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The effect of TAP pipeline for the Balkans, Turkey and Italian gas markets

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Eurasian natural Gas Infrastructure
Athens, June 22-23 2016
Vincenzo Cioffo

Published in: Government & Nonprofit
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The effect of TAP pipeline for the Balkans, Turkey and Italian gas markets

  1. 1. The effect of TAP pipeline for the Balkans, Turkey and Italian gas markets Vincenzo Cioffo Italian Regulatory Authority for Electricity Gas and Water͌ Eurasian Natural Gas Infrastructure June 22 - 23 Athens 1 ͌The speaker is the only responsible for the expressed opinions which do not bind the Italian Regulatory Authority for Electricity Gas and Water
  2. 2. Eurasian Natural Gas Infrastructure June 22 - 23 Athens Medium Term Gas Market Global gas demand growth slows despite much lower gas prices Following a stagnation in 2014, global gas demand is estimated to have returned to growth in 2015. It is difficult for gas to compete in a world of very cheap coal, falling costs and continued policy support for renewables Fierce competition develops in Europe Production growth from Russia and the Caspian region – the world’s largest exporting region – slows to half the level recorded between 2009 and 2015. Abundant supplies of liquefied natural gas (LNG) lead to strong competition among producers. For Gazprom to achieve its stated strategy of maintaining market share in Europe, it will need to adopt a more competitive pricing mechanism than in the past. New investments grind to a halt Gas supply risks remain substantial. As a result, concerns about gas supply security could reappear on the horizon before the end of our forecast period. 2
  3. 3. Natural gas consumption in Italy by sector G(m3) 25,0 26,1 25,1 26,1 25,4 28,7 29,7 32,2 30,2 28,2 30,2 31,6 33,9 30,8 31,0 31,1 25,7 28,7 18,7 19,4 20,3 20,3 20,3 20,7 21,0 20,6 19,9 19,2 17,6 14,5 15,7 15,5 15,0 14,8 14,5 14,0 16,5 20,1 22,8 22,1 22,6 25,7 27,1 30,6 31,5 34,3 33,9 29,0 30,1 28,2 25,3 20,6 17,9 20,9 1,6 1,7 1,7 1,8 1,7 1,7 1,8 1,9 1,9 1,7 1,7 1,6 1,7 1,6 1,6 1,7 1,8 2,0 0 10 20 30 40 50 60 70 80 90 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Residential and Tertiary Industry Thermoelectric Other Sector Eurasian Natural Gas Infrastructure June 22 - 23 Athens 3
  4. 4. Gas demand in Italy 90% of the gross domestic consumption is satisfied by imports while the remaining 10% by domestic production. M(m3); estimates based on gas entry point 6.777 6.513 2.666 6.530 24.036 4.387 4.848 7.244 7.107 2.621 5.074 27.589 5.893 5.673 0 5.000 10.000 15.000 20.000 25.000 30.000 Algeria Lybia Norway The netherlands Russia Qatar Others 2014 2015 Eurasian Natural Gas Infrastructure June 22 - 23 Athens 4
  5. 5. Eurasian Natural Gas Infrastructure June 22 - 23 Athens Estimated border prices of gas imported 5
  6. 6. Eurasian Natural Gas Infrastructure June 22 - 23 Athens Principles of gas transmission tariff 6
  7. 7. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 7  Azerbaijan is an important gas supplier for Turkey.  As soon as the Transanatolian Pipeline (TANAP) is completed Turkey will start to buy an extra 6 bcm from the second phase of the Shah Deniz field.  An additional 10 bcm from the Shah Deniz field is allocated to the European gas market.  Although it is difficult to conclude new long-term contracts with European utilities, the Southern Gas Corridor will go forward. Azeri gas in Turkey
  8. 8. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 8  The potential of the Southern Gas Corridor is not limited to Azeri gas, as it may also transport new supplies from the Eastern Mediterranean, Turkmenistan and Iraq in the future.  The diversity of potential suppliers and the possibility to expand volumes also have positive implications for Turkey’s supply security.  Last but not least, the end of sanctions on Iran have made trade with this country easier especially regarding energy. Turkey’s supply security
  9. 9. Eurasian Natural Gas Infrastructure June 22 - 23 Athens Final Joint Opinion The project 9
