The changing environment within the gas industry
A Transco case study

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Page 4: From a nationalised industry to public gas transporter

Transco 5 Image 31965

In the same year that The Beatles received their MBEs, the nationalised Gas Council rebuilt and modernised the UK’s gas industry. The energy map of Britain was drastically redrawn with the discovery in the North Sea of high quality gas reserves that would provide supplies for the foreseeable future. Coal and oil gasification plants become virtually obsolete.


In the decade that Neil Armstrong landed on the moon, the Gas Council carried out one of the biggest civil and commercial engineering programmes ever undertaken. A ten-year, £1 billion programme converted every gas appliance in the UK to use natural gas and retired existing plants. By the end of the decade, gas usage had tripled.


Money went metric and the UK gas industry was transformed from a local manufacturer of gas with a distribution network to a full-scale energy company with operations that extended from exploration to marketing. In 1972, a new Gas Act restructured the Gas Council and regional gas boards into the nationwide British Gas Corporation.


Margaret Thatcher’s first government was elected and, in a programme to be copied around the world, it prepared to privatise national corporations.


The British Gas Corporation was privatised as British Gas plc, with 17 million customers, 4.5 million shareholders, over 89,000 employees and had annual cost operating profits of £688 million. It was granted a 25 year monopoly to supply gas to customers using under 25,000 therms a year and was subject to strict pricing controls by the regulator, the Office of Gas Regulation (Ofgas).


Competition began to be felt. The South Morecambe gas field, British Gas’s first major independent find, was brought into operation. It was one of the largest gas fields on the UK
Continental Shelf. The Monopolies and Mergers Commission (MMC) recommended the publication of contract price schedules, allowing competitors to undercut British Gas in the 25,000-plus therms a year business user market.


Ofgas issued direction for the use of common carriage rights, using the British Gas network.


Government proposed a reduction of the monopoly threshold to 2,500 therms a year. British Gas was required to separate its transportation and supply businesses, and agreed to create the conditions to allow competitors to supply 60 percent of the market by 1995.


Boris Yeltsin stopped an attempted coup in Russia. The MMC recommended divestment of British Gas’s gas trading business. It proposed a totally competitive gas market by 2000-2002.

British Gas announced a major restructuring into five business divisions to be completed by March 1994. The Government demanded that competition in the domestic market be phased in from 1996-1998, well ahead of the original timetable.


The Channel Tunnel was completed and Transco formally separated as a stand-alone business within BG plc.


Mad cow disease (BSE) and competition in domestic gas supply in the southwest hit the headlines. The Network Code, which governs relationships between gas suppliers, shippers and Transco was published and came into force.


In the UK’s largest demerger, the marketing, sales and retail activities of British Gas separated to become Centrica plc. BG plc was formed and focused on the operation of the gas pipeline (through Transco) and storage systems, gas and oil exploration, international gas transportation, distribution and power generation and energy research and technology.


The domestic gas market became fully competitive. Transco spent over 500 man-years to design and build the computer systems that enable the world’s largest competitive market to function.

Transco | The changing environment within the gas industry