COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC89) 334 final - SYN 206 
Brussels, 6 September 1989 
TOWARDS COMPLETION OF THE INTERNAL MARKET 
FOR NATURAL GAS 
(Communication from the Commission) 
Proposal for a 
COUNCIL DIRECTIVE 
on the transit of natural gas through the major systems 
(presented by the Commission) 
G^îlk 
TOWARDS COMPLETION OF THE 
INTERNAL MARKET FOR NATURAL GAS 
CONTENTS 
SUMMARY AND CONCLUSIONS 
INTRODUCTION 
PART I. 
A. 
B. IMPORTANT ASPECTS OF THE NATURAL GAS SECTOR 
SPECIFIC CHARACTERISTICS 
COMMUNITY GAS TRADE 
PART 11. TOWARDS A MORE OPEN GAS MARKET 
A. THE NEED FOR MORE COMPETITION IN THE GAS SECTOR 
B. 'GAS TO GAS' COMPETITION 
PART III. 
A. 
B. 
C. A STEP-BY-STEP APPROACH TO THE PROBLEM: 
PROPOSALS FOR THE FUTURE 
RIGHT OF TRANSIT 
THIRD-PARTY ACCESS 
COMMUNITY DIMENSION OF TRANSMISSION INVESTMENTS 
ANNEX: PROPOSAL FOR A DIRECTIVE ON THE TRANSIT 
OF NATURAL GAS THROUGH THE MAJOR SYSTEMS 
- 2 -
SUMMARY AND CONCLUSIONS 
in the general framework of the complet Ion of an Internal energy 
market, the Commission considers ft necessary to achieve a more open 
Internal market for natural gas. 
In the present situation where for practical and technical reasons 
there Is no competition between gas suppliers for sales to end-
consumers In the Community, there Is a lack of competitive pressure on 
gas companies to operate efficiently and minimise costs. 
In order to Improve the efficiency of the gas supply system and create 
'gas to gas" competition to the benefit of the consumer, the Commission 
proposes the following "step-by-step' approach: 
a) The setting up (Directive Article /OOa EEC) of modal It les for the 
applIcatlon of transit rights between gas companies of the 
Community In the high-pressure grid of the EC; 
b) The setting up of an organisation of représentât Ives of the 
entitles responsible for the high-pressure gas pipeline systems. 
This organisation will be required, upon request by the Commission, 
to help with the modal ft les for claims to transit rights and, when 
necessary, to seek reconcf11 at Ion between the parties In case of 
difficulty and to produce an annual report on Its activities; 
c) The setting up, by the Commission, of a consultation process by 
establfsh/ng two consultative committees - the first with the 
Member States; the second with the sectoriel Interests Involved -
In order to discuss if third-party access to a European transport 
system needs to be organised and, when necessary, under what 
conditions, In order to ensure an implementation which will 
guarantee the preservation of the quality of service to the 
consumer and the security of supply. 
The net benefit for the Community as a whole of introducing a system of 
third-party access to the gas transmission grid has been evaluated at 
some 625 million ECU per annum. It should be stressed that there are 
also Important Indirect advantages resulting from Increased competitive 
behaviour of gas companies whose wide beneficial Impact In the longer 
run on a 11 gas consumers cannot be quantified. 
d) Improvements In the informative procedure and consultation on 
future Community investments in the natural gas transport sector. 
This Is the subject of a separate Communication from the Commission 
on energy Investments. 
- 3 -
Introduction 
The European Commission has expressed In Its Working Document of 
May 1988(1) the need to achieve a more open internal market for 
gas. Specif leally, this theme appeared In the Council Resolution of 
September 1986 on new Community energy policy objectives for 
1995(2) which referred to 'greater integration, free from 
barriers to trade, of the Internal energy market with a view to 
Improving security of supply, reducing costs and improving 
economic competIt Iveness". 
2. The Commission's Working Document presented a comprehensive 
Inventory of possible barriers to trade In gas and Identified 
priority areas for action to remove the most significant barriers. 
The priorities Included the following: 
a) greater price transparency for non-tariff sales, especially In 
the United Kingdom and the Federal Republic of Germany; 
b) harmonisation of taxation on energy; 
c) the posslblIfty of third-party access to the grid In return 
for a reasonable carriage charge. 
