THE CHALLENGE OF GLOBALIZED NATURAL GAS MARKETS THE NATURAL GAS MARKET IN EUROPE 15 MAY 2012 Presented by: RAUL YUNTA HUETE HYDROCARBONS DIRECTOR COMISIÓN.

THE CHALLENGE OF GLOBALIZED NATURAL GAS MARKETS

THE NATURAL GAS MARKET IN EUROPE 15 MAY 2012

Presented by:

RAUL YUNTA HUETEHYDROCARBONS DIRECTORCOMISIÓN NACIONAL DE ENERGÍA. SPAIN

STRIKING A BALANCE

IN THE MIDST OF CHANGE

May 13-16, 2012

Québec City, Québec (Canada)

THE NATURAL GAS MARKET IN EUROPE

INDEX

1. Natural gas regulation in Europe. Legal framework Institutions The Madrid Forum

2. Current status of the internal gas market in Europe. From 27 markets to one. The gas target model.

3. One example case: Spain


1. Natural gas regulation in Europe: Legal Framework

Existing legislation.

Three Gas EU Directives on internal market completiono (1998, 2003, 2009) Transposed into Laws in every EU Member State

EU Gas Regulations oDirect application to every EU Member State.

Framework Guidelines and Network Codes o Detailed provisions to define markets and systems functioning

Guidelines of good practices oVoluntary basis


1. Natural gas regulation in Europe: Legal Framework

Main principles of the European Regulation:

o Equal market access conditions Criteria: Transparency, fair competition and non discrimination Effective separation of network activities from production and supply

activities: TSOs and DSOs effective unbundling. Harmonized network access rules (FGs and NCs) Regulated TPA tariffs for the use of the network.

o Consumers freely choose of supplier / Suppliers freely deliver to customers

o Clear roles and responsibilities: Increase Security of Supply: regional cooperation of TSOs More functions and independence for NRAs


1. Natural gas regulation in Europe: Institutions

o Regulatory organisms: European Commission, ACER, CEER, NRAs

Different roles and competences at defining and applying the relevant regulation

o Associations and stakeholders representatives: ENTSOG, GIE, GLE, GSE, EFET, EUROGAS, IFIEC, …..

Consultative roles, lobby activities.


ENTSOG: European gas transmission system operators group


1. Natural gas regulation in Europe: The Madrid Forum

“ The European Gas Regulatory Forum, Madrid Forum, discusses the issues regarding the creation of a true internal gas market: cross-border trade, tarification, allocation and management of capacity and other technical and commercial barriers to the creation of a fully operational internal gas market.

The participants include national regulatory authorities, Member States governments, the European Commission, transmission system operators, gas suppliers and traders, consumers, network users, and gas exchanges. Since 1999 the Forum meets twice a year in Madrid”


2. Current status of the internal gas market in Europe: From 27 markets to one.

Source: Eurogas

European countries gas consumption in 2009 and 2010


East European countries are highly dependent on Russian gas imports

Central European countries hold more developed and interconnected networks: diversified supplies from Russia, Norway and The Netherlands

North African supplies cover part of the demand of Mediterranean countries. New interconnections are expected to bring this gas to the central European countries.

LNG market is not equally developed. Spain and UK stand for the highest provisions.



The European Union is highly dependent on gas produced outside of its borders Security of supply has been historically met through long-term contractual

arrangements This LT arrangements are with producers outside of the EU rather than on

wholesale gas markets in the EU. It is expected that 70% of European gas supplies in 2030 will come from outside

the EU A well functioning internal market is crucial


Source: Eurogas


2. Current status of the internal gas market in Europe: The Gas target Model

2014 as the deadline for the completion of the gas internal market.

The Gas Target Model should provide a framework for the development of the EU gas market, giving particularly support for the guidelines and network code development.

The key challenge is to put in place effective rules for facilitating cross-border trading, hubs

development and market integration between Member States.


The Gas target Model

Improve effectiveness by realising economic pipeline investments

Vision for a sustainable IEM in gas

Pillar 1:Enable functioning wholesale markets

Pillar 2:Tightly

connect markets

Pillar 3:Enable secure

supply patterns

Pillar 1: Enabling functioning wholesale markets – hubs- so that every European final customer is easily accessible from such a market.Pillar 2: Fostering price convergence between the functioning wholesale markets by tightly connecting the markets. Facilitate cross-market supply and trading.Pillar 3: Enabling the establishment of secure supply patterns for the functioning wholesale markets.

FGs and NCs on CAM, Balancing, Tariffs, CMP, etc. have the aim that capacity between wholesale functioning markets will be used as effectively as possible leading to improved price alignment between the markets and improved SoS.


The Gas target Model



TARGET: To foster effective competition in the gas market.

TOOLS: Gas market is set up over networks and infrastructures access:

Consequently competition can be obtained through a fair TPA to the network

Effective separation of network activities from production and supply activities: TSO (ENAGAS) ownership unbundled from supply and production companies

TSO Certification according to 3rd Package requirements

Regulated Third Party Access to InfrastructuresNon discriminatory and transparent rTPA with ex-ante regulated tariffs.

Infrastructures development under a regulated economic regime: transmission and distribution gas pipelines, LNG plants and Underground Storage.

Guarantee of investment recovery with a reasonable rate of return.


3. One example case: Spain SPANISH GAS MARKET EVOLUTION:

Starting point: In year 1998 the Law of Hydrocarbons was set up:• Sector Monopoly• One single main company vertically integrated:

Supply (owner of supply contracts) Owner of transmission gas pipelines and LNG plants Owner of distribution gas pipelines Access to Retail market, final consumer.

Current situation: year 2012 TSO ownership unbundled from supply and production companies Legal and functional separation of DSOs from supply activities. Market with diversity of shippers.


3. One example case: SpainGas Indicators Evolution 1998 2011

Demand 13 bcm 34 bcm

Customers 3,5 mill. 7,4 mill.

Gas ratio in primary energy 11% 25%

Number of shippers Almost only one More than 25

Transmission Network size 5.000 km More than 12.000 km

Distribution Network size 24.000 km More than 60.000 km

Regasification terminals 3 7

Underground Storage capacity (working gas)

22.864 GWh 37.400 GWh (2012)

Supply diversification 5 different origins 13 different origins


3. One example case: Spain: Gas Import Origins


3. One example case: Spain: Shippers Gas Market Quota Evolution




CHALLENGES AHEAD: Higher integration with Europe. Steps already taken:

Development of new interconnection capacities between Spain and France through Open Seasons (to 7,5 bcm in 2015)

Harmonization of system functioning and market rules through South Gas RegionaI Initiative Other steps

Adoption of common European Network Codes: CAM, CMP, Balancing, Tariffs, Interoperability, etc.

Accomplish Gas Target Model objectives: Wholesale market with Portugal, Hub development.


Conclusions

A well functioning internal market is crucial: Competitive natural gas market. Security of Supply. Sustainable and efficient market.


THANK YOU VERY MUCH !

THE CHALLENGE OF GLOBALIZED NATURAL GAS MARKETS THE NATURAL GAS MARKET IN EUROPE 15 MAY 2012 Presented by: RAUL YUNTA HUETE HYDROCARBONS DIRECTOR COMISIÓN.

Documents

gas internal market

eu gas market

gas pillar

natural gas regulation

gas suppliers

gas exchanges

true internal gas market

wholesale gas markets