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Wednesday, 17 July, 2002, 17:11 GMT 18:11 UK
Norwegian gas giants avoid EU fines
Natural gas platform, Norway

Norway's largest energy companies, Statoil and Norsk Hydro, have escaped billion-dollar fines from the European Union's competition authorities.


I am very satisfied that this matter has been resolved in such a favourable manner.

Norsk Hydro president Eivind Reiten
The European Commission had threatened to fine the two companies, as well as a range of smaller gas producers, for co-operating on prices and the amount of Norwegian gas sold to European Union customers.

As a member of the European Economic Area, Norway must comply with EU competition regulations. In return, the country has access to the EU's internal market.

The Commission had argued the practice of co-operating on prices broke EU anti-trust rules, hindering competition and reducing customer choice.

But after the Norwegian gas producers agreed to sell 15 billion cubic metres of gas to new EU customers by the end of 2005, the Commission's anti-trust legislators said on Wednesday no fines are necessary.

The companies will be allowed to carry through long-term contracts already signed with EU customers, even though this happened while the companies were still co-operating on price.

Relieved and satisfied

The deal comes as a relief to Statoil and Norsk Hydro, which faced fines of $3bn and $2bn respectively.

Statoil spokeswoman Trude Maseide told News Online the company is happy with the outcome of the dispute.

"We are happy to reach agreement with the European Commission. The result follows our business strategy, and we had already implemented the necessary changes with effect from last year".

Norsk Hydro's President and chief executive, Eivind Reiten, also said he was satisfied.

"I am very satisfied that this matter has been resolved in such a favourable manner.

"We are also very pleased with the cooperation we have enjoyed with the Norwegian authorities in this matter", Mr Reiten said in a statement.

A spokesman for Norsk Hydro, Tor Steinum, told News Online the company never felt it had been in breach of EU anti-trust legislations.

"We have always been of the opinion that the organised sale of Norwegian gas was done on demand from the Norwegian state, and that it did not break rules on competition within the EU".

Norway is the second largest provider of gas to the European market after Russia, with Statoil alone being one of the leading producers and providers of gas to the EU.

The Norwegian state is the majority shareholder in Statoil, and also holds a 40% stake in Norsk Hydro.

'Price-fixing cartel'

The sale of Norwegian gas had long been organised through a joint gas sales committee (GFU).

The committee was set up by the Norwegian government to negotiate contracts on behalf of the participating gas companies.

Until recently the government had defended this practice, calling it a necessary part of managing the country's natural resources, and ensuring a stable energy market.

But the GFU was seen by some in the EU as a price-fixing cartel in breach of anti-trust EU rules, and the committee was abandoned after pressure from the European Commission.

The EU is in the middle of ambitious economic reforms. Liberalising the energy market is seen as an important element in reaching goals set out at the Lisbon summit two years ago.

The aim is to make the EU the most competitive and dynamic economy in the world by 2010.

Criticism

Critics in Norway see what has happened as an attempt by the EU to gain control over Norway's gas market.

They also point out that other major gas suppliers - like Russia and Algeria - co-ordinate their sales in much the same fashion as Norway did before the EU demanded an end to the practice.

Others warn the EU of alienating its second largest gas provider. The EU already has to import 50% of its total gas consumption.

This figure is set to increase as the EU will need more gas in the future, partly to meet targets set out in the Kyoto agreement on greenhouse gasses.

Norwegian operators export virtually all of their total annual gas production of about 55 billion cubic metres to the EU.

The Norwegian Oil and Energy Ministry estimates that the country's total gas exports will rise to 80 billon cubic metres in 2008.

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