The Commission has undertaken to examine each of the potential 
obstacles listed In the inventory and will report to the Council 
as these examinations are completed. As a matter of priority, the 
Council requested the Commission to submit its views on the 
obstacles to Community gas trade and on the third-party access 
concept during the course of 1989. This Communication addresses 
these questions with reference to the structure of the gas 
industry, the Interests of the consumers and the need for more 
competition. As part of its assessment, the Commission has taken 
Into consideration the results of studies carried out, at its 
request, by an Independent consultant as well as the various 
opinions which were brought to Its attention by the Member States' 
gas experts, the oil and gas Industry, consumer associations and 
other interested parties. The Commission also looked at the system 
of third-party access which exists In the United Kingdom and In 
the United States. 
4. in order to improve the efficiency of the gas supply system and 
create "gas to gas' competition to the benefit of the consumer, 
the Commission proposes the following "step-by-step" approach: 
a"> the setting up of a Council Directive (Legal basis: Article 100a 
EEC) on the modalities of setting up an obiIgat/on for natural gas 
transit between gas companies of the Community for the high-
pressure grid of the EC; 
(1) C0M(88) 238 final. The Internal Energy Market. 
(2) O.J. n9 C 241 of 25.09.86. 
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b) a detailed consul tat Ion procedure for all concerned to define the 
conditions under which It would be possible to give expanded 
general access to third parties (notably public distributers and/or 
Industrial consumers) to transport systems. 
Additionally, in a separate Communication (C0M(89) 335), a draft 
Council Regulation envisages communication to the Commission of all 
Investment projects of Community interest in the natural gas 
sector, so that the Commission may make such observât ions on these 
projects as will enhance the Community dimension. 
PART I IMPORTANT ASPECTS OF THE NATURAL GAS SECTOR 
A. Specific characteristics 
a) Rôle of natural gas in the total energy balance 
5. In the framework of the Community energy policy objectives, 
natural gas contributed significantly to the objective of 
diversification of energy supplies away from oil and to the further 
development of the Community's own energy resources. 
Between 1975 and 1988, natural gas more than doubled Its share in 
the total Community energy balance to achieve a present share of 
18%. 
The current natural gas share of gross energy consumption varies 
widely across Member States: there are some "mature" gas markets In 
a number of countries (the United Kingdom, the Netherlands, Italy, 
Germany, France, Belgium, Luxembourg) and in some other (Greece, 
Portugal, Denmark, Ireland, Spain) there are plans to develop new 
gas Industries or considerably expand existing ones. 
For the future, the Commission envisages a continuing and Important 
rôle for gas In a diversified mix of energy supplies for the 
Community. 
°) Organisational structure of the gas industry 
6. The way in which the gas industry Is structured and organised 
varies quite widely across Member States, although certain common 
features emerge in a number of cases. Typically, gas production 
(where It takes place) tends to be organisâtionalIy separate from 
transmission and distribution. Frequently, exploration and produc­
tion activities Involve a wider range of Internat ional oil and gas 
company interests than do the 'downstream' operations of the gas 
industry. Gas production In most Member States is not, therefore, a 
State monopoly or near-monopoly activity. Nevertheless, there Is 
very considerable State Involvement In the upstream gas industry In 
major gas-consuming countries such as France and Italy, for 
example. 
- s -
Bulk gas Importing and transmission, in contrast to production, Is 
an activity carried out by a single national organisation in the 
vast majority of Community Member States, in a good many cases, 
that organisation Is also 100% owned by the State (In Denmark, 
Italy, Spain and the Republic of Ireland, for example) while In 
other cases (Belgium and the Netherlands) there is mixed ownership 
with considerable State Involvement and control. The United Kingdom 
now provides an Interest Ing exception to the general pattern In 
that (pending the emergence of competI tors) there is a privately-
owned monopoly seller which Is likely to remain the dominant bulk 
transporter of natural gas. Only In West Germany are there several 
major importing transmission companies, but In practice they tend 
to cooperate rather than compete for bulk purchases and one of them 
Is very much dominant in terms of size and importance, as over 70% 
of gas sold In West Germany passes through Its hands. 
