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France to Raise Natural Gas Supply to South, Regulator Says

France’s natural gas distributor will raise capacity on its North-South link in a bid to prevent a repeat of last summer’s price surge and volatility, according to the regulator.

GRTgaz SA, the French gas pipeline operator controlled by GDF Suez SA, will offer 15 gigawatt-hours a day of additional capacity this summer, the Commission de Regulation de l’Energie said in a May 29 consultation published on its website. The higher capacity is aimed at encouraging additional gas being sent from north to south, where tight supply last year pushed prices higher.

The regulator also called on GRTgaz to limit the effects maintenance work may have on capacity of the North-South link in the coming months. The maximum technical capacity on the link is 450 gigawatt-hours a day at present.

The measures are a response to what the regulator called a “disconnect” since the second quarter of 2012 between prices on the southern and northern French spot natural gas markets. The gap widened between April and September last year when it averaged 2.74 euros ($3.62) a megawatt-hour compared with an average of 0.16 euros a megawatt-hour in 2011. The difference prompted the regulator to start a probe into how prices are determined.

No “abnormal behavior” by market participants has been detected so far, the regulator said. The price variations are due to a “massive” diversion of LNG cargoes from Europe to Asia, where prices are higher, and “structurally” tighter supply to southern France.

LNG imports to France’s Fos-sur-Mer terminal in the south fell 18 percent from 2011 to 2012 and 55 percent to Montoir-de-Bretagne, the CRE said. At the same time, French pipeline exports to Spain rose.

In its recommendations to improve the flow of natural gas to southern France, the regulator said the southern and northern French markets, known as Point d’Echange de Gaz Sud, or PEG Sud, and PEG Nord, should be merged in 2018.

Transparency in the usage of France’s LNG terminals also needs to be improved, it said.

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