BLOOMBERG: Netherlands Buys Gas Pipes From Exxon, Shell Venture (Update4): “Shell Chief Executive Jeroen van der Veer plans to sell assets worth as much as $12 billion, after the company admitted in January it had misled investors for six years about its oil and gas reserves.” (ShellNews.net)

Nov. 1 (Bloomberg) -- The Netherlands, Europe's No. 3 natural-gas producer, will pay Exxon Mobil Corp. and Royal/Dutch Shell Group 2.78 billion euros ($3.55 billion) for their stakes in the domestic gas grid, breaking the oil companies' hold on the Dutch gas market.

The purchase gives the government sole control of the gas grid and gas-transport business, with the merchant business remaining a three-way venture with the two oil companies, the Dutch economics ministry said in a statement on its Web site. The transaction would split up the three partners' 41-year-old distribution and marketing venture NV Nederlandse Gasunie.

``If you have the situation where a number of shippers want to make use of the system, and Shell and Exxon are the biggest, the others may have the feeling their interests are not dealt with,'' said Ben Warner, a spokesman with Gasunie. ``Every shipper now has the same rights.''

European power and gas markets are scheduled to open to full competition by 2007. The proposal by Economics Minister Laurens Jan Brinkhorst, sent to parliament today, falls short of a 2002 plan to separate Groningen, Netherlands-based Gasunie into three businesses, with Shell and Exxon Mobil competing against each other in gas trading.

``It's a partial solution,'' said Tim van Doorn, head of energy sales in Europe at Fortis Bank NV in Amsterdam. ``Just because there's the unbundling of trade and supply it doesn't mean there's going to be a level playing field for the capacity in the system. It depends on what role trading sees for itself in the market.''

Breakdown

Negotiations on the future of Gasunie's structure broke down last October because of a ``lack of confidence'' about future transport tariffs between the various parties, said Paula de Jonge, an Economics Ministry spokeswoman.

``An independent transport sector gives the best guarantees of fair competition,'' she said.

Shell Chief Executive Jeroen van der Veer plans to sell assets worth as much as $12 billion, after the company admitted in January it had misled investors for six years about its oil and gas reserves.

``We want to trade in gas and not be in transportation,'' said Henk Bonder, a Shell spokesman in The Hague. ``This is in line with what we said about portfolio management in our gas and power business.''

German Divestment

Shell and Exxon Mobil last December agreed to sell a 10.5 percent stake in VNG Verbundnetz Gas AG, a gas distributor in eastern Germany, to EWE AG for about 960 million euros. Shell last week announced plans to unite its two parent companies and locate its headquarters in The Hague, after almost a century as an Anglo-Dutch company. Exxon Mobil is based in Irving, Texas.

The Dutch network is important in Europe because it lies between the U.K., the largest market and the region's largest producer, and Germany, the second-largest market.

The Netherlands ``is an important exporter, especially when demand is higher in winter,'' said Brian Little, director of evaluation and forecasting at Brentford, England-based Energy Markets, a consulting company.

Proven Reserves

The Groningen gas field, the largest in continental Europe, was the biggest known gas field when it was tapped in 1959. It contains about a third of the proven gas reserves in the European Union, according to Royal Dutch/Shell Group and Exxon Mobil Corp.

``The Dutch network could be strategically important for U.K. gas supplies,'' as North Sea production declines, Little said. In July, Gasunie said that E.ON AG, Europe's second-largest utility, and Fluxys NV, the Belgian natural-gas grid manager, will help the company to build a new gas pipeline to Britain.

Gasunie has lost market share to rivals such as Germany's E.ON, which owns Germany's biggest gas distributor, as the European Union tries to create a single energy market in the region.

The Netherlands has the cheapest retail gas prices in Europe ahead of the U.K., according to a study released earlier this year by the European Commission. German gas is about 50 percent more expensive for large customers, the study estimated.

The Dutch market is more competitive than some other European markets, based on some measures, the study found. The Netherlands has four companies with more than 5 percent of the retail market. Germany has one.

``It's positive in that we are convinced the gas market will be stimulated if transport is completely independent from trade and supply,'' said Sjaak Lomme, chairman of the Association of Free Energy markets industry group in Amsterdam. ``But my feeling is there are almost no details on the conditions. It's a missed opportunity.''

Wider Plans

Brinkhorst's proposals for Gasunie reflect wider plans for stimulating competition in the Dutch energy market, including proposals announced in March announcement that would require energy companies to split their power-grid operations from their commercial businesses.

Brinkhorst will send a bill to parliament early next year proposing the ban on the simultaneous ownership of network management companies and companies that deliver, trade or produce power. The proposals, which will probably become law in the middle of next year, will make the networks' position more transparent and benefit consumers by increasing competition, he has said.

In a letter sent to Brinkhorst last week, the three-largest Dutch energy companies -- Essent NV, Nuon NV and Eneco NV -- called the proposed split ``an unnecessary and disproportionate measure for achieving fair market competition and ensure supplies.''

The three companies all had their credit outlooks cut to ``negative'' from ``stable'' by Standard & Poor's on April 1, the day after Brinkhorst announced the split-up plans. Separation from the distribution network operations could ``markedly weaken'' the credit quality of the generation and supply businesses, Standard & Poor's analyst Karl Nietvelt wrote at the time.

To contact the reporter on this story:

Peter Dinkloh in Frankfurt at  pdinkloh@bloomberg.net.

To contact the editor responsible for this story:

Tim Coulter in London at  tcoulter@bloomberg.net.

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