Only In France and the United Kingdom are gas transmission and 
distribution activities vert leally integrated within a single 
company, though the Republic of Ireland is also moving In this 
direction. In other cases, a single national transmission company 
is complemented by a number of regional or local gas distribution 
companies, many of which are municipally owned. The West German 
situation Is somewhat exceptional, In that there Is a third 
Industry tier of regional transmission companies between the main 
Importing utilities and the distributors. Belgium Is also Interest­
ing in that there Is an unusually high proportion of private owner­
ship In the distribution sector. 
Where transmission and distribution activities are separate, the 
usual arrangement is for the national transmission company to sell 
gas direct to larger consumers as well as to the distributors, who 
then on-selI to households and other smaller gas users. 
As mentioned above, the structure of the West German gas industry 
is particularly complex and may merit some separate discussion, 
given the size of the West German market and Its central Importance 
to the Integrated gas grid In Western Europe. The ownership pattern 
Is a complIcated web of cross-holdings and sub-holdings which 
Involves a number of major West German Industrial and mining 
concerns as well as some of the major international oil companies 
or their West German subsidiaries. Although there Is some Indirect 
public sector Interest, the degree of private ownership In the main 
West German gas transmission companies Is significantly higher than 
In most other Member States. 
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B. Community gas trade 
a) The European gas transmission network 
10. The cooperation which exists between most European gas 
transmission companies Is reflected in the existence of a rather 
wel/-Integrated European gas grid which currently covers France, 
Belgium, the Netherlands, Luxembourg, West Germany, Denmark and 
Italy, together with Austria and Switzerland. Some Member States 
are not yet interconnected to the European gas grid (the United 
Kingdom, Ireland, Spain, Greece and Portugal). The number of gas 
trunklInes in Western Europe fs relatively limited. Their ownership 
Is concentrated In the hands of a small number of major gas 
utilities and (to a lesser extent) international oil companies 
which sometimes operate In the framework of Joint ventures. 
b) The Importance of Community gas trade 
11. Natural gas flows In the Interconnected European grid are quite 
Important. In 1988, half of the gas consumed in the Community was 
the result of International transactions between Member States and 
with third countries. Based on the latest forecasts of Member 
States, It Is estimated that In 2000 the Importance of Inter­
national gas transactions between Member States and with third 
countries will remain high In relation to total consumption 
(± 50%). Recent forecasts made by the IEA and other professional 
Institutions estimate an even higher degree. 
12. The transit of gas within the Community, crossing one or more 
Member States, represented, in 1987 (latest figure aval table), 
± 22% of total gas Imports (Intra + extra EC). In 2000, the Impor­
tance of gas transit within the EC, based on Member States' fore­
casts, will grow to around 33% of total gas imports (intra + extra 
EC) as set out below: 
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Contracted Gas Exports/Imports in Transit through a Member State 
(year 2000, In mtoe) 
Exporter 
Netherlands 
Netherlands 
Netherlands 
Norway 
Norway 
Norway 
USSR Importer 
France 
Italy 
Luxembourg"' 
Netherlands 
France 
Spain 
France In transit through 
Belgium 
West Germany/ 
Switzerland 
Belgium 
West Germany 
Belgium 
Belgium/ 
France 
West Germany Volume 
3.8 
3.3 
0.4 
3.8 
6.3 
0.8 
9.1 
27.5* 
PART II TOWARDS A MORE OPEN GAS MARKET 
A. The need for more competition In the gas sector 
13. Natural gas supply within the Community Is characterised (see 
above, paragraphs 7 and 8) by a series of national, regional or 
local monopolles. Although gas competes with other fuels In most of 
Its end-markets - such as heavy fuel oil for Industrial steam 
raising and electricity or gasoil for space heating in the house­
hold sector - there Is for practical and technical reasons no 
competition between gas suppliers for sales to end-consumers 
anywhere In the Community. In cases where competition from other 
fuels is not particularly Intense, there Is a lack of competitive 
pressure on gas suppliers to operate efficiently and minimise 
costs. 
in the framework of the achievement of a single market for energy, 
the basic question Is how to Improve the efficiency of the gas 
supply system and create "gas to gas' competition to the benefit of 
the consumer. 
