OMV Gas International Move & More. Interaction between Transit & Storage/ Investment into Gas...

OMV Gas International

Move & More.

Interaction between Transit & Storage/ Investment into Gas Infrastructure in SEE

Bratislava, September 29th 2006

Martin Schwarzbichler

2 | OMV Gas International, M. Schwarzbichler, September 29, 2006

Interaction between Transit and Storage/Investment in Gas Infrastructure in SEE

1. Interaction between Transit and Storage

Is this the right time?

Step-by-step approach?

2. Investments into gas infrastructure as pre-requisite

3. Conclusion


time / developme

nt step

Offering arbitrage possibilities for Offering arbitrage possibilities for traders / supplierstraders / suppliers

Offering parking possibilities for traders / suppliersOffering parking possibilities for traders / suppliers

Keeping a minimum stock of storageKeeping a minimum stock of storage

gas on voluntary basis ?gas on voluntary basis ?

Covering the seasonal swingCovering the seasonal swing

Satisfying the peak demandsSatisfying the peak demands

Interaction between Transit and Storage in SEE: Strategic mix of storage products

but before considering all that, something else is needed…

InfrastructureInfrastructure


Gas imports to EU-25

Source: European Commission, Competition DG, Energy Sector Inquiry/Draft Preliminary Report; BP Statistical Review 2005;

Study A.T. Kearney, „Russland am Gashahn“, January 2006;

Gas imports to Europe are increasing considerably

0

100

200

300

400

500

600

700

800

900

1985 1990 1995 2000 2004 2010 2020 2030

Years

Volu

mes in

bcm

/year

Total EU-25 production Total EU-25 consumption

2006


Forecast of Gas Supply Europe

21756

115

126

221

78

100

211

163

31

2005 2030

Indigenous production

Import Norway

Import GUS

Import Algeria

Import Others

- North Africa- West Africa- Latin America- Caspian + Golf Region

Source: OME 2006

in billion m³

502

816

1)

1) EU 25, Balkan states and Switzerland

(653 Imports)

(291 Imports)


New projects / Investment needs

95 bn. Euro97 bn. Euro

201 bn. Euro

Exploration & Production

Transmission Distribution LNG

IEA-Forecast: 561 bn. Euro between 2001 and 2030

OECD Europe: Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom.,

Transition Economies excl. Russia: Albania, Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Estonia, the Federal Republic of Yugoslavia, the former Yugoslav Republic of Macedonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Romania, the Slovak Republic, Slovenia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. For statistical reasons, this region also includes Cyprus, Gibraltar and Malta.

OECD

EUROPE

Transition

economies

excl.

Russia 26 bn. Euro

Conversion EUR / US$ average 2003: 1,1312 (Österreichische Nationalbank)

75 bn. Euro 50 bn. Euro17 bn. Euro

276 bn. Euro

147 bn. Euro

112 bn. Euro

26 bn. Euro

Source: IEA, World Energy Investment Outlook 2003, OECD Europe

IEA Total: 635 bn. US$


Increasing gas demand and decreasing gas production: Corridors through SEE are linking new gas sources with the EU

Source: IEA - World Energy Outlook 2004; Cedigaz (Feb 2004) Eurogas

Zeebrugge

Montoir

Fos

Barcelona

Arzew

Kapsala

Krk

Nabucco

Investments in SEE gas infrastructure create win-win situation for EU-25/SEE

EU-25/SEE need new import lines

Domestic productionNetto Imports

Natural Gas Transport

LNG Terminal

Pipeline

LNG-Route

Pipeline planned

LNG-Route planned


OMV Develops Along the EU Growth Belt

Mature Markets East- EuropeanGrowth Belt

Austria is third largest investor in CEE.

Expand from mature into growing markets

Increase the lead to other regional competitors

Further boost profitability potential

Continued growthSource: Vienna Institute for International Economic Studies; 2004OMV, 2006


Projects/growth opportunities from

OMV´s perspectiveNabucco Gas PipelineOpening a new gas supply

corridor for Europe from Middle East and Caspian regions

Raising transit profiles of participating project countries

Contribution to security of supply for partner countries and for Europe as a whole

Strengthening the turntable position of Austrian pipeline grid and the Hub Baumgarten within the European network

Adria LNG

Potential supply regions: (North) Africa and Middle East Potential markets: Adriatic region (Croatia, Italy, …) and Western and Central Europe

Source: GIE, OMV Gas International, September 2006

Storages along Nabucco PipelineTechnical feasibility study for new storage at Baumgarten / Austria

CEGH

Trading possibilities Currently 21 active traders

Storage projects


Share of natural gas in primary energy resources / Storage Working Gas Capacity

Source: CEER, October 2005OMV, September 2006

Specifics of SEE

Natural gas has to be price-competitive towards other fuels.

Additonal volumes ensure competitivity of natural gas compared to alternative fuels.

Cross border capacities have to be developed in SEE area.

Pipeline systems are developed to serve mainly industrial and transit purposes.

UGS are planned to be built in most countries.

12,5

3,22.1

0,9

2.7

0.5

0,4

10 % - 20 %

20 % - >

2.1…. Storage Working Gas Capacity [ in bcm ]

Storage workingGas as % of annual

consumption


Gas Infrastructure Projects: Risk Allocation – a balancing exercise

Source: Norton Rose, Presentation at Fourth Asia Gas Partnership Summit on February 20th, 2006

Construction risk

Operational risk

Force majeure risk

Exchange rate risk

Cash flow risk

Default risk

Market risk

Technology risk

Political risk

Environmental risk

Counterparty credit risk


Suggestions with specific focus on SEE Regulatory/legal framework

Acquis communautaire represents an appropriate legal framework; any legal framework should not go beyond

Regulatory co-operation: only the regulatory authorities territorially involved should participate in investment related conditions

Energy Community Treaty as common legal basis Investment attraction

Providing stable and predictable tariffs and tariff structures Stable and predictable regulatory framework that takes into

account individual cases Remuneration reflecting risks specific to gas infrastructure

investments in SEE Development of infrastructure in discretion of investors /

operators Commercial conditions

Long term capacity contracts enable the feasibility of projects, contribute to security of supply

Short term contracts should only be offered where demanded by the market and economically feasible


South East Europe process: Energy Community Treaty

ObserverParticipantsContracting Parties; TK not signed yet

Parties of Energy Community Treaty:

Steps to and within the Treaty

Developing the SEE electricity market2002: Athens MoU on Electricity Market2003: Athens MoU on Gas Market2005: Energy Community Treaty (10/2005 signed, 07/2006 ratified)As soon as possible: Reaching the objectives of the Energy Community Treaty; Guidelines for New Gas Infrastructure Investment


Conclusions Before considering transit & storage issues the infrastructure has to

be built.

EU-25/SEE is getting more dependent on imports, investments of new gas infrastructure are needed. Various large scale infrastructure projects are in feasibility and/or development phases (with respective lead times to realisation).

Specifics of SEE have to be taken into account for the legal/regulatory framework.

Investments in SEE gas infrastructure create win-win situation for EU-25/SEE.

A stable and predictable legal and regulatory framework will be necessary in order to provide a sound investment climate.

The industry is ready to invest into infrastructure projects as long as promising economic results can be reached. A cooperation between representatives from policy and from industry will be a key element in this respect.


Thank you for your attention!

OMV Gas International GmbHInternational Pipeline Projects

Martin [email protected]

OMV Gas International Move & More. Interaction between Transit & Storage/ Investment into Gas...

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