  10. 10. Final Joint Opinion Results evaluation  Requests for transportation of Shah Deniz II gas have a range between a minimum of around 32.1 and a maximum of 42.6 bcm/year.  It is possible to say that the demand from sources other than Shah Deniz have a maximum of 14.3 bcm/year.  not only the sponsors of TAP, but also the market, considers TAP especially as a vehicle for the transportation of the Shah Deniz II gas to Italy, which is the main destination market of TAP.  there's a demand for forward and reverse flow to Albania and Greece as well. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 10
  11. 11. Final Joint Opinion Contribution of TAP to the Southern-East Europe  link between the Italian gas market and the South-Eastern Europe gas market. TAP will strongly contribute to market integration in South Eastern Europe.  reverse the traditional flow north-south and this allows export of gas from Italy arriving also from the Caspian region to the hub of northern Europe.  crucial contribution to price convergence in the South Eastern Europe area. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 11
  12. 12. Final Joint Opinion TAP Tariffs  TAP AG proposes that all shippers pay a uniform TAP Tariff, irrespective of they use forward or reverse capacity products.  the fee structure for forward flow gas transportation through the Trans Adriatic Pipeline follows an entry-exit charge system. The calculated Target Revenue for any given period is broken down to an entry fee and an exit fee component under a 50%-50% split.  The entry fee is allocated in proportion to all volumes entering the pipeline, unrelated to the distances for which such volumes will be shipped. The exit fee is allocated to volumes exiting the pipeline at various exit points, the respective allocations being done in proportion to volumes and travelled distance.  As far as Reverse Capacity is concerned, especially for virtual reverse flow, as there are no additional costs, Authorities believe that market procedures should start at a very low reserve price, for example 5% of the TAP Tariff. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 12
  13. 13.  TAP will be connected to the Italian natural gas grid to provide firm capacity at the Italian virtual trading point (PSV), from which all Italian gas exit points can be reached  TAP can reach Austria via TAG pipeline  TAP can reach Germany and France via Transitgas TAP can connect Caspian gas to multiple European markets Eurasian Natural Gas Infrastructure June 22 - 23 Athens 13
  14. 14. Connection to Bulgaria TAP can provide Bulgaria with a new source of gas through existing and planned infrastructure. TAP can provide Bulgaria with a new source of gas through existing and planned infrastructure. Reverse flow on Kula/Sidirokastro Interconnection point exporting Russian gas from Bulgaria into Greece. IGB – is designed to connect Greece (Komotini) to Bulgaria (Stara Zagora). MoU with IGB signed in January 2014. Eurasian Natural Gas Infrastructure June 22 - 23 Athens 14
  15. 15. entsog Gas Network Eurasian Natural Gas Infrastructure June 22 - 23 Athens 15 Europe’s current gas system is largely resilient to a wide range of extreme scenarios, with the exception of SEE region
  16. 16. Conclusions Balkans: to connect “energy islands” and to provide price convergence Turkey: more security of supply and more Asian hub Italy: more diversification and more European hub Eurasian Natural Gas Infrastructure June 22 - 23 Athens 16
  17. 17. Eurasian Natural Gas Infrastructure June 22 - 23 Athens  AEEGSI Annual Report on the State of Services and on Regulatory Activities 2016  AEEGSI/RAE/ERE Joint Opinion of the Energy Regulators on TAP AG’s Exemption Application July 2013  AIE Medium Term Gas Market Report 2016  ECRB Market Monitoring Report Electricity and Gas Markets in the Energy Community April 2016  ENTSOG TYNDP 2017 Scenarios References 17
  18. 18. THANK YOU ! GRI SSE – pilot project XII Eurasian Natural Gas Infrastructure June 22 - 23 Athens 18

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