North & Northwest Europe Gas Regional Initiative 1 st Steering Group Meeting The Hague 09/10/2006 European Federation of Energy Traders Achieving results together Colin Lyle Colin.Lyle@efet.org Colin Lyle The Hague 9 October 2006 1
Colin Lyle The Hague 9 October 2006 2
Colin Lyle The Hague 9 October 2006 3
N/NW Europe Gas Regional Initiative - Achieving results together � Priorities for the GRI Process Contents: � What can be achieved by the N/NW GRI? � Commitment and value Colin Lyle The Hague 9 October 2006 4
Priorities for the GRI Process Gas trading is developing across Europe Virtual hub (in-grid Gasum Gasum balancing point) Physical hub ( e.g Eesti Gaas Eesti Gaas border point) Latvijas Gaze Latvijas Gaze Svenska Svenska Less liquid Kraftnät Kraftnät Gassled Gassled Lietuvos Dujos Lietuvos Dujos Zone D Zone D Energinet Energinet gas trading National National P B N Grid Gas Grid Gas BEB BEB locations Board Gáis Board Gáis EON-R.T. EON-R.T. PGNiG PGNiG TTF VNG VNG GTS GTS E E O O N N - - R R . . T T . . Fluxys Fluxys W ingas W ingas Transgas Transgas EON- EON- CEGH @ Soteg Soteg G G Huberator @ R R EON-R.T. EON-R.T. T T R.T. R.T. 3 H-gas zones 3 H-gas zones g g Slovtrans Slovtrans a a z z ( ( OMV/AGGM OMV/AGGM H H Baumgarten ) ) GRTgaz GRTgaz Zeebrugge GRTgaz GRTgaz MOL MOL west west east east Geoplin Geoplin GRTgaz GRTgaz Snam Snam GSO GSO south south NB. Not all trading Rete Rete Gas Gas locations are Enagas Enagas shown DEPA DEPA Galp Galp Colin Lyle The Hague 9 October 2006 5
Priorities for the GRI Process A European perspective � lead to convergence on a consistent market approach, not a series of incompatible geographic markets within the EU � be structured in a completely transparent manner with information accessible to all stakeholders on an equal basi � have ambitious and achievable targets that build on lessons both from the electricity market and from the experience at gas hubs � have a clear timetable and commitment to implement improvements Colin Lyle The Hague 9 October 2006 6
Priorities for the GRI Process The N/NW region can lead by example � � Providing information transparency and offering the maximum capacity to the market for the use of all main infrastructure, particularly storage and necessary services. � Achieving fully effective unbundling of all main infrastructure operators so that there is non-discriminatory access to all services needed to enable trading at and between hubs. � Addressing barriers resulting from historical agreements (e.g. for long distance transportation) through capacity release, re-negotiation and/or other stimuli to capacity trading . � Aiming for large market-based (daily) balancing zones throughout Europe, and the provision of within-day information by the TSOs. progress on these issues will benefit the whole of Europe. Colin Lyle The Hague 9 October 2006 7
N/NW Europe Gas Regional Initiative - Achieving results together � Priorities for the GRI Process Contents: � What can be achieved by the N/NW GRI? � Commitment and value Colin Lyle The Hague 9 October 2006 8
What can be achieved by the N/NW GRI? � Regulation � Transportation Workstreams: � Operability � Markets Colin Lyle The Hague 9 October 2006 9
What can be achieved by the N/NW GRI? Regulatory Coordination and Investment � Quick win – Agree consistent obligations and incentives on TSOs. � E.g. “provide capacity to deliver gas to meet all reasonable demands for firm gas supplies” � Quick win – Ensure full and consistent compliance with the Gas Transmission Regulation EC/1775/2005 � Longer term deliverable – Evaluate and present findings for improved Cross-Border Regulation � Quick win and Longer term deliverable – a consistent regional supply/demand outlook report in compliance with national requirements in EU Directives Colin Lyle The Hague 9 October 2006 10
What can be achieved by the N/NW GRI? � Regulation � Transportation Workstreams: � Operability � Markets Colin Lyle The Hague 9 October 2006 11
What can be achieved by the N/NW GRI? Primary and secondary capacity markets Improved access to Europe’s gas routes Source: remains essential for market integration Eurogas Infrastructure map Colin Lyle The Hague 9 October 2006 12
What can be achieved by the N/NW GRI? Primary and secondary capacity markets At the May 2006 Madrid forum, EFET set out a 10 point plan for the fair allocation of x-border capacity. This included… • Greater transparency • Market based allocation mechanism • Correct treatment of existing capacity • Variety of contracts Colin Lyle The Hague 9 October 2006 13
