Regulatory issues of global significance for the gas industry

March 14, 2011 | 00:00

Regulatory issues of global significance for the gas industry

On 8 March 2011, members of the International Confederation of Energy Regulators (ICER) and the International Gas Union (IGU) participated in their first joint ICER-IGU workshop. The workshop was held in Washington DC with the participation of ICER Chair Lord John Mogg, the IGU President Datuk Rahim Hashim and ICER and IGU members from 28 countries. Moderators and presenters for each session were senior representatives from ICER and IGU, plus some honoured guests.

Participants agreed that this workshop anticipate potentially a greater and rewarding dialogue between energy regulators and the natural gas sector. Natural gas is set to play a central role in meeting the world’s energy demand for the coming decades. During the four sessions, the participants analysed the background to and identified a wide range of opportunities and approaches for constructive dialogue on the future development of natural gas markets. ICER and IGU envisage pursuing further exchanges and appropriate cooperation on a number of specific issues of mutual interest, drawing from the workshop’s four themes. We anticipate that these issues will be discussed by ICER and IGU
members, separately and jointly, including in technical workshops.

Interaction between regulators and operators We are in an unprecedented period of change in the global gas industry. Many countries are in the process of implementing, or have implemented, some form of new gas legislation. In many countries, legislation is focusing on ensuring security of supply and the protection of the environment. To achieve the desired results on these and other objectives, regulators believe that open dialogue with the gas sector is essential.

• Globalisation of the gas market requires enhanced communication between regulators across national and regional boundaries. It will be important to identify best practice in consultation processes and to encourage the use of such standards.

• A major market-wide issue is the reduction of risk coupled with an improvement of regulatory certainty by sharing and implementing best practices. The management of risk during periods of regulatory and
other change is important.

• A key issue concerns regulators’ duty to protect the interests of gas consumers, where possible by establishing the right conditions for competition to flourish and for a stable, transparent and independent regulatory framework allowing the industry to reach their decisions on necessary investments.

Regulatory influences on international investment
Regulators and industry agree on the importance of enhancing security of supply internationally. The regulatory framework is an essential element in ensuring adequate long-term investments to support secure and sufficient  capacity. Natural gas, liquefied natural gas (LNG) - where major expansion of capacity is planned over the next years - and unconventional production will require significant investments over the coming decades.

• Regulators and gas industry agree to continue their dialogue in order to achieve a greater shared understanding of the challenges facing the world’s gas markets.

• Industry will strive to facilitate the information regulators require to foster efficient regulation, and that markets require to function efficiently.

• The gas industry and regulators need to work to achieve a common perspective on how to ensure secure investment and supplies of gas in both developed and developing markets.

• Authorisations need to be streamlined to encourage new infrastructure necessary to fulfil security of supply.

• Fluent interaction and effective relations between industry and regulators will help to improve the investment necessary to increase energy security worldwide by increasing the diversity of gas supplies.

• Efficient investment is one sign of regulatory success.

Regulation and gas price formation

Regulation is fundamental in allowing competitive and efficient markets to develop; it is vital for some activities, especially for transmission networks, as natural monopolies. The challenge is to ensure the right balance in regulatory intervention, so that transparent and competitive conditions can thrive and
customers can benefit from fair prices.

• Regulated gas prices continue in many countries. However, globally the proportion of gas that is priced though traded markets has been steadily increasing.

• Liquid and transparent markets are seen by both regulators and the gas industry as fundamental to achieving energy policy goals relating to competitiveness, sustainability and security.

• Regulators and industry recognise that retail price controls can often distort or suppress market signals in competitive markets.

• Effective regulation is an important factor in achieving efficient gas price

Environmental aspects of natural gas
Natural gas contributes positively to economic growth and increased economic activity, usually without relying on subsidies; it also has better combustion properties and offers lower emissions than other fossil fuels. The gas industry is committed to increasing energy efficiency and making a significant contribution to reduce harmful emissions.

• The gas industry and regulators recognise that natural gas should not be inhibited from contributing to the future low-carbon, global economy.

• There could be an increasingly important role for gas as a partner for renewables, so that natural gas plays a central role in moving to a decarbonised world.

• The industry and regulators recognise that action is needed to promote research on the sustainable use of energy, and to develop regulatory mechanisms and incentives that enable energy companies to implement efficiency programs.

• The industry and regulators recognise the importance of continued dialogue to assess and minimise the environmental impact of activities like shale gas extraction and encourage the continued development of gas industry technologies.

Continuing Dialogue

Following today’s first ever joint workshop, the two organisations will work to strengthen their dialogue and collaboration on these issues, in particular

• investment in international gas infrastructure;

• global gas market developments; and

• the role of gas in a carbon constrained world.

Key personnel from ICER and the IGU will take forward these topics of mutual interest, through virtual and physical round table discussions, with a view to reporting on progress at the World Forum on Energy Regulation in Quebec in May 2012, and at the World Gas Conference in Kuala Lumpur in June 2012.

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