EXECUTIVE SECRETARY

Bratislava, Slovakia, 5 May 2004

Statement by Mrs. Brigita Schmögnerová,
Executive Secretary

Mr. Deyirmendjian, Chairman of the UNECE Gas Centre, Mr. Boucly, Chairman of the Board of Directors, SPP, Mr. Lapunik, General Director, SPP, Ladies and Gentlemen,

It is a pleasure for me to participate at the 10th Anniversary of the Gas Centre and at the UNECE Gas Centre 9th High-Level Conference on the Gas Industry’s Regulatory Relations.

I would like to use this opportunity to congratulate once again Mr. Jacques Deyirmendjian, Chairman of the UNECE Gas Centre Executive Board and Bureau; Mr. George Kowalski, Director of the UNECE Division for Industrial Restructuring, Energy and Enterprise Development; the former and present staff of the Gas Centre, Mr. Klaus Brendow, Mr. Lucio d’Andrea and Mr. Alexandre Chachine, who were the “founding fathers” of the Gas Centre from the UNECE side; as well as all former and present member companies of the Gas Centre, its former Chairmen and all those who have contributed to the success of the Gas Centre. It is still and I hope will remain an excellent example of the cooperation between the United Nations, in this case the Economic Commission for Europe, and the business community. The UNECE is no doubt a pioneer in the UN system in developing good working relationships with the business sector. This partnership I believe is an excellent contribution to strengthening UN values to the benefit of all.

The 9th UNECE Gas Centre High-Level Conference is focused on the Gas Industry’s regulatory relations. It will be very interesting to learn how regulatory frameworks are being developed in different member States in and outside the EU. There are many important questions to be discussed, such as: Does regulation provide competitors with a level playing field? Are regulators either governmental departments or independent agencies able to give consumers a better market position vis-à-vis dominating gas industries? Will regulation improve or be a barrier to a higher affordability and access of household consumers to gas as a source of energy? Will regulation promote or discourage investments in infrastructure at a proper level? Is it sure that lower costs – which mean more efficiency in the whole gas chain – will activate lower end prices? Will it be supportive to better security of supply?

Another important issue, which I expect to be addressed today, is the development of new liberalized market structures, market opening and its efficient organization. I am sure you will address the risk that new regulations might tend towards overregulation, introducing new inefficiencies.
The transit, transportation and distribution capacity in the gas infrastructure is another important issue. Are electricity black-outs to be expected in the European gas market, similar to those in California and Italy? And if so, when and why? Is inadequate regulation of the gas market the reason for such black-outs or should more regulations prevent them from happening? The UNECE is discussing the question of security of supply, mainly focused on oil, in the Energy Security Forum, with experts from OPEC, Oil companies and consultancy firms. I hope and expect that such questions and the answers will be part of your presentations and the discussions that will follow them.

I am looking forward to an interesting conference.

Ladies and Gentlemen,

A few days ago the EU and the new Member States, including my home country Slovakia which is hosting this conference, celebrated an historical EU enlargement. The enlarged European Union provides for a better future for all countries involved. I hope very much that the EU enlargement will not imply a new division line between the EU and non-EU Member States. I believe that there is a role for UNECE to play in preventing new divides in Europe and the UNECE region. In the case of UNECE gas activities we have an excellent ally, as Mr. Deyirmendjian reminded us yesterday: this is a gas pipe connecting suppliers and consumers, connecting countries and its peoples and bringing peace . The Gas Centre is one of the UNECE activities by which we contribute to the strengthening of integration in the UNECE region, and therefore remains relevant.

The new EU Member States from Central and East Europe have, in a historically short period, transformed their economies and prepared for EU accession. Looking at the gas markets, which are being liberalized in the new Member States in a short period of time as part of the restructuring of their economies, there are elements that have to be considered. Energy price liberalization in a situation of lack of competition and inadequate efficiency of regulatory bodies rapidly pushes up prices. This might have negative consequences on consuming industries and households and, with some time lag, a reverse impact on the energy sector including the gas industry as demand for gas will inevitably decline. I believe that pricing policies of gas companies should be more responsible taking into consideration not only short term profitability but also longer term gains, market share positions and the interests of other stakeholders. In countries with economies in transition and in the early stage of post-transition, where energy costs in a consumer basket represent a considerable proportion of expenses far exceeding the advanced market economies, these elements should be taken into consideration and an appropriate social and economic balance should be maintained. Liberalization of the gas market and the development of an efficient regulatory body to correct market failures are important steps forward towards more competition, lower prices and a more efficient gas industry. The role of international cooperation in achieving these goals is recognized. The 10th Anniversary of the Gas Centre which we celebrated yesterday illustrates this well.

I hope that we can be optimistic about the further integration of the European gas market, restructuring national markets into a more open integrated European market. Structural steps forward, as are now being implemented, have to stimulate economic and sustainable growth in the EU itself as well as in the countries with which the EU has good relations. The UNECE will continue to play a constructive role in these developments, as all UNECE countries are expecting us to do.

Finally I would like to use this opportunity to express my gratitude to the Slovak Gas Company SPP for hosting this meeting. I wish you a very productive deliberations and welcome again to my home country.

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