Security of supply of natural gas

Natural gas, which is regarded as the preferred fuel for electricity production in the European Union (EU), is becoming an increasingly important source of energy. Europe is in a relatively strong position as regards gas supplies, as it has significant reserves of its own and 70%-80% of world reserves are within the European market’s economic reach. In the new internal gas market, there will no longer be a single player guaranteeing security of supply. Consequently, responsibility for this task cannot be entrusted solely to the industry, which is itself dependent on its external supplies.

ACT

Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply.

SUMMARY

Background

The Green Paper on security of energy supply drew attention to the worrying level of dependence on gas imports from sources outside the European Union (EU). Furthermore, over 40% of our natural gas consumption is at present imported, and the forecasts indicate that this level of dependence could rise to 70% in 2020.

In the context of a European gas market in transition, the task of organising security of supply cannot be entrusted to just one player on the market. In this respect, the Member States are under an obligation to define the roles and responsibilities of all the players on the market with regard to security of supply.

The Gas Directive (2003/55/EC) recognises the right of Member States to regard security of supply as a public service obligation. This Directive has established the common rules for the internal market in natural gas that enable Member States to take the requisite measures to safeguard supply in the event of a sudden crisis in the energy market. The Community gas market is currently being liberalised, which is why there is a growing need to guarantee the security of gas supplies.

However, various obstacles to competition still need to be overcome: high network access tariffs, guarantee of general conditions that are non-discriminatory and transparent in terms of access to the network, difficulties confronting new entrants, monitoring of the production and import of gas by one or two companies, etc.

Objective

This Directive establishes a common framework within which Member States can define general security-of-supply policies that are transparent, solidarity-based, non-discriminatory and consistent with the requirements of a single market in gas.

Security of supply for specific customers

Member States will ensure that supplies for household customers inside their territory are protected at least in the event of:

• a partial disruption of national gas supplies during a period to be determined by Member States taking into account national circumstances;
• extremely cold temperatures during a nationally determined peak period;
• periods of exceptionally high gas demand during the coldest weather periods statistically occurring every 20 years;

At the same time, Member States may:

• extend the scope to small and medium-sized enterprises (SMEs) and other customers that cannot switch their gas consumption to other energy sources;
• set or require the industry to set indicative minimum targets for a possible future contribution of storage, either located within or outside the Member State, to security of supply;
• take the appropriate measures in cooperation with another Member State, including bilateral agreements, to achieve the security of supply standards using gas storage facilities located within that other Member State;
• set or require the industry to set indicative minimum targets for a possible future contribution of storage, either located within or outside the Member State, to security of gas supply;
• adopt and publish national emergency provisions.

Given the importance of securing gas supply, the Commission should monitor, on the basis of reports from Member States:

• the extent to which gas supply is covered by new long-term contracts for imports from third countries;
• the existence of adequate liquidity of gas supplies;
• the level of working gas in storage and of the withdrawal capacity of gas storage;
• the degree of interconnection of the national gas systems of Member States;
• the foreseeable gas supply situation at Community level concerning specific geographic areas in the Community.

By 19 May 2008, the Commission will, in the light of the manner in which Member States have implemented this Directive, report on the effectiveness of the instruments used and their effect on the internal gas market and on the evolution of competition on the internal gas market.

Gas Coordination Group

A Gas Coordination Group has been established to facilitate coordination of security of supply measures by the Community in the event of a major supply disruption. This group could also assist Member States in coordinating measures taken at national level.

The Group will be composed of representatives of Member States, of representative bodies in the industry concerned and of relevant consumers, under the chairmanship of the Commission.

Reporting

Member States will adopt and publish a report covering in particular the following points:

• the competitive impact of the measures taken to implement the Directive;
• the levels of storage capacity;
• the long-term gas supply contracts concluded by companies established and registered on their territory, and in particular their remaining duration;
• the regulatory frameworks to provide adequate incentives for new investment in exploration and production, storage and transport of gas and of LNG.

RELATED ACTS

Proposal for a Regulation of the European Parliament and of the Council of 16 July 2009 concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC [COM(2009) 363 final – Not published in the Official Journal]. This Proposal for a Regulation aims to safeguard security of gas supply. Its aim is to guarantee the permanent functioning of the internal market for gas. This Proposal defines the responsibilities of natural gas undertakings, Competent Authorities of the Member States, industrial gas customers and the European Commission in the area of security of supply.

The Competent Authority designated by each Member State is responsible for establishing:

• a Preventive Action Plan establishing the measures to reduce the high risks identified. This Plan lays down standards relating to supply, evaluates the risks, draws up preventive measures and provides information on public service obligations. This Plan is updated every two years;
• an Emergency Plan establishing the measures to be taken to mitigate the impact of a gas supply disruption. It establishes the procedures to be followed in a crisis.

The Competent Authority of a State must ensure that the gas industry maintains the gas supply to protected consumers in the following two cases:

• extremely cold temperatures during a seven day period;
• high gas demand during a sixty day period.

This Authority also has a role to play in the assessment of risks associated with the security of gas supply. This assessment takes place every two years.

In a supply crisis, the infrastructure put in place by the Proposal should have the capacity to deliver the necessary volume of gas to satisfy total gas demand of the calculated area during a period of 60 days.

The crisis levels are:

• early warning;
• alert;
• emergency.

The Proposal also stresses the importance of solidarity and information exchange between Member States in the management of a supply crisis.

Codecision procedure (2009/0108/COD)

Commission Decision 791/2006/EC of 7 November 2006 establishing the composition of the Gas Coordination Group [Official Journal L 319 of 18.11.2006].

Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC [Official Journal L 176 of 15.07.2003].

Communication from the Commission to the European Parliament and the Council "The internal market in energy: Coordinated measures on the security of energy supply" [COM(2002) 488 final – not published in the Official Journal].

Last updated: 03.08.2009