Indirect Imports, 
(Luxembourg). on-sold by Oistrlgaz (Belgium) to Soteg 
This figure of 27.5 mtoe represents 28.7% of total gas Imports 
ai ready contracted for 2000 (Intra + extra EC). It does not 
take into account the transit of additional gas Imports which 
wi ! I be necessary tc cover the expected total demand of 
230 mtoe In 20C0. If this is taken into account, the percentage 
would r ise to ± 33%. 
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B. "Gas to gas' competition 
14. Besides Introducing In effect transit between operators of the 
high-pressure grid, the Commission considered the possiblIIty to 
achieve "gas to gas" competition through the introduction , at 
Community level, of a system of third-party (e.g. large Industrial 
consumers) access to the European transmission grid. 
In that context, the Commission examined what would be the advan­
tages and drawbacks of Introducing such a system for the consumers, 
for the gas industry and for the Community as a whole. 
in particular, the Commission looked at the following Issues: 
a) Would third-party access lead to lower prices by providing 
incentives for producers to compete one with another? 
b) Would lower prices and greater competition have an impact on 
the development of domestic resources and on security of 
supply? 
c) Would the potential benefits outweigh the potential drawbacks? 
15. The principal potential advantages and drawbacks of Introducing a 
system of third-party access were Identified as follows: 
Advantages 
a) the possiblIIty of lower gas purchase prices, if direct 
marketing opportunities lead gas producers to compete more 
aggressively for market share; 
b) the erosion (through third-party access arrangements) of 
monopoly profits on certain high-margin gas sales to Industrial 
customers; 
c) some Increased competitive pressure on gas utilities to reduce 
overheads and operate more efficiently; 
d) wider gas purchase options (and therefore, possibly, lower 
prices) for new gas-fired power stations; 
e) Increased options for UK gas producers to sell into the rest of 
the Community, Increasing the likelihood of a cross-Channel 
link and further Integration. 
Drawbacks 
a) the possiblIIty In a tighter gas market than exists today, that 
competition between new and existing bulk gas buyers could lead 
to a "bidding up' of gas purchase prices; 
b) possible Increases In selling prices to small consumers, to 
compensate gas utilities for any loss of Industrial market 
profits; 
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c) increased market uncertainty which might put at risk the 
necessary long-term Investments In gas supply capacity, both 
within and outside the Community, and the security of supply; 
d) adverse consequences of market uncertainty for the development 
of 'new' or Infant gas Industries. 
16. The 'order of magnitude" of the financial Impact of third-party 
access has been evaluated as follows: 
16.1 Border gas prices 
It Is worthwhlle noting that the International gas market Is 
scarcely a model of atomistic perfect competition. in 
continental Europe It is effectively oligopolistic/ 
olIgopsonlstlc, with perhaps only three or four large potential 
sources of Incremental gas for the coming ten to fifteen years 
which would be able to sell directly to consumers (USSR, 
Norway, Algeria and, maybe, the Netherlands) and buying 
consortia which effectively reduce the number of Independent 
buyers to a handful. This market Is therefore unlikely to 
function like a perfectly competitive market, even If third-
party access were to double or treble the number of buyers. 
In this current situation, the Impact of a third-party access 
system on y as import purchase prices must be regarded as an 
open quest ion as so much depends on the strategy of the signif­
icant players. 
Intensified competition may take place to some extent where 
large new markets are available (gas-fired power generation, 
for example), but widespread price cutting seems most unlikely 
In the oligopolistic conditions of the European gas market. 
Nevertheless, there would be some Increased competitive 
pressure on existing gas buyers to negotiate the best possible 
Import deals for their Incremental supplies. It Is therefore 
expected that there would be a fairly modest reduction in the 
average cost of gas Imported into the Community (2-3%) and some 
reduction In the cost of new gas production within the 
Community, as a result of Increased competitive pressure. 
Taking this Into account, the total "gas cost" benefit might be 
250 million ECU per annum by 2000 for the Community as a whole. 
This figure excludes the UK on the grounds that third-party 
access leg/slat Ion already exists and a decision to Introduce a 
Community-wide system of third-party access would have little 
additional effect. 
