study on underground gas storage in europe and central asia working party on gas ... · 2011. 2....

Study on Study on Underground Gas Storage Underground Gas Storage in Europe and Central Asiain Europe and Central Asia

Working Party on GasWorking Party on Gas

Geneva, January 19, 2011Geneva, January 19, 2011

United Nations Economic Commission for Europe Committee on Sustainable Energy

Study on Underground Gas Storage Study on Underground Gas Storage in Europe and Central Asiain Europe and Central Asia

Economic Commission for Europe / Committee on Sustainable Energy

Summary :• Introduction• Structure of the UGS Study• Current status of the UGS Study• Next steps : reasons for going further• Recommendations

Introduction :• As a reminder, this Study should benchmark all aspects of

underground gas storage in Europe and Central Asia• As principles :

• make efficient use of already available data (cooperate with IGU, GSE, ERGEG, IEA?…),

• Use a country by country approach (country representative) for gathering data but also take into account a market area concept

• In the 2010 WPG session, an overview of storage business and of the 90’s UGS Study results were presented

• In this 2011 session, a more detailed description of the current organization of the Study and its potential improvements will be proposed.

4Economic Commission for Europe / Committee on Sustainable Energy

Structure of the Study (1) :

• Chapter 1 : New and emerging technologies : • to identify innovations in UGS business that may

lead to a better cost efficiency, • to list the technologies that have been put in place or

that are planned to be put in place to improve efficiency of the facility, in terms of quality of service, responsiveness to Client or cost

• Heads : Mr A. Iskhakov (Gazprom), Mr H. Spreckels (E-On Gas Storage) and Mr C. Gomez-Montalvo (Geostock)

• Main items in Chapter 1 : • automation of well monitoring, • intelligent UGS (operational / commercial optimization),• increasing of UGS daily peak production• reduced environment impacts, • drilling technologies,• offshore technologies,• capex and opex optimization

• Chapter 2 : Current UGS status : set up an updated data base for all existing UGS plants in each country,

• Heads : Mr M. Sandu (Romgaz), Mr J. Mandl (ÖMV) and Mr B. Ernecic (PSP) with support of Mr J. Wallbrecht (BEB / IGU) and Mr A. Iskhakov ( Gazprom)

• Main items in Chapter 2 :• Calorific value• working volume,• cushion gas volume,• nominal and peak withdrawal rates,• injection rate,• min and max pressure,• compression power,• number of wells,…

Structure of the Study (5) :• Chapter 3 : Market structure and legal framework :

describe the legislation and guidelines for UGS market organization (incl. TPA rules) and UGS services,

• Heads : G.-H. Joffre (Storengy) with support of Ms A. Brandenburger (RWE Gasspeicher) and Mr U. Duda (E.On Gas Storage)

Structure of the Study (6) :• Main tems in Chapter 3 :

• Part A (to be answered by regulation authorities):

• Currrent regulatory access• Principles of Capacity Allocation Mechanisms (first

come first served, first committed first served, auction, open season, pro rata, …)

• Principles of Congestion Management Procedures (first come first served, first committed first served, market based, pro rata, secondary market, use it or lose it, use it or sell it,…)

• Main outlook for future years

• Part B (to be answered by companies for each storage)

• TPA regime• Storage service (virtual, hub, firm, interruptible,

parking, lease, bundled, unbundled,…)• Characteristics of contracts (duration, volume,

withdrawal and injection capacities, price)• Principles of CAM and CMP• …

• Part C (to be answered by companies and regulation authorities)

• Access to transmission capacities for • Existing storage sites,• Extension and new storage sites

Structure of the Study (9) :• Chapter 4 : UGS projects : set up a data base for

planned projects in each country including criteria for selecting projects,

• Heads : Mrs E. Wicquart (EDF) with support of Mr J. Wallbrecht (BEB / IGU), Ms A. Brandenburger (RWE Gasspeicher) and Mr U. Duda (E.On Gas Storage)

Structure of the Study (10) :• Items in Chapter 4 :

• Status (planned, feasibility , design, committed, budget approval, under construction)

• Calorific value• working volume,• cushion gas volume,• nominal and peak withdrawal rates,• injection rate,• min and max pressure,• compression power,• number of wells,…

Structure of the Study (11) :• Chapter 5 : Legal framework for development and

operation : provide with all useful information (legislation and procedures) necessary for granting consents and authorizations to SSO,

