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Morocco’s Competition Council Criticizes Domestic Liquified Gas Monopoly

The council recommends rewording the draft text, minimizing prior authorization issued by the government authority in charge of energy.

07 Jan 2022

Fez - Morocco’s Competition Council released today its opinion concerning the draft law n° 94.17 on the downstream (sales to customers) section of the natural gas sector. The council further recommends the amending of law n° 48.15 relating to the regulation of the electricity sector.

The council considers that since the Liquified Natural Gas (LNG) sector is yet to be established, it is imperative to take advantage of the benefits of competition in this market. The council also pointed out the need to avoid practices that would hinder the development of the sector, including freezing positions, establishing monopolies, and granting exclusivities.

The council concluded that the draft law n°94.17 is unfavorable to the development of the sector for several considerations, more considerably the risk to monopolize the sector of the distribution.

The analysis published by the council revealed that the bill includes the creation of a transmission system operator (GRT), which it considers would lead to a monopoly. The GRT would be a public limited company responsible for the design, construction, operation, management, maintenance. Furthermore, it would be solely responsible for the development of LNG transport and strategic reserves of natural gas throughout the country.

The GRT would have the power to delegate the construction, operation, and/or maintenance of gas facilities to private companies within the framework of public-private partnerships.

The report explains that the GRT's would-be monopoly could undermine the rapid development of the natural gas market. It also could hinder the diversification of means of transport, the innovation in new transport technologies, and the entrepreneurial freedom of supply of providers and distributors.

The council assumes that “any exclusivity of regional distribution may hinder the development of a competitive market,” explaining that “it would maintain the dominant position of incumbents, including that of distributors of alternative solutions such as LPG with the risk of abuse of their dominant position vis-à-vis their industrial customers.”

The analysis additionally notes that the bill enables the government authority in charge of energy to intervene in the natural gas sector’s regulations This point hamstrings the National Electricity Regulatory Authority (ANRE) with “limited powers that do not allow it to effectively carry out its missions.”

The council recommends rewording the draft text, minimizing prior authorization issued by the government authority in charge of energy, and maximizing it on the side of an already existing system such as ANRE. This would contribute to removing regulatory barriers to entry into the natural gas market.

The council also urged for local producers to be exempted from import authorization.

The competition council advised improving the visibility and predictability of the bill in response to the prospects of national and international investors and to guarantee competition in the transport and storage sector.

The council explained that “transportation of natural gas by pipeline and by mobile means of transport (road, rail or sea) must be subject to free competition.” The report clarified that this step should “diversify the sources of supply, so as to no longer depend on a single source and thus guarantee the security of supply of the wholesale and retail markets.”

Ensuring free competition in the distribution sector requires not granting regional distribution exclusivities, according to the competition council recommendations, which also include encouraging operators to build distribution facilities. The council said that “end consumers, especially industrial customers (who do not have direct access to the transmission network) should have a choice of several distributors (such as local producers, ONEE, etc.).”

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