These benefits are likely to be achieved if the current 
"buyers' market" conditions persist. In a "sellers' market", 
the increased number of bulk gas purchasers resulting from 
third-party access rights might exacerbate the tendency to "bid 
up' the level of prices where gas Is perceived to be becoming 
In short supply. It is however necessary to say that, based on 
a very favourable gas reserves situation of traditional and 
potential suppliers of the Community, it seems likely that a 
"buyers' market" situation would remain for the next ten to 
fifteen years. 
- 10 -
16.2 Gas Industry efficiency 
The competitive threat of direct marketing will also bring some 
additional pressure to bear on gas utilities to operate more 
efficiently and reduce their non-gas costs, especially at the 
level of transmission. The efficiency benefit Is estimated at 
about 250 million ECU per annum by 2000 for the Community as a 
whole. 
16.3 Income distribution effects 
Some European transmission companies might suffer a direct loss 
In trading profit In the event of third-party use of their 
systems, it is assumed that those whose profitability is 
currently below a "normal" level would pass on the Increased 
unit costs to smaller domestic and commercial customers, in 
order to protect an already poor financial posit/on. 
On the other hand, under a third-party access régime, very 
large local or regional distribution companies would also be 
able to choose between a range of suppllers. These local or 
regional distribution companies would be exercising their 
considerable market power on behalf of the smaller consumers 
and might negotiate better terms than those obtained by large 
industrial consumers. As the city-gate prices are negotiated by 
organisations representing both the smaller, and the larger 
distribution companies, the smaller ones will also take 
advantage of the possfblIIty for the larger ones to negotiate 
better terms. 
To the extent that third-party access causes transmission 
companies to suffer a loss of profit, we would expect to see: 
a) redistribution of Income from transmission 
companies to Industrial users In Italy, West 
Germany and the Xlnlted Kingdom; and 
b) redistribution from small consumers to large users 
In Belgium and Spain. 
16.4 Macro-economic effects 
To the extent that third-party access leads to lower Industrial 
gas prices, It might be expected to contribute to an Improved 
Community trade performance In world markets for manufactured 
goods and thus to an Increased level of economic activity In 
the longer term. Although some manufactured goods (such as 
nitrogeneous fertlI/sers) are very gas Intensive, the cost of 
gas accounts for only around 0.5% of output value for EC 
Industrial product Ion as a whole. For this reason, the external 
trade effect Is likely to be relatively modest. An annual 
benefit of around 125 million ECU per annum has been estimated 
on a very tentative basis. 
- 11 -
16.5 Overview 
For the Community as a whole, the best estimates for the year 
2000 are as follows: 
a) reduced border prices and Community gas production 
costs - around 250 million ECU per annum, provided 
that "buyers' market" conditions persist; 
b) Increased gas Industry efficiency - around 
250 million ECU per annum; and 
c) macro-economic (trade) benefit - about 
125 million ECU per annum. 
The combined benefit of some 625 million ECU per annum is 
equivalent to around 2% of the Community's projected total 
annual gas supply costs in 2000. One should stress again the 
"order of magnitude" nature of these results and the dangers of 
mlsinterpretatIon. For example, there are likely to be resource 
allocation benefits from elfmlnat/ng monopoly profits that we 
were not able to quantify. Also, the possible negative effect 
on supply security has not been calculated In financial terms. 
17. The Commission's evaluation Is that the major direct benefits of 
third-party access would accrue to very large gas users, although 
there Is a potential for small electricity consumers to benefit 
indirectly from the competitive pricing of gas to combined-cycle 
power generation. Mediums I zed Industrial companies who could not 
themselves purchase direct might nevertheless form purchasing 
consortia or buy through Independent gas marketers/trader s. 
The Commission will remain vigilant to the fact that an Increase In 
intra-Co/nmun/ty trade of natural gas, together with an Improvement 
in the competition situation, should have an appropriate Influence 
on the price paid by all consumers. 
Even if the system of third-party access were not heavily used, 
however, there may still be advantages in the mere potential for 
competition to take place If third-party access In Itself causes 
modifications to restrictive or ant/-competitive business 
behaviour. 
in a general sense, therefore, ft may be said that an open, 
flexible gas supply system Is more likely to be beneficial than 
otherwise. 
