Post on 01-Apr-2015
BG Group
Flame conference, Amsterdam, 13th March 2007
Liberalisation and Security of SupplySteve Surrall, Director Business Development, Europe Downstream
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Legal notice
This presentation includes forward-looking statements.
Such statements are only predictions and actual events
or results may differ materially. For a discussion of
important factors which could cause actual results to
differ from the forward-looking statements, please refer to
BG Group plc’s Annual Report and Accounts 2005.
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Introduction
• Changes in the UK gas market
• Implications for the European gas market
• European consumers able to seize opportunity?
Liberalisation and security of supply
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Changing composition of UK gas supply 2003-07
Source: National Grid
New import flows replace declining UKCS production
0
50
100
150
200
250
300
350
400
2004 2005 2006 2007
mill
ion
cubi
c m
etre
s /
day
UK production Norway IUK imports BBL LNG terminals Stock withdrawals
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Investments decided in lower price environment
Source: Argus
Capital deployed to supply growing import demand
0
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006 2007
UK
NB
P m
on
th a
hea
d (
p/t
her
m)
0
10
20
30
40
50
60
70
80
90
100
Dat
ed B
ren
t ($
/bb
l)
UK NBP (p/therm) LH scale Dated Brent ($/bbl)
IUK
Langeled, BBL
South Hook,Dragon
Grain LNG
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Oil price indexation: is it sustainable?
European Buyers’ Term Contract Indexation by Region
Source: Energy Sector Enquiry 2005-06
High oil prices may encourage revision of oil-indexed pricing
0%
20%
40%
60%
80%
100%
UK W.Europe E. Europe
pe
r ce
nt
%
Other
Other energy prices
Electricity
Crude oil
Heavy FO
Gasoil
Gas price
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Implications for investment
• Competition and uncertain prices a challenge to investment?
• UK and US examples prove this is not the case
BG Armada rig, North Sea
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Transportation – investment in infrastructure
• Access to infrastructure remains problematic
• Alternatives to unbundling must be demonstrated
Unused capacity rarely released to market
BG pipe infrastructure
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Storage
• Access to storage is key
• Role of the regulator– incentivise new facilities– ensure fair access for new
entrants– make storage available on non-
discriminatory basis
TPA exemption can incentivise investment
Rough storage facility
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Implications for new entrants and NOCs
• New entrants/NOCs seeking downstream role
• European Commission recognises attributes of new entrants/NOCs
• EU member states should welcome NOCs
Egyptian LNG
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Conclusion
• European Commission assert liberalisation and security of supply can co-exist
• Open markets do not prevent the incentive to invest
• Future UK gas supply position may have knock-on effects on aiding liberalisation
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Thank you