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Daily Telegraph: Gas firms in 'profiteering' inquiry after prices soar: "BP, Shell and other North Sea oil and gas producers are under investigation by the Government over claims that they may have been profiteering from the gas crisis by withholding supplies.": Monday 28 November 2005

By Roland Gribben
(Filed: 28/11/2005)

BP, Shell and other North Sea oil and gas producers are under investigation by the Government over claims that they may have been profiteering from the gas crisis by withholding supplies.

The Trade and Industry Department and Ofgem, the gas and electricity regulator, are trying to establish why North Sea gas production has dropped more sharply than expected.

 
Gas hob
Wholesale gas prices have soared by 40 per cent to 170p a therm

The faster than forecast rundown in output, in addition to a shortage of storage capacity and renewed allegations of market rigging, were among the reasons advanced for last week's price explosion amid the turmoil created by the cold snap.

Wholesale prices soared by 40 per cent to a peak of 170p a therm in a feverish spot market, resulting in energy-intensive companies reducing production and forcing the Government on to the defensive. It accused traders of behaving irrationally.

Ofgem says that information from oil companies about the rundown in North Sea gas production came too late to bring forward plans to increase storage capacity to help cushion the shortfall.

Oil companies rejected the profiteering claims. A BP spokesman said yesterday: "Definitely not. We have been working hard to ensure that our infrastructure is operating smoothly so that we can make available the maximum supplies of oil and gas."

Ofgem is attempting to counter complaints that it has failed to provide strong enough signals about the prospects of gas shortages and price surges in a prolonged cold snap.

In a series of initiatives disclosed today, the regulatory body says it is in talks with EU authorities, oil companies, the National Grid and operators of the interconnector - the North Sea gas pipeline between Bacton, Norfolk, and Zeebrugge - to try to improve the operation of the gas market and pin down allegations of price rigging.

Sir John Mogg, the chairman of Ofgem, has asked the European Commission to hold an urgent inquiry into some of the reasons behind the price explosion.

He wants the commission to discover why continental suppliers are holding back shipments to Britain despite the attraction of higher prices and whether intervention by the Spanish and Italian governments is distorting the gas trade and represents the start of a protectionist trend.

Ofgem is reinforcing warnings of further production cuts by energy-intensive industries along with further price rises for domestic customers in a prolonged cold spell but says it will be "business as usual for most of Britain."

25 November 2005: Gas price leap worries Bank chief
 

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