PART III A STEP-BY-STEP APPROACH TO THE PROBLEM: PROPOSALS FOR THE 
FUTURE 
18. To achieve a more open gas market, the Commission is examining the 
following questions to which the answers would permit an opening up 
of the market beyond the present transit situation. These questions 
on which the Commission will report separately to the Council have 
the following objectives: 
a) ensuring that competition within the new 
environment Is not distorted by State aids, 
predatory pricing or by discriminatory, collusive 
or other ant I-competitive practices on the part of 
gas Industry players; 
b) removing barriers to free competition In natural 
gas created by statutory monopolles, exclusive 
rights, statutory restrictions and restrictive 
commercial agreements; 
b) bis making uniform the common commercial policy, 
including extension to the natural gas sector; 
c) the expediency of repealing the Directive on gas in 
power plants, albeit this point Is less pertinent 
than a) and b) above. This would create a large new 
market for gas, allowing more room for competition. 
The Commission Intends to come back to this Issue 
In the framework of the preparation of new 
Community energy policy objectives. 
In that perspective, the Commission also considers It necessary 
I) to establish the modal /ties necessary with a view 
to guaranteeing the free circulation of natural gas In 
the Community, 
II) to Introduce "gas to gas" competition through a 
system of third-party access to the transmission 
grid, 
III) to actively promote a Community dimension of 
Investments In the transmission system. 
To provide an answer to these Issues, the Commission envisages a 
"step-by-step" approach as follows: 
- 13 -
A. Introduction of a legal Instrument on the modal It les of 
enforcing the obligation to transit natural gas In the 
Community 
19. As explained above (paragraphs 11 and 12), there is already a 
great deal of international trade in gas In the Community. 
Natural gas circulates within the integrated grid through arrange­
ments between pipeline owners. We have referred, in paragraph 10, 
to a number of Joint venture pipelines which carry gas on behalf of 
the partners in the Joint venture. 
Gas is a/so transported on a tariffed rather than a Joint venture 
basis. These arrangements are a/most all made on long-term basis 
between gas util/ties. 
20. There may be restrictions to the free flow of natural gas over 
national borders due to the existence of some legislation or admin­
istrative obstacles to gas trade (see paragraph 18) which may 
prevent normal commercial arrangements between Interested parties. 
In view of achieving a more integrated European gas market, it 
seems necessary that the right of transit set up In principle by 
the EEC Treaty be effectively enforced by Member States. 
A draft Council Directive on this subject Is attached in annex 
(legal basis: Article 100a). it contains the modalities for 
enforcing the right of transit for the transport of natural gas 
between transmission companies. 
21. In order to assist the Commission In the preparation of the 
necessary modal ft les for Increased access to transit, It will set 
up a representative body of organisations responsible for the 
networks. 
This organ/sat ion will be responsible for assisting the Commission 
In studying, when requested: 
the conditions (technical, financial, legal) of transit; 
the appropriate measures to encourage the development of 
exchanges and Improve the Infrastructure through shared 
developments; 
the conditions required to encourage advanced cooperation in 
the development of new equipment for the product Ion or 
transport of gas; 
the possibilities for cooperation with entitles In the third 
countries. 
- 14 -
At the Commission's request, this organ/sat Ion will equally be 
responsible to act as a prlvlledged forum where one would seek to 
secure agreement, by conciliation, between the companies concerned 
on transit operations, which are In the Community interest. 
Finally, this organ/sat Ion w/ll make an annual report to the 
Comm/ss/on on its actIvltles. 
22. Finally, In order to be able to avoid distortions and 
dlscrI ml nation during the limited phase of the setting up of 
transit rights, and because of the different strategies, past and 
present, followed in the Member States to put In place arrangements 
for production, commercialisation and distribution, methods of 
investment financing and product ion Itself, the Commission will 
establish, before 1 July 1990, transparency regarding the following 
elements: 
financing of investments; 
arrangements relative to the financing of production, 
commercial/satIon and the distribution of natural gas In the 
Member States. 
B. Third-party access 
23. In view of the above ment Ioned evaluation (see paragraphs 14 to 
17), the Commission proposes the following: 
(I) the Commission will pursue Its consultation with 
all Interested parties during a maximum period of 
one year In order to examine In depth whether 
third-party access to the European transport system 
needs to be organised, and, If so, under what 
conditions, In order to guarantee the maintenance 
of the quality of service to consumers and supply 
security.. 