What can be achieved by the N/NW GRI? Primary and secondary capacity markets EnergiNet Trial daily capacity auctions to improve liquidity and connection in the Northern region GTF Gassco VEP BEB Cross Border Capacity TTF GTS ERG VP-North Co-ordinated auctions at: � Bunde-Oude Statenzijl � Emden � Ellund Colin Lyle The Hague 9 October 2006 14
What can be achieved by the N/NW GRI? Primary and secondary capacity markets � Quick win – Implement co-ordinated capacity auctions on a trial basis � E.g. Daily capacity auctions implemented early 2007 at specific cross border points to complement trading. � Longer term deliverable – Compatible and consistent capacity products for all TSOs Colin Lyle The Hague 9 October 2006 15
What can be achieved by the N/NW GRI? � Regulation � Transportation Workstreams: � Operability � Markets Colin Lyle The Hague 9 October 2006 16
What can be achieved by the N/NW GRI? Gas quality uncertainties must be resolved. � A shared (H gas) quality specification setting out clearly defined parameters will help to facilitate greater cross- border trade. � Gas meeting this quality specification that is delivered at any cross-border or inter-TSO point within the EU must not be refused on grounds of quality. � The responsibility for investment to ensure that this can be achieved lies clearly with the TSOs overseen by their national regulators. Source www.EFET.org September 2006 Colin Lyle The Hague 9 October 2006 17
What can be achieved by the N/NW GRI? Gas quality uncertainties must be resolved. Richer Richer Enough Enough Norwegian Norwegian lean gas lean gas gas gas to blend? to blend? Rich LNG Rich LNG Can Can Capacity Capacity Bacton Bacton to move to move blend? blend? lean gas lean gas to IZT? to IZT? Enough Enough Can IUK Can IUK lean gas lean gas accept accept to blend? to blend? the gas? the gas? Source: GIE website for map www.gte.be Colin Lyle The Hague 9 October 2006 18
What can be achieved by the N/NW GRI? Active market-based balancing helps liquidity Primary interventions by shippers and traders, residual interventions by the TSO, cash-out at market price primary primary expected expected residual residual residual residual primary primary End of the “day” Hour H Colin Lyle The Hague 9 October 2006 19
What can be achieved by the N/NW GRI? Gas quality and interaction of balancing regimes � Quick win – Full acceptance that gas quality is the responsibility of the TSO once gas is in a transmission system � E.g. Regulators bring TSOs/others together to implement optimum gas quality solution for transport of (comingled) gas between Belgium and UK and publication of information affecting capacity. � Longer term deliverable – Consistent regional implementation of market-based daily balancing with intraday trading and cash-out at the market price. Colin Lyle The Hague 9 October 2006 20
What can be achieved by the N/NW GRI? � Regulation � Transportation Workstreams: � Operability � Markets Colin Lyle The Hague 9 October 2006 21
What can be achieved by the N/NW GRI? Information transparency and gas hubs Congested entry points Expansion planned Part expansion planned ERGEG assess there to be congestion in EU pipelines - - but limited TSO but limited TSO ERGEG assess there to be congestion in EU pipelines Source: ERGEG plans for expansion. Is congestion physical or contractual? plans for expansion. Is congestion physical or contractual? Colin Lyle The Hague 9 October 2006 22
What can be achieved by the N/NW GRI? Information transparency and gas hubs � Quick win – improve our standards of information provision to match ‘best in class’ (see August 2006 paper on gas information transparency) � Including full compliance with EC/1775/2005 and the GGPSSO before the next Madrid Forum. � Quick win – Participation of each network operator and the biggest local supplier at each hub, as set out in September 2006 paper on liquidity providers. � Agree an action plan and start implementation early 2007 � Longer term deliverable – Larger and better connected hubs throughout the region. Colin Lyle The Hague 9 October 2006 23
N/NW Europe Gas Regional Initiative - Achieving results together � Priorities for the GRI Process Contents: � What can be achieved by the N/NW GRI? � Commitment and value Colin Lyle The Hague 9 October 2006 24
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