• Heads : Mr T. Korosi (Hungarian Energy Office), Mr W. Rokosz (PGNiG) and Mr G.-H.Joffre (Storengy) with support of Ms A. Brandenburger (RWE Gasspeicher) and Mr M. Laczko (E.On Földgaz Storage),

Structure of the new study (12) :Items in Chapter 5A. Questionnaire to be sent to national regulatory authoritiesIn the case of new, existing and abandonned sites

• Which authority for supervision and decision ?• Which procedures and which regulating laws ?• Duration, environmental impact studies• Obligation of landowners• Ownership (cushion gas and remaining hydrocarbons• Incentive role of State/local authorities;

Structure of the new study (13) :Items in Chapter 5B. Questionnaire to be sent to storage system operators (satisfaction survey)

• Evaluating the regulation and authorization process related to storage-related activities

• Evaluating the regulation related to landownership issues• Evaluating other provisions related to storage operation

Structure of the Study (13) :• Chapter 6 : Tariffs of UGS : provide with

information (if available and taking into account confidentiality issues) about construction costs and operation costs,

• Heads : Mr G. Martinus (Gas Terra) with support of Mr Z. Czike (E.On Földgaz Storage) and Mr W. Rokosz (PGNiG)

Structure of the Study (14) :• Main items in Chapter 6 :

• Investment and operating costs in each storage facilities • Average investment and operating cost for each type and

size of storage• Cushion gas (included ?, depreciation ?)• Accuracy of cost estimate

Structure of the Study (15) :• Chapter 7 : Outlook and main expected trends of

UGS markets : describe the gas market (supply and demand) evolution and define the UGS needs subject to this evolution.

• Heads : Mr G. Martinus (Gas Terra) with support of Mr J. Wallbrecht (BEB / IGU), Ms A. Brandenburger (RWE Gasspeicher) and Mr U. Duda (E.On Gas Storage)

Structure of the Study (16) :• Main items in Chapter 7

For 2010, 2015, 2020 and 2025 : • National natural gas supply• National maximal peak demand• Storage supply• National storage demand

Structure of the Study (17) :• Conclusion and recommendations : incl.

Comparison with the first study.• Annexes : glossary, contact details, maps, data

base, units, bibliography,…

Structure of the Study (18) : responding parties

TSSO CCSO NRA MA OtherChapter 1 XChapter 2 X XChapter 3.A XChapter 3.B XChapter 3.C X XChapter 4 X XChapter 5 X XChapter 6 X XChapter 7 X X

Explanation of termsTSSO Technical Storage System Operator (may be the same as the CSSO)CSSO Commercial Storage System OperatorNRA National Regulatory AgencyMA Mining AuthorityOther Representative Organisations (IGU, GSE, Cedigaz, Eurogas), TSO's,

Consultants (Poÿry, Falke, Storconsult, Deloitte, Teamconsult,…)other?

Current status of the Study :

2008 2009 2010 2011 2012

NUMBER OF MEETINGS

TERMS OF REFERENCE

QUESTIONNAIRE 0% 80% 95%

ON-LINE QUESTIONNAIRE

0% 10% 95%

LETTERS OF INVITATION

0% 95% 95%

IGU CONTRACT 0% 10% 100%

ANSWERS TO QUESTIONNAIRE

0% 0% 0%

ANALYSIS AND WORDING THE REPORT

0% 0% 0%

Current status of the Study :• The Study progress was not significant enough in 2010• Due to competition and workload, Company representatives

are less and less available for co-operations• Company managers do not feel the use of an additional

benchmark Study as there are already many studies made by other gas business bodies (IGU, Cedigaz, …) or from consultants

• The remaining work is huge (collection and analysis of data) and the working group members are too few.

Next steps : Why should we continue ?• A pluralist co-operation : as participants may be companies,

national bodies, consultants,.., the exchange may be more fruitful• A relevant geographic area: Europe and Central Asia makes

sense, marketwise • A multidisciplinary approach : technical, legal, commercial,

economic,..• And initially the needs for updating the Study were defined as

follows: • The market became more complex, particularly because the EU Directives for

liberalization of gas market (TPA concept) : investment decision making then became more difficult,

• Many newcomers entered the market as operators (SSOs) or as customers (TSOs, shippers, DSOs and power producers),

• Due to the further decline of EU gas production, UGS becomes and will become more and more important,

• Investors and developers of Gas Industry need to have benchmark for their investment decisions.