For that purpose, It will set up two consultative 
committees, one with Member States and the other 
with the interested parties (producers, trans­
mission and distribution companies and consumers). 
(II) on the basis of this consultation, the Commission 
will take Its decision concerning the Introduction 
of a system of third-party access to the gas 
transmission grid. 
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C. Promotion of the Community dimension In Investments In the 
transmission system 
24. The objective Is to ensure that the Investment decision taken by 
Individual gas companies will take into account the possibilities 
to further interconnect and improve the coherence of the 
integration process of the European gas grid. This is the subject 
of a separate Communication from the Commission on energy 
investments. 
m 
m m 
ANNEX 
Proposal for a 
./^COUNCIL DIRECTIVE 
ON THE TRANSIT OF NATURAL GAS 
THROUGH THE MAJOR SYSTEMS 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establfshfng the European Economic 
Community, and in particular Article 100a thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and Social Committee, 
Whereas It Is necessary to adopt the measures required to gradually 
complete the Internal market by 31 December 1992; whereas successive 
European Councils have recognised the need for a single Internal 
market, and, In particular In Rhodes, the need for a single energy 
market ; 
Whereas there must be greater Integration of the European energy market 
If a single Internal market Is to be achieved; whereas natural gas is 
an essential component of the Community's energy balance; 
Whereas the objective of the single natural gas market Is to ensure 
greater profitability and security of supply by freer trade but avoid 
unacceptable restrict ions on competition; whereas the special nature of 
the natural gas sector must be taken Into account In the pursuit of 
this objective; 
Whereas there Is already Increasing trade in natural gas each year 
between high-pressure gas transmission grids In Europe; whereas the 
Community's security of natural gas supply can be improved and costs 
can be reduced by coordinating the building and operation of the Inter­
connections required for such trade; 
Whereas it is possible and desirable to Increase the number of inter­
connections to Integrate more regions or even Member States which are 
not yet or are not fully linked up Into the European transmission grid 
and, thereby, to improve the security and quality of natural gas 
supply; 
- 2 -
Whereas In the future Interconnections between several Member States 
will need to be made to allow adequate supply and compliance with 
the natural gas transit obligation will have the effect of reducing 
non-technical obstacles: whereas compliance with this obligation 
constitutes a first stage In the development of the Internal market for 
natural gas. 
Whereas this obligation must, at least at this stage, be confined to 
the transit of natural gas through high-pressure grids; 
Whereas the financial, technical and legal conditions for such transit 
must, as a general rule, be worked out directly between the trans­
mission companies concerned; 
Whereas the conditions of transit should be equitable and should not 
bring about, directly or Indirectly, conditions contrary to Community 
competition rules; 
Whereas It Is necessary, In order to realise this first stage of the 
Internal energy market In satisfactory competitive conditions, to 
approximate legislative, regulatory or administrative provisions passed 
by Member States so as to provide a procedural framework for the formulation of these 
agreements In the most transparent manner; 
Whereas It could prove necessary for the Council to decide, before 
1 January 1993, without prejudice to the Commission's own powers, 
complementary conditions governing the modalities of Intra-Communlty 
transit; 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
Member States shall take the measures necessary to ensure compliance 
with the obligation for the transit of natural gas through high-
pressure gas transmission grids In accordance with the conditions laid 
down In this Directive. 
Article 2 
Transmission of natural gas under the following conditions shall 
constitute transit of natural gas through transmission grids within 
the meaning of this Directive: 
41 
- 3 -
(a) the transport is carried out through the high-pressure gas 
grid on the territory of a Member State; 
(b) the transport Is carried out between Member States' gas 
companies. 
2. Operations Involved In such transmission and contributing to the 
security and quality of natural gas supply shall be considered to 
form part of transit within the meaning of this Directive. 
3. The high-pressure natural gas transmission grids and the entities 
responsible for them, which are listed In the Annex, shall be 
covered by the provisions of this Directive. This list shall be 
revised whenever necessary by decision of the Commission. 
Article 3 
1. The conditions of natural gas transit through gas transmission 
grids shall be negotiated and agreed by the bodies responsible for 
the grids concerned. 
