Options for Energy Buyers Options for Energy Buyers Bloomberg Offices Bloomberg Offices 8 November 2006 8 November 2006 Centrica Storage Limited
Rough Storage use for Winter 06 and beyond 1. Introductions to CSL 2. The role of storage in GB 3. Rough Recovery • Options for Energy Buyers (1) – Rough Update 4. Storage Outlook for Winter 06 5. Options for Energy Buyers (2) – Use storage information 6. Options for Energy Buyers (3) Valuing Rough Storage 7. Operating with Rough Storage in your portfolio 2
An introduction to Centrica Storage • Centrica Storage Limited is a wholly owned subsidiary of Centrica plc • Centrica Storage is a ring-fenced part of Centrica plc, separated from the supply side legally, physically and financially (Chinese walls). Undertakings agreed with Secretary of State December 2003 governing operation of Rough 3
Introduction to CSL - Facilities overview 47/3B Installed 1983 24 wells 24/7 Operation Hedon, near Hull Administration/engineering York ROUGH 47/8A 29 km @ 36" 29 km @ 16" Installed 1977 AMETHYST EASINGTON 6 wells TERMINAL 0 10 20 km 24/7 Operation Easington Terminal Venture House, Staines Rough gas processing Headquarters and Amethyst gas processing Commercial Tie in to National Transmission System 4 office 24/7 Operation 24/7 Operation
Introduction to Centrica Storage – Process Overview • Represents 74% of UK storage and supplies 10% of York UK peak winter demand • Largest offshore gas storage facility in Western Europe (strategically important). 18”Inter-field CD Pipeline • 185 billion cubic feet 1.25 Miles BP (bcf) cushion gas BD 36” Submarine • ~118 bcf storage Pipeline 18 Miles capacity 47/3B 47/8A • Deliverability max AP 44.8mcm/day AD Riser Shaft • Average Injection Rough 36” Pipeline To National ~15mcm/day Transmission • Onshore processing System 16” terminal at Easington Pipeline Easington for Rough, Amethyst, Terminal Rose and Helvellyn processing (third party gas). 5
Actual GB Load Duration Curve 05/06 450 Storage Year 05/06 400 Storage 350 prices from 300 market 250 spread Continued cm indigenous m 200 production declines Rough Injections Rough Injections 150 100 Rough storage is used to provide seasonal swing to 50 the market 0 1 26 51 76 101 126 151 176 201 226 251 276 301 326 351 Beach Supply Isle of Grain IUK Rough MRS SRS Rough injection Supply 04/05 6
Existing UK Storage Facilities Winter 05/06 1400 Winter 06/7 Glenmavis Partington 1200 Humbly Grove available for Avonmouth the Winter Dynevor Arms Hole House Farm 1000 Hornsea More deliverability from Hole Hatfield Moor House Humbly Grove 800 Rough GWh 600 400 Rough 200 0 1 16 31 46 61 76 Time to empty - Days 7
Rough’s place in the storage and gas market Deliverability Average Injection - Summer 06 National Grid National Grid Hole House LNG LNG 13% 40% 3% Humbly Grove 6% Hornsea Hole House 2% Rough 8% Rough 35% 66% Hafield Moor Humbly Grove Hornsea Hafield Moor 6% 15% 4% 2% Storage Capacity National Grid LNG 7% Hole House 1% Humbly Grove 7% Hornsea 8% Hafield Moor 3% Rough 74% 8
Recovery Program - Statistics Phased Recovery completed to plan • Phase 1 – remanning: full extent of damage unknown, installations ‘black’ • Phase 2 – reinstatement of injection operations • Phase 3 – reinstatement of production operations • Potential for reoccurrence eliminated Over 400,000 man-hours worked Safety • Zero lost time accidents • No Safety or Environmental incidents Quality • >500 Flange Joints made • No hydrocarbon leaks, minimal rework - start up first time to plan Time • Phase 2 - 112 Days from incident to recommence injection • Phase 3 - 217 Days from incident to become production ready Cost • Circa £30 million project Execution • Planned, resourced, managed and implemented by CSL 9
CSL – Rough Flows £50> million spent on Rough by CSL to date! 50> million spent on Rough by CSL to date! £ Net Storage Movement 600,000,000 • Near 100% reliability for 2005 • High summer load factor on injection 2005 • Highest withdrawal rate 492 GWh 500,000,000 • Near 100% load factor on injection • Sand monitoring & 8 Alpha • High level of availability • Highest volume injected in a season • Inj Rates higher than forecast 400,000,000 • Release of peak production rates Nov-Jan • Original space targets met • Cycling from November to late January • Production tested – 5 th October 300,000,000 • Production starts – 2 nd November 200,000,000 Facility closed for 100,000,000 repairs 0 01/01/05 01/02/05 01/03/05 01/04/05 01/05/05 01/06/05 01/07/05 01/08/05 01/09/05 01/10/05 01/11/05 01/12/05 01/01/06 01/02/06 01/03/06 01/04/06 01/05/06 01/06/06 01/07/06 01/08/06 01/09/06 01/10/06 01/11/06 -100,000,000 -200,000,000 10 -300,000,000
