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Thomas Kleefuß: The Gas Target Model – Requirements and consequences for the CEE Region


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Thomas Kleefuß (NET4GAS CEO): The Gas Target Model – Requirements and consequences for the CEE Region, 18th Euroforum Annual Conference, Berlin, October 23rd 2012

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Thomas Kleefuß: The Gas Target Model – Requirements and consequences for the CEE Region

  1. 1. Connecting MarketsThe Gas Target Model – Requirementsand consequences for the CEE RegionThomas Kleefuß, CEO18th Euroforum Annual ConferenceBerlin, October 23rd 2012
  2. 2. AGENDAOverview of Infrastructure developments in CEEMaking the European Gas Target Model workRequirements for a new market designConclusion
  3. 3. Gazelle will transport from January Nord Streamgas to Waidhaus and change gas flows in CEE Commentary Nord Stream  Capacity 30 bcm/y  Length 166km, size DN Gaspool 1400, pressure PN 84 OPAL  Budget €377mm (CZK 9,378mm)  NET4GAS delivers projects on time and within budget:  1,035 easement contracts negotiated and signed  Transfer station in Brandov started-up in October 2011 NCG  First 20km will be completed by Gazelle November 1st 2012 VTP  This will guarantee full entry capacity for all volumes from the GE contract and OPAL  Start-up date January 1st 2013
  4. 4. Liquidity in CEE will improve by new gas supplies from the southern corridor and the north south connections enable market integrationThe southern corridor willtrigger upstreamcompetition againstrussian gas where as thenew North-SouthCorridor(s) are will enableto connect neighbouringmarkets with just two PL- SK(smaller) projects: a) b)a) Poland connection (using the SK-HUN SK-HUN connection or existing TGL lines)b) Oberkappel connection (in cooperation with TGL)NB: a new corridor more East wouldjust create an additional route forRussian Gas what isn‘t needed
  5. 5. The „Turn Table“ for Gas in Central Europe supports east-west and north-south transits Sayda 35 mil m3/d 18 mil m3/d35 mil m3/d Brandov Olbernhau35 mil m3/d92 mil m3/d Gazelle Hospozín 93mil m3/d 0,5 – 2,5 mil m3/d93 mil m3/d Český Těšín Waidhaus30 mil m3/d 70 mil m3/d 93 mil m3/d 30 mil m3/d 180 mil m3/d HPS Lanžhot Významné předávací stanice 25 mil m3/d 5
  6. 6. NET4GAS is committed to develop and connect markets NET4GAS the Turn Table for Gas in CEE Pro-actively Develop innovative design the market Transform our strength into growth products Influencing the market Pillars of Fast, flexible and rules shaped by Development of assets: transparent support ofimprovement, EU, ENTSOG and ACER New connections and traders & suppliers and development interconnectors, other network operator Develop new tariffication and growth efficient redesign of business by innovative methods which allow existing capacities and customer-oriented financing of SoS products Asset Management Sales & Regulation NET4GAS Operational and commercial excellence for a safe, reliable andfoundation environmentally friendly transport service Performance-driven culture that inspires, develops and challenges employees 6
  7. 7. “GATRAC” Bundled Hub-to-Hub products as a role model for Europe cross border gas transports can be met rather quickly by expansion of the GATRAC Benefits: TTF No need to amend legal framework if national legal rules are not mandatory for cross border capacities Similar procedures and contracts for all routes Compatible with TRAC X VTP NCG VP PEG CEGH current scope of cooperation possible future routes 7F-BD
  8. 8. Our strategic vision was implemented in the Gas Target model – NET4GAS promotes market integration in CEE NET4GAS Vision and Methods  9 – 11 functional gas market areas within the EU (instead of 30+ today) European Gas  Integration of trading regions via TSO consolidation withTarget Model of strong focus on synergies CEER / ACER  Remaining functional markets are sufficiently physically connected – as long as congested connections exit, market coupling procedures are applied   Appropriate EU-wide tariffication methodology for TSOs to be established (with cross-border cost allocation)  8
  9. 9. Gas Target Model EU Border LNG VP Production Storage Endcustomer Gasinfrastructure - EU Marktarchitecture today: tomorrow: 28 E/X-Systems 1) > 10 E/X-Systems 2) One european As premises for functional E/X-System (national, sub-national) markets 6 national Systems: 40 bcm < x < 100 bcm 4 national Systems: 12 bcm < x < 18 bcm To difficult and to long for15 national Systems: 1 bcm < x < 9 bcm realisation (x = annual consumption) 1) after implementation of 3rd package 2)no congestion or restriction in combination of Entry and Exit 9