Recommendations : 1. Secure the current participations (done in December 2010)2. Make lobbying in the gas business community for more

participants (companies, national bodies and consultants)3. Reinforce the management of the Study using a joint

UNECE + Consultancy (benchmark oriented) team : the consultant should deal with lobbying, data collection and analysis (some offers will be proposed)

4. Find a budget for financing the consultancy support, 5. The first results of the study were initially planned at the

end of the year 2010 but they will not be available before mid 2012 even if a relevant organization is put in place.

Thanks for your attention

Back up

1. The key role of natural gas storage in security of supply

2. Gas storage development perspectives

3. Risks and incentives

4. Conclusions

1. The key role of natural gas storage

in security of supply

Security of supply : Security of supply : a a «« highhigh--visibilityvisibility »» topictopic

January 2009

January 2010

October 2010

Reduction in gas supply in %, January 2009

Regulation onSecurity of Gas

Supply

Natural gas storage : Natural gas storage : A key role in the A key role in the European policyEuropean policy

sustainability

security of supply

The European energy policy

Large proven reserves (conventional + unconventional )

Large panel of routes and suppliers

A storable energy

A market-oriented storage industry which proved its efficiency through crisis

Austria

Belgium, Portugal,Switzerland

Bulgaria

Hungary

Ireland

Netherlands

Poland

Romania

Slovakia

SpainUnited-Kingdom

Danemark

Czech Republic

Estonia, Finland,Lithuania, Lux.

0% 20% 40% 60% 80% 100%

Imports / Demand (%)

EU-27Storage/Imports = 25% EU-27 2020e

EU-27 2030eGermany

France

Source: SG Equity Research / Eurogas / GSE 2008

Another way to look at Another way to look at storage in Europestorage in Europe

2. Gas storage developmentperspectives

1. Need for security of supply Decline of local production

Increase of import contracts & remoteness of sourcing

=> two major driverstwo major drivers

2. Need for flexibilityDecline of local production

estimated additional seasonal swing demand ≈ 14 Bcm in 2030

Development of trading

Exple : traded volumes on NCG

Increase of CCGT

Increase of wind power generationestimated additional peak swing demand ≈ 10 Bcm in 2020

=> two major driverstwo major drivers

5,04,3

France

Belgium

Netherlands

Germany

Poland

Latvia

Denmark

Czech R.

Slovakia

Austria

Croatia

Romania

Bulgaria

Portugal

Source: GSE 2009, CEDIGAZ 2009, IGU 2009

Storage volumesStorage volumesin Europein Europe

–– current situation current situation ––Hungary

Europe storage facilities : working gas volume in bcm

Total around 80 bcm

Turkey

5,04,3

France

Belgium

Netherlands

Germany

Poland

Latvia

Denmark

Czech R.

Slovakia

Austria

Croatia

Romania

Bulgaria

Portugal

Source: GSE 2009, CEDIGAZ 2009, IGU 2009

Storage Storage projectsprojectsin Europein Europe

Hungary

0,6around 70 bcm

Albania

2,40,1

Bosnia-H.

Lithuania4,5

Serbia

1,6 1,5

Turkey

• A worldwide oversupply situation Economic crisis => fall of the demand (2009 : -3% / -4%)

New GNL capacities (+50% from 2009 to 2013)

Rise of non conventional gas

• Impact on the flexibility market Spot prices < Long term oil indexed prices

Squeeze of the seasonal spread

=> ……but short term uncertaintiesbut short term uncertainties

3. Development :Risks & incentives

Stability of the regulation Stability of the regulation : a necessity for attracting funding

Regulatory instabilityRegulatory instability(three directives in ten years !)

several dozen billion EUR to be invested in the next 20 years

Incentives

- strategic storage might be definitely damaging

- choice of access regime should be market-oriented

- negotiated TPA should be the preferred choice wherever market conditions allow : ⇒ best regime to facilitate investments⇒ best regime to foster commercial creativity and provide best response to the demand

Inappropriate regulatory frameworkInappropriate regulatory frameworkRISK

Incentives

4. Conclusion

Transparency

Market Orientation

Dialogue

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