also contribute to further infrastructure investments. This is, therefore, a remedy which enhances security of supply in France and in the EU.

What about GDF Suez's public service obligations?

The Commission understands that GDF Suez has been careful not to propose commitments that would put it in a position not to respect its public service obligations. There are also a number of other options available for GDF Suez to meet such obligations – including, for example, storage and booking of short term capacity.

In the light of previous energy decisions, why was a structural remedy not imposed, such as unbundling of the network operator?

Firstly, the reduction of GDF Suez's share of import capacity will lead to a permanent change in the structure of French gas imports. It is, consequently, of a structural nature.

Secondly, commitments must relate directly to a specific potentially abusive behaviour and must constitute a necessary, suitable and proportionate remedy. The behaviour identified in the Commission's preliminary assessment concerned capacity reservations by GDF Suez as a shipper of gas, and not the behaviour of the network operator (GRTgaz). Unbundling would not have resolved the competition problem in this case.

Why does GDF Suez have until 2014 to reach the 50% reservation ceiling?

The decision allows for GDF Suez to reach the 50% ceiling in various ways.

GDF Suez can release its existing import capacity, but can also expand existing or construct new import capacity infrastructure. Such investment, which necessarily takes a few years to complete, will increase overall import capacity into the French market to the benefit of both competition and security of supply. At the same time, the Commission has also insisted on a very significant rapid capacity release.

How much does the rapid release of capacity represent?

The capacity that will be released by GDF Suez in the period 2010-11 constitutes approximately 7 billion cubic metres per year. This corresponds to about 10% of the total long-term import capacity into France.

Why is the duration of the commitments so long?

The duration is appropriate for a case relating to long-term capacity reservations. Current capacity reservations often run 20-25 years into the future.

What happens if no one wants the liberated capacity?

This is highly unlikely. Many third parties have specified the difficulties they face due to a lack of available capacity. Of course, this does not mean that third parties will necessarily book capacity for more than 20 years at a time, like GDF Suez. Nor does it mean that they can necessarily organise themselves from one day to the next to take all the freed capacity. However, this will not result in any supply problem, since the commitments allow GDF Suez to book any left overcapacity under a short-term regime. Consequently, no capacity will remain unused.

Why is capacity also liberated outside France?

The purpose of the commitments is to enable third parties to book transport capacity into France. A situation where capacity is only liberated on one side of the border, but where there is no possibility to book capacity on the other side would not be of any use to a new entrant. This is why there is a need to match liberated capacity on certain French entry points with capacity on the other side of the border.

Why does the immediate release not target all entry points into France?

The immediate release covers all the main entry points into France. A balance has been sought between liquefied natural gas (LNG) and pipeline gas, as well as between different geographic entry points. Whereas individual shippers all have their own preferences, the Commission’s market test showed that a correct balance has been struck. Moreover, certain entry points are less suitable due to problems of accessibility (for instance a limitation of vessel size at the Fos Tonkin LNG terminal).

Why does GDF Suez have a choice between liberation of capacity at Dunkerque or at the Montoir de Bretagne LNG terminal?

GDF Suez has committed to release pipeline capacity at Dunkerque. However, such capacity is only likely to be useful to third parties if upstream capacity can also be liberated. This issue cannot be resolved unilaterally by GDF Suez and, should no solution be found for this upstream situation, a corresponding capacity will instead be released at Montoir LNG terminal. Consequently, this fall-back option serves to ensure that third parties gain access to useable capacity.

Why is so much capacity liberated at Fos Cavaou LNG terminal?

Fos Cavaou LNG terminal has been identified by third parties as a key entry point to the South of France, a zone characterised by insufficient import capacity. A significant capacity release at Fos Cavaou has, therefore, been considered as an essential part of the commitments. Moreover, GDF Suez's behaviour in deciding the terminal's size and organising the initial capacity allocation procedure constitute a specific part of the case, which requires a specific remedy.

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