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Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets

  • Chaton, Corinne
  • Gasmi, Farid
  • Guillerminet, Marie-Laure
  • Oviedo, Juan Daniel

Motivated by recent policy events experienced by the European natural gas industry, this paper develops a simple model for analyzing the interaction between gas release and capacity investment programs as tools to improve the performance of imperfectly competitive markets. We consider a regional market in which a measure that has an incumbent release part of its gas to a marketer complements a program of investment in transport capacity dedicated to imports by the marketer, at a regulated transport charge, of competitively-priced gas. First, we examine the case where transport capacity is regulated while gas release is not, i.e., the volume of gas released is determined by the incumbent. We then analyze the effect of the "artifcial" duopoly created by the regulator when the latter regulates both gas release and transport capacity. Finally, using information on the French industry, we calibrate the basic demand and cost elements of the model and perform some simulations of these two scenarios. Besides allowing us to analyze the economic properties of these scenarios, a policy implication that comes out of the empirical analysis is that, when combined with network expansion investments, gas-release measures applied under regulatory control are indeed effective short-term policies for promoting gas-to-gas competition.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-203.

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Date of creation: Nov 2010
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Publication status: Published in Energy Economics, vol.�34, Elsevier, 2012, p.�1251-1258.
Handle: RePEc:tse:wpaper:23579
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Web page: http://www.tse-fr.eu/

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  1. Corinne Chaton & Farid Gasmi & Marie-Laure Guillerminet & Juan D. Oviedo, 2008. "Un instrument de court terme pour stimuler la concurrence. Le gas release," Revue économique, Presses de Sciences-Po, vol. 59(3), pages 475-486.
  2. Cédric Clastres & Laurent David, 2009. "The impact of asymmetric regulation on surplus and welfare: the case of gas release programmes," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 33(2), pages 97-110, 06.
  3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  4. Cédric Clastres & Laurent David, 2009. "The impact of asymmetric regulation on surplus and welfare : the case of gas release programmes," Post-Print halshs-00442213, HAL.
  5. Oviedo, Juan-Daniel & Guillerminet, Marie-Laure & Gasmi, Farid & Chaton, Corinne, 2008. "Un instrument de court terme pour stimuler la concurrence : Le gas release," Economics Papers from University Paris Dauphine 123456789/11509, Paris Dauphine University.
  6. Noureddine Krichene, 2005. "A Simultaneous Equation Model for World Crude Oil and Natural Gas Markets," IMF Working Papers 05/32, International Monetary Fund.
  7. Cremer, Helmuth & Laffont, Jean-Jacques, 2002. "Competition in gas markets," European Economic Review, Elsevier, vol. 46(4-5), pages 928-935, May.
  8. Cremer, Helmuth & Gasmi, Farid & Laffont, Jean-Jacques, 2003. "Access to Pipelines in Competitive Gas Markets," Journal of Regulatory Economics, Springer, vol. 24(1), pages 5-33, July.
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