2. Member States shall take the measures necessary to ensure 
examination by the entitles which come under their territorial 
Jurisdiction of any request for transit according to the following 
conditions; 
Any request for transit shall, within eight (8) days, be 
communicated by the request I ng entity or entities to the Commission and the 
national competent authorities-, 
The responsible entities shall be obliged, within a maximum of 
one month, to open negotiations on the conditions of the 
natural gas transit requested; 
The transit conditions must be equitable for all the parties 
concerned and should not Include unfair clauses or unjustified 
restrictions. In particular, payment for transit must take 
account of the responslblI/ties of the entity responsible for 
transit for ensuring security of supply and contractual quality 
of service; 
The Commission and the national competent authorities shall be 
Informed, within eight (8) days, of any agreement on transit; 
If, after twelve months following the communication of the 
request, negotiations have not achieved an agreement, the 
Commission and the national authorities will be Informed, 
without delay, by the Interested parties who have to indicate 
their reasons. 
- 4 -
Article 4 
In the absence of due reasons for the failure to reach an agreement or if the reasons 
appear unjustified or Insufficient, the Commission, acting on a 
complaint from the requesting body or on Its own initiative, shall put 
in hand the procedures provided for by the Treaty or any other appl Icable 
provision of Community law. 
Article 5 
Before 1 January 1993, without prejudice to the Commission's own 
powers, the Council will decide - as far as it Is necessary -
complementary conditions governing the detailed rules of Intra-CommunIty 
transit . 
Article 6 
Member States shall bring Into force the laws, regulations and 
administrative provisions necessary to comply with this Directive not 
later than 1 July 1990. They shall forthwith Inform the Commission 
thereof and communicate to the Commission the provisions of national 
law which they adopt In the field covered by this Directive. 
The provisions adopted pursuant to the .first paragraph shall make express 
reference to this Directive. 
Article 7 
This Directive is addressed to the Member States. 
Done at Brussels, For the Council 
The President 
/4 
Annex 
List of entitles and high-pressure gas transmission grids 
Member State Entity Grid 
Federal Bayerngas GmbH Grid supplying end 
Republic distributors 
of Germany BEB Erdgas und Erdol GmbH (municipal 
authorities, etc.) 
Deutsche Erdgas Transport and major 
GmbH end consumers 
Energieversorgung Weser " 
Ams AG (EWE) 
Erdgas Verkaufs Gesell- N 
schaft mbH 
Ferngas Nordbayern GmbH 
Ferngas Salzgltter GmbH 
Gas-Union GmbH 
Mob I I 011 AG 
Ruhrgas AG M 
Saar Ferngas AG 
Thyssengas GmbH u 
Vereinigte Elektrizltats-
werke Westfalen AG (VEW) 
Westfalische Ferngas AG " 
Energieversorgung 
Mittelrhein 
EWAG, Nurnberg 
Erdgas Schwaben GmbH 
Erdgas Sudbayern GmbH 
GEW Koln 
Gasversorgung Siiddeutsch-
land 
Gasversorgung Sudhannover 
Nordhessen 
- 2 -
Member State Entity Grid 
Hamburger Gaswerke " 
Landesgasversorgung 
Nledersachsen 
Maln-Gaswerke AG N 
Schleswag AG 
Sudhesslsche Gas und " -
Wasser AG 
Technlsche Werke der Stadt 
Stuttgart AG 
Thiiga AG 
GASAG, Berlin 
Belgium Dlstrlgaz SA 
Denmark Dansk Naturgas A/S 
Spain Empresa Naclonal de Gas SA 
(ENAGAS) 
Catalana de Gas 
Gas de Euskadl " 
Greece DEPA " 
Luxembourg SOTEG " 
Netherlands NV Nederlandse Gasunie " 
Italy Snam S.p.A. " 
France Gaz de France Public grid 
SNGSO 
United Kingdom British Gas 
Ireland Irish Gas Board " 
ISSN 0254-1475 
COM(89) 334 final 
DOCUMENTS 
EN 13 12 
Catalogue number : CB-CO-89-398-EN-C 
ISBN 92-77-52840-0 
Office for Official Publications of the European Communities 
L-2985 Luxembourg