Russia's gas monopoly, Gasprom, could tap into a huge Western European market after privatization, but it would need to be overseen by a strong independent regulator. Sir James McKinnon, director-general of Britain's Office of Gas Supply, said Wednesday.


Addressing Russian managers and specialists at a week-long seminar on hydrocarbon legislation. Sir James drew on Britain's experience with privatization of its gas industry to call for a similar conversion for Gasprom.


Because of conflicting ownership claims as Russia's state gas industry tries to privatize, Western businesses have struggled to conclude meaningful deals either for export of gas or the development of new fields and pipelines.


McKinnon said that the gas industry was a "natural monopoly" because competing pipelines are impractical. But pricing, he said, was a key issue.


"It is vital to have adequate regulation if you are going to have a monopoly of the gas supply", he said. "Regulators must not interfere in the management of companies. Regulators are referees".


Sir James said that it was of vital importance that Russia manage its reforms successfully the first time around. To that end, a private -- though regulated -- gas industry would be a significant source of income and stability for Russia, he said.


He described Britain's privatization program as a valuable model that Russia might wish to emulate for its successful integration of a giant monopoly industry into the private sector.


"British Gas was privatized as a monopoly, but our regulators have kept the industry fair", he said. "We have learned a great deal about the relationship between competition and regulation".


Peter Cameron, Director of the Dutch-based International Energy Institute which sponsored the seminar, agreed that Russia's gas industry should privatize while remaining a monopoly, subject to strict price regulations.


"But it is important not to overestimate the impact of law", he said. "If Western investors are going to invest enormous sums in Russia, they want a guarantee of stability and a return on their money".