Establishing of South East Europe process

3 November 2005 GIE Conference 2005 1

Gas Market Developments in SEE

Balázs SÁNDOR

Chairman GIE ECSEE Study Group

Athens - 3 November 2005

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Establishing of South East Europe process

• EC put forward a strategy: Developeingthe SEE electricity market

• All SEE countries agreed to adopt EU legislation

Athens MOU on Electricity Market (2002)Athens MOU on Electricity Market (2002)

• Extent the scope of MOU with gas andnew Directives

Athens 2003 MOUAthens 2003 MOU

• Legaly binding document signed on 25th October 2005

Energy Community TreatyEnergy Community Treaty

Croatia Bosnia-Herzegovina, Serbia and Montenegro, Romania, Bulgaria, Turkey, Albania, Macedonia Italy, Austria, Hungary, Greece, Slovenia

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GIE supports the achievement of the South East Europe process

• GIE sees its role as a facilitator• GIE support the process with them experience in

creating the framework of new SEE market• Participation in the work of Regional Gas Regional Gas

Infrastructure Financing Working GroupInfrastructure Financing Working Group• Input and comments for:

– WB Study on gas economics of SEE Region– Infrastructure Regulatory Group – GGP, GII– Update our comments on Gas Transition Strategy Paper

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Main Challenge for SEE

Creating a sustainable real gas market in the region on long term with:

– Stable legislation (National and Regional)– Investment security guaranty– Reform the gas industry– Payments reform– Special emphasis on the social and environmental

aspects– Compatible market design

The creation of „new gas market should be The creation of „new gas market should be bulild up step – by – step!bulild up step – by – step!

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Main Characteristics of SEE gas industry (I)

Market situation – Gas consumption

– Special „Gas Business”-es.

– Dominant industrial consumption

– Heavily depend on import gas

– High increase of gas consumption in the next 15 years, mainly in the power and households sector.

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10

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60

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90

Bosnia-H. Croatia Romania Bulgaria Serbia-

CG

Turkey Greece Slov enia Austria Italy Hungary

2020

Increase in consumption 15 years forward (%)

EUSEE

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Main Characteristics of SEE gas industry (II)

Transmission Pipeline System and UGS

– Pipeline systems are developed to serve mainly industrial and transit purposes. Built during ’70’s – ’80’s

– The cross border capacities are weak in the SEE area.

– New import routes or new import sources are crucial to fulfill the future demand.

– Most of the SEE countries are already building or planning to build new UGS facilities.

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5

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25

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BH-Gas Transgaz Serbiagas DEPA OMV MOL

pipelines

Age of the pipeline system (years)EUSEE

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Main Characteristics of SEE gas industry (III)

Legislation

– The legal framework basically in line with EU Directive– The accounting unbundling principle apply by nearly

all of the country– There are room for modernization of infrastructure

tariff systems– The monopoly position of state owned company is

very stable in transmission and wholesale

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Recommendations

1. Clear roles and responsibilities

2. Healthy investment climate

3. Set up of a dedicated Gas Forum for SEE

New infrastructures should benefit as many SEE countries as possible to increase security of supply and develop gas consumption

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1. Clear roles and responsibilitiesRoles and responsibilities should be clearly allocated especially to ensure Security of Supply

• Multiple players, longer chains, more interfaces

• Key role of the authorities to define the rules- predictable and stable legislative environment- appropriate framework for developing infrastructure- independent national regulatory authorities- clear the responsibilities of each market player

• Unbundling of investment decisions• Transportation capacity to fit future demand • Investment in “insurance” assets

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2. Investment climate should enhance market development

• Appropriate funding arrangements in place to underpin investments

• Legislative environment to be predictable, stable and complete

• Regulatory environment based on incentives stimulates entrepreneurship, innovation and efficiency improvements over time

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3. Gas Forum in SEE

• We see a key role for a dedicated Forum to enhance the achievement of the SEE Gas Market in particular in developing connections between SEE countries

• Efficiency of the voluntary process as shown by the Madrid Forum

• GIE proposes to reinforce the dialogue between all parties and share experiences: changing the legal framework, enhancing investments, taking credits, social policy (gas prices), environmental policy …

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Main infrastructures projected• Members of GIE playing key role in a main pipeline

project of the region!• The new transmission pipelines should benefit as

many SEE countries as possible. They will increase the Security of Supply and develop the gas consumption in

- the countries directly crossed by new the pipes and- the neighboring countries through new

connection pipes The following main project were presented (except The following main project were presented (except

EGL) in the 2nd Regional Gas Infrastructure EGL) in the 2nd Regional Gas Infrastructure Financing Working Group meeting by GIE membersFinancing Working Group meeting by GIE members

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Nabucco influenced countries

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Bulgaria > Serbia Interconnectorinfluenced countries

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Turkey > Greece > Italyinfluenced countries

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Trans Adriatic Pipelineinfluenced countries

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Western Balkan Corridor (considered)

potentially influenced countries

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Thank You for your Attention

Balázs SÁNDOR

[email protected]