Centrica Storage Limited – New Production Process B B D P • Heli-deck • All gas processing facilities • Accommodation • Gas compression (injection) C • 12 wells • Main power generation • 12 wells D 11
Process Changes Bypassing dehydration and running sealine wet • Modifications based upon running the Rough 36” sea line ‘wet’ • Bypass the Rough 3B Glycol Dehydration Trains • Installation of large header and return pipework • Glycol Contactors, Production Separators and Glycol Regeneration Packages become redundant • ESD System extensively modified to reflect changes • Install new Hydrate / Corrosion Inhibitor Chemical Injection Skid on both Rough 8A and Rough 3B • Two Injection aftercoolers modified to eliminate failure mode and return to four injection cooler operation • Outcome: • Offshore production process simplified • Injection aftercooler duty improved • Pipeline corrosion management regime enhanced 12
1 st NOVEMBER – ROUGH STORAGE FULL 116.5 bcf! (78 day service) FM on Injection lifted from Gas Day 18 th July 2006 • • Rough returned to injection early June – 112 days after the FM • Since the return to physical injection operations in June CSL has filled in excess of 58 bcf of space before the end of winter • Full production rates available following the return from annual maintenance in September All production trains were tested in turn 5 th October 2006 • Commercial withdrawals began 2 nd November 2006! • 13
Options for Energy Buyers (2) - Storage Information •http://www.nationalgrid.com/uk/Gas/Data/misc/ •http://storit.centrica-sl.co.uk (aggregate site nominations within day) •CSL supportive of attempts to drive forward transparency in the UK and Europe where appropriate 14
Options for Energy Buyers (3) – Book storage Rough – SBU pricing and intrinsic value Standard Bundled Unit (SBU) Withdrawal 1 kWh/day The Q1-Summer spread Purchases fits the shape of the SBU Space 67 kWh and provides a good hedge in forward markets. Summer Contract Injection 0.35 kWh/day Q1 Contract 455m SBU’s sold 1 SBU provides space equivalent to 2.27 therms D J F M A M J J A S Once market monthly contracts trade one can optimise position to fit optimal profile Initial Hedge Shape to give 2.27 x (Q1-Summer) p/SBU Sales Optimal hedge Shape to give 2.4 x (Q1-Summer) p/SBU 15
Unlocking the extrinsic value Good Rough Reliability from high availability of the asset to CSL and customers Customers able to reshape the CSL product or sell/buy unused capacity as firm or interruptible Extrinsic Customers able to buy/sell gas in store Ability to re-nominate withdrawal/injection 2.8 to 3.2 with short lead times Customers nominated quantities equal their Poor Rough Reliability allocated quantities – irrespective of asset Injection Cancellation availability Long Injection Period Market volatility provides cycling ability to leverage greater value from a Rough SBU Force Majeure Sales activity range Extrinsic value from use of Rough on 100+ days beyond intrinsic valuation 2.4 Intrinsic Potential upside to 2.4 intrinsic as Dec – Mar spread increases on Fundamental change to winter contract 2.27 Re-optimise hedge in more liquid market – further intrinsic value Initial Intrinsic Hedge in product-limited market fits shape of Rough 16 Note: Each SBU contains 2.27 therms, therefore to convert from pence/SBU into pence/Therm divide by 2.27
Site Map Capacity Inventory and Centrica Storage Administration Nominations Billing Bulletin Board Management Allocation Bulletins (AR functions) Enter Transfer Overview View Transfer Enter Transfer Change Enter Nomination View Bulletin Accept Transfer View Transfer Public Bulletins Password View Nomination View Charges Enter Bulletin Capacity Transfer Accept Transfer Private Bulletins New Account View Profile Edit Bulletin Capacity View Inventory Edit Account Activity report Availability 17
Within the Gas Day Before the gas day After the gas day Allocation Nomination STORI T 18
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