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Challenges for the European Gas Market

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Michael Woltran presents at the Vienna Forum on European Energy Law, 2013

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Challenges for the European Gas Market

  1. 1. OMV Gas & Power Move & More. Challenges for the European Gas Market Vienna, March 8, 2013 Michael Woltran Senior Vice President Gas Logistics
  2. 2. 2 |Vienna Forum on European Energy Law – March 8, 2013 Oil & gas import dependencyMajor global gas flows, 2010/2035 (bcm) Ongoing Changes in the Energy Landscape Changing supply pattern Globalization of gas trade / LNG to link global energy market Divergent regional import dependency 139 390 2010 2035 0 27 0 41 94 168 86 252 62 29 25 107 Source: IEA World Energy Outlook 2012
  3. 3. 3 |Vienna Forum on European Energy Law – March 8, 2013 European Gas Market – Economic Challenges I 0 100 200 300 400 500 600 700 201520102005 20252020 SOURCE: OMV market update 2012, based on public and proprietary data Forecast EU 27+Turkey, bcm Technical supply capacity Widening gap too large to manage byToP flexibility High uncertainty in forecast OMV expected demand forecast range Full demand forecast range Range for contracted supply volumes incl. ind. prod.  Demand – supply gap  Widening demand – supply capacity gap since 2008  End of this decade demand – supply pattern to change  Uncertain developments lead to broad range in demand forecast  Need to meet demand
  4. 4. 4 |Vienna Forum on European Energy Law – March 8, 2013 UK SEE 9297 211206 3529 5938 Turkey NWE CEE 7477 Italy Gas demand by submarket bcma Stagnating demand Growing demand 4839 Nabucco West TANAP South Caucasus Pipeline Ø 2009-111 2020  Slow demand growth (~1.8% p.a.²)  Regional differences (Turkey: Fastest growing market (~3.6% p.a.²))  Profitability of market-based energy business under pressure  Increasing import dependency on gas European Gas Market – Economic Challenges II 1 Average 2009-11 taking for actual figures to eliminate yearly weather fluctuations 2 CAGR 2011-2020 SOURCE: OMV market update 2012/2030 based on Eurogas, Cera, local regulators and OMV analysis
  5. 5. 5 |Vienna Forum on European Energy Law – March 8, 2013 European Gas Market – Political Challenges Energy challenges calling for feasible solutions for the European gas market  Challenging regulatory framework for natural gas in Europe  Restrictive energy policies  Natural gas squeezed from policy environment (e.g. high subsidies for renewables, low carbon price)
  6. 6. 6 |Vienna Forum on European Energy Law – March 8, 2013 European Gas Demand Scenario until 2035 Gas - most important energy fuel until 2035 in Europe EU 27+Turkey primary energy demand mn t p.a. Coal Nuclear Renewables Gas 2035 1,859 31% 25% 10% 12% 22% 2020 1,825 27% 29% 16% 12% 16% 2010 1,822 26% 33% 17% 13% 11% Oil Source: IEA World Energy Outlook 2012, BP Statistical Review, IHS CERA, OMV analysis
  7. 7. 7 |Vienna Forum on European Energy Law – March 8, 2013 The European Gas Market – How to Look Like  Liberalized, but not overregulated market  Decarbonisation targets to meet the real market environment  Gas infrastructure development shaped by EU needs and SoS, diversification and geostrategic goals  Increasing regional integration between European energy markets  Stronger correlation among Gas Hubs  Variety of suppliers, supply sources and contractual terms European gas markets  Long-term supply patterns to adapt to new market reality  Adopted contracts containing intelligent price concepts  LTCs to remain backbone for secured supply?! Gas promotion to increase the gas demand Supply / Demand Infrastructure Competitive Gas Market Regulatory Framework
  8. 8. 8 |Vienna Forum on European Energy Law – March 8, 2013 Natural Gas, the Energy Source of the Future(?)!  Supporting decarbonization of European economy  Natural gas in combination with increased share of Renewable Energy Sources  Lowest CO2 emissions  Further development of technologies and innovation  Further enhancement of markets (liquidity, flexibility, integration)  A wise and strategic energy turnaround offers new possibilities and markets for natural gas:  High potential of natural gas in the market  Diverse fields of application (thermal / power / transportation market) Any pragmatic roadmap for a sustainable future has to involve a larger role for gas and to strengthen awareness of natural gas as green energy in policy, public and among our customers  Increased share of natural gas in the energy mix Current situation Vision
  9. 9. 9 |Vienna Forum on European Energy Law – March 8, 2013 OMV as Integrated Gas and Power Player Strategy: Integrated Gas
  10. 10. 10 |Vienna Forum on European Energy Law – March 8, 2013 Reasonable Thoughts for the Gas World  Current radical changes on the global energy market  In combination with increasing import dependency on gas in Europe  Lead to a challenging role for natural gas as a perfect supplement to renewable energy in the future energy mix.  Thus we need a fully functioning European gas market  With supportive political and regulatory framework and  Efficient market conditions  Progress in geostrategic projects (Nabucco) and logistical integration  New markets to be opened up for natural gas  Competitive pricing What we have to concentrate on now is the promotion of gas as the best solution to meet future energy demand!
  11. 11. 11 |Vienna Forum on European Energy Law – March 8, 2013 Michael Woltran Senior Vice President OMV Gas & Power GmbH Trabrennstrasse 6-8 1020Vienna/Austria www.omv.com

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