There is one big problem with the proposed French mega-merger of Suez, the power, gas and water utility, and Gaz de France (GdF), which once again is troubling civil servants and bankers in Paris.

It isn’t the French unions that have growled intermittently over the backdoor privatisation of the national gas company. It isn’t competition; the European Commission has delivered a conditional blessing to the deal. It isn’t even the soaring cost of the transaction for Gaz de France; the rise of the Suez share price has turned the deal, once billed as a near-partnership of equals, into a more one-sided affair.

The real problem with this deal (and it is a problem that could prove to be insurmountable) is that it was not Nicolas Sarkozy’s idea. In seeking to sever any connection with the ancien régime of Jacques Chirac and Dominique de Villepin, the former president and his prime minister, the new President has been pushing his energy pawns around in a careless, disinterested sort of way, like a child bored by his toy soldiers.

In a bizarre attempt to put a Sarkozy package around GdF’s future, the President even proposed in March that an alliance be formed between it and Sonatrach, the Algerian state oil and gas producer. This could be a key component of the President’s union of Mediterranean states, it was suggested, and would reinforce the North African nation as an alternative gas supplier to Russia.

Unfortunately, Sonatrach was unimpressed by the suggestion that Algeria should hitch its oil and gas industry to the coat-tails of France’s monopoly supplier. Initially Suez ignored the alternative GdF strategies, choosing to regard them as electioneering, but with Mr Sarkozy now enthroned, Gérard Mestrallet, the Suez chief, is looking for decisions from the man in the Elysée Palace. Suez suggested that the valuation problem could be solved by transferring to GdF some Suez stock held by state institutions. That would help to restore equilibrium and remove the requirement for a huge cash dividend from GdF to Suez.

Suez has not been standing still; the French utility has doubled its shareholding in Gas Natural, the Spanish gas monopoly, to 11 per cent. It’s more than a calling card, but with La Caixa and Repsol each owning almost a third of the Spanish business, it would a very long-term game to gain control.

At the same time, the European gas market is not standing still. The European Commission has been flexing its muscles, raiding the offices of gas and power companies and threatening to enforce diverstment of pipelines and transmission grids if it finds evidence of anticompetitive behaviour. This is potentially goods news for competitors of incumbents such as GdF, but there are other threats on the horizon for old monopolists.

Gas is becoming cheaper and could become even more so in Britain over the next few years, thanks to new infrastructure. Huge volumes of Norwegian gas are being pumped into the UK and a convoy of ships will be delivering frozen gas to terminals on the Thames and in West Wales from 2009. Britain is creating an expanding gas balloon with an exit valve at the Interconnector pipeline to Zeebrugge.

It’s a huge opportunity for aggressive energy companies to compete, buying cheap gas in Britain for export to the Continent. It will not only cause a commercial headache for incumbents, such as GdF, which are tied to expensive, long-term contracts to buy Russian gas, but also a political problem, as the French Government will come under intense pressure to deliver cheaper energy to consumers.

Unprivatised, monopolistic, sluggish GdF is a political accident waiting to happen. Without a merger, it can only become a whipping boy for angry regulators and consumers. What will President Sarkozy do?

Kazakhs find their plausible excuse

Kicking multinational oil companies is good sport and the Kazakh Government’s decision to suspend operations at Kashagan, a monster oil development, and threaten its operator, Eni, of Italy, with expulsion is being compared with Shell’s troubles at Sakhalin, where the Kremlin used alleged environmental violations to force the oil company to make financial concessions.

Kashagan has been a messy project with huge delays and, like Sakhalin, massive cost overruns. Eni recently increased the budget from $11 billion to $19 billion. Arguably, Kashagan presents even greater difficulties - involving extremely deep wells under high pressure and huge concentrations of hydrogen sulphide. At the same time, Eni is beset by environmental problems; the oilfield is located in a shallow part of the Caspian Sea, which is a breeding ground for beluga sturgeon.

It would be wrong, however, to see the Kazakh move as opportunistic and copycat. On Friday, KazmunaiGaz, the Kazakh energy company, bought 75 per cent of Rompetrol, a Romanian oil refiner with 630 petrol stations in seven European countries. Rompetrol suggested that the deal would bring Kazakh oil into Central Europe, weakening Russia’s hegemony.

Like Gazprom, KazmunaiGaz is spreading its wings and looking for markets abroad. Eni’s troubles are only giving the Kazakhs more arguments to do their own thing.

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