“THERE appear to be no pressing problems connected with increased dependence on gas, including gas imported from overseas. The liberalisation of European gas markets will make an important contribution to our security.” These words, taken from the Cabinet Office’s Energy Review, seemed overoptimistic a year ago but today the complacency takes your breath away. The gas is still out there but, despite a year of chinwagging, we are no closer to a deal with the Norwegians on how the precious molecules are to arrive in the UK. There is no treaty between Britain and Norway, never mind a pipeline route or a length of steel tube.
Like banana republics, Britain and Norway are squabbling over who controls which bit of the pipeline. Statoil, owner of the Ormen Lange gasfield, wants to build a new line direct to an English beach but a jealous BP wants to keep Statoil’s longboats out of our waters and insists the Norwegians use the existing UK subsea gas grid. A serious delay could matter — Britain becomes a net gas importer in 2005 and no one is expecting domestic prices to decline when we start buying abroad.
This is more than a quarrel over who — Statoil or BP — collects the pipeline tariff. Statoil’s interest in controlling the gas all the way from Norway to Norfolk tells us something that politicians and economists generally fail to understand.
There is no international gas market, not in the sense that there is a market for oil. And whatever the European Commission thinks, there probably never will be. Britain has an internal market but even here most of the fuel that cooks your dinner was acquired from oil companies, not in a short-term traded market but under long-term contracts, often pegged to oil prices.
Outside the UK, all is different. There are three potential sources of gas: Algeria, Norway and Russia. In each country, the gas industry is controlled by a single entity. Instead of many competing energy companies, access to the fuel is a matter of doing a deal with Algeria’s Sonatrach, Russia’s Gazprom or Norway’s Statoil.
Fearful of being held hostage by big gas bullies, the EU forced Statoil to scrap its gas negotiating committee, a cartel that sold all the gas exported from Norway. But Statoil still controls the flow of gas into Northern Europe through Europipe and it wants to extend its influence with the proposed Britpipe. It has increased its leverage further, buying three salt caverns near Aldbrough in the East Riding, with the aim of turning them into gas storage facilities.
So who else could sell us gas if we don’t like the Norwegian terms? This week Brian Wilson, our Energy Minister, is in Algeria schmoozing with Sonatrach but Algeria is too far; its natural market is Spain and Italy. Russia has loads of gas and bold plans for a Baltic pipeline but Gazprom’s market is Germany and Central Europe. E.ON, the huge utility, owns Ruhrgas, the German pipeline network that has a seat on the board of Gazprom. We can bet that Ruhrgas will play a big role in developing Russia’s gas sales and its priority will be the German market, not the UK.
We are stuck with the Norwegians, who at least are straight and reasonably friendly. Nevertheless, Statoil is no charity and it has something we badly need. Last week, the Treasury pulled the rug from under the Cabinet’s ridiculous projections for growth in renewable energy. Realism is taking hold but there is now a big hole in the forecasts which only gas can fill.
But did I hear a faint whisper from No 10 . . . something about nuclear power?
Brown picks wrong target
GORDON BROWN is on the stump — he scents weakness at the top and wonders if his time has come. It is a difficult game to play, especially when the leader is taking the nation into an unpopular war. Brown needs a cause and yesterday he chose to champion cheap drugs for developing nations and called for a better deal for developing countries at the World Trade Organisation.
Pointing at the rich drug companies, he said: “Nobody can claim special interests or special privileges when people are dying unnecessarily.” The Chancellor held out the image of a tragic infant death from Aids-related disease and tuberculosis and said that more needed to be done.
Who could disagree? Is it so wrong that generic manufacturers in India copy the drugs and sell them cheaply? Well, yes, it is wrong. First, because it is a form of theft and the WTO needs to enforce patents if it is to avoid trade boycotts of poor countries. Second, is it reasonable to demand that scientists who develop vaccines and investors who fund them, work for a pittance? But the most important argument is public health. Britain’s greatest health advances were achieved by building sewers, not making vaccines. In Britain, HIV infection slowed after a public health campaign. In South Africa it is an epidemic because the country’s president is unwilling to condemn the superstition and misogyny pervading South African society.
Cheap drugs will not conquer HIV, nor will cheap shots against rich drug companies. But a little political bravery might go a long way.
Playing by the rules
LIKE ALL good bureaucrats, the European Commissioners do the job well if they have the right rule book. For example, Mario Monti has quashed preferential corporate tax schemes operated by Belgium, the Irish Republic and the Netherlands that offended Europe’s rules against state aid. The EU is at its best when it is applying its treaties, slapping down national rules that infringe trade and the internal market, bringing down borders for the benefit of consumers, investors and workers.
The problems start when member states make bad rules to solve problems, such as the Savings Tax Directive, intended to stop us dodging high EU taxes. Inevitably, the Swiss are having the last laugh. The new law seeks to catch foreign depositors through exchange of information and the Swiss have agreed to help by withholding tax on interest paid.
But who are these depositors, ask Swiss lawyers? The directive concerns individuals and rich Europeans will simply ensure that interest on their millions is paid to companies. Other wizard schemes are already being dreamed up to spoil the directive, such as payment of interest in other forms — dividends or premiums to life insurance policies. And what about Sharia law? Will the Savings Tax Directive apply to Muslims who are forbidden to take interest? I can already hear judicial throats clearing in the European Court of Human Rights.