  10. 10. Trading Regions enable i.e. faster establishment of functioning wholesale markets  Trading Region AB = Cross-border entry/exit system including all nominated Trading Region model at a glance points on the transmission systems of countries A and B  End-user Zone = National balancing zone for national final customers, no matter Country A Country B the system (distribution or transmission) they are connected to Trading Region AB  Virtual point of the trading region serving as the sole marketplace of the trading VP region and all attached end-user zones. Shifting of gas between trading region and end-user zone is done by nominating a virtual exit on the VP.  A trading region allows shipper to End-user End-user bundled their purchase portfolios but not the supply portfolios of the countries Zone A Zone B inside  Storages and indigenous productions of Final customers (A) Final customers (B) the countries inside the region are linked to the VP  The trading region model reduces the E or X contract X contract requirements of legal conditions between participating countries for establishing of cross-border markets as much as NB: Trading regions can be developed also for more than two , possible countries and don’t hamper the establishment of full merged markets later -10
  11. 11. The pilot project of “Trading Region” is a first step towards the Gas Target Model Trading Region in Central Europe Commentary PL-Hub  A Central European trading region would Gaspool facilitate the creation of one common virtual trading point and the establishment of a single gas exchange, the benefits of which are:  Establishing a functioning gas market with hub-to-hub capacity products to all neighbouring markets and potentially NCG beyond (CEGH+)  Cross-regional arbitrage opportunities and HUN-Hub diversification of gas suppliers  Increasing liquidity and pricing competition  Shift of idle transit capacities to required PSV intra-market capacities  Reduction of pipe-to-pipe competition and optimal application of existing pipeline infrastructure within regionTrading Hubs
  12. 12. Connection to Oberkappel will support an EU-North-South corridor and serve as a backbone for a trading region CZ-A-SK-HU Oberkappel connection  Most efficient investment compared to WAG extension  N4G North-South-corridor to Poland is already reflected in the European 2 Investment plans (#1). 1 (Moravia Project)Oberkappel  N4G now tries to includeconnection Oberkappel connection in the regional and European Eustream investment plans (#2) Baumgarten UGS Interconnection point Compressor station 12
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  14. 14. Market Survey 5GL was promising with regard to the connection between Austria and ItalyPartner (TSOs) and necessary investments  Tauerngasleitung GmbH, TGL GmbH: Tauerngasleitung from Haiming (D) to Tarvisio (I) and connection to Slovenia (app. €1,2 bn )  NET4GAS. s.r.o.: N4G-Oberkappel Interconnection, ONI (app. € 150 mio )  Bayernets GmbH: “Monaco-Pipeline” (intra national grid extension)  Geoplin Plinovodi: Interconnection to the Tauerngasleitung Interconnecting five gas markets o Germany (NCG, Gaspool) o Austria (VTP = CEGH) o Italy (PSV) o Czech Republic (VOB) o Slovenia (VTP) Market Survey o Start: August 2011 o End: November 2011 o More than 230 shippers informed o Results expected soon• Supported by o National Regulators o EC DG Energy Implementation o Depends on the results of the recent market survey and a possible open season procedure o Not before 2016/17
  15. 15. The Gas Target Model will work, if…. Regulators will offer a stable outlook and leave TSOs incentives for cooperation Regulators will take a long term view and develop new financing mechanisms for sufficient transit and SoS capacities TSOs and shippers take an active role in regional markets developments the development and implementation of Hub-to-Hub capacity products e.g. (GATRAC) will be supported by all stakeholders incl. shippers and producers Efficient Investments will made  Based on integrated grid and capacity mapping  in line future market design (gas target model)  more integration (include existing assets) than „in addition“ (avoiding asset competition) TSO consolidations will take place - also cross border regulatory regimes for all infrastructure will be harmonized
  16. 16. Connecting Markets Thank you for your attention! Berlin, October 23rd 2012