tbe 2008 consultation · continental imports in line with forecast with higher bbl offsetting lower...

TBE 2008

TBE Process

Dec:

•Publish Ten Year

Statement

Feb/Mar:

•Consultation

Apr/May/Jun

•Demand & Supply

Forecasts

•Outline investment

proposalsJuly 10th:

•Industry seminar

September?:

•Long Term Auctions

Oct/Nov:

•Review Investment

Plan

TBE 2008: Demand Forecasting

0

200

400

600

800

1000

1200

1400

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Th

rou

gh

pu

t (T

Wh

)

DN Firm DN Interruptible NTS Industrials NTS Pow er Irish Exports Continental Exports

Forecast demand (November update)

Actual Forecast

Sector Share of Forecast Gas Demand Growth

2006 – 2016 (excluding exports)

30%

10%

2%

58%

DN Firm DN Interruptible NTS Industrials NTS Power

Energy Efficiency

Historical DN demand

300

400

500

600

700

800

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

TW

h p

er

an

nu

m

Firm Interruptible Shrinkage

Energy Efficiency

� Further falls in NDM gas demand in 2007

� Need to consider the effect of energy efficiency in

the forecast

� Standard of living / comfort v energy efficiency

� Technologies

� Insulation

� Lighting: Compact fluorescent & LED

� Smart meters/intelligent heating controls

� Domestic CHP

� Efficient appliances

Fuel Prices

Wholesale fuel prices

Sources: Nymex & Heren

0

20

40

60

80

100

Jan-

2005

Apr-

2005

Jul-

2005

Oct-

2005

Jan-

2006

Apr-

2006

Jul-

2006

Oct-

2006

Jan-

2007

Apr-

2007

Jul-

2007

Oct-

2007

Jan-

2008

p/t

he

rm

NBP Day-Ahead Price

Fuel Price Forecast (November update)

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

p/k

Wh

Domestic Small Firm Large Firm Interruptible Beach Pow er NBP

Actual Forecast

p/th

Power Generation

Power Generation – actual demand

0

10

20

30

40

50

60

70

80

90

100

01/10/2007 01/11/2007 01/12/2007 01/01/2008 01/02/2008

MC

M

-40

-30

-20

-10

0

10

20

30

40

50

60

£ / M

Wh

Low Base case High Spark - Dark spread Actual

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2020

/21

Demand Nuclear Coal & Oil Gas

Plant Margin - Generating Plant Closure

-20%

-10%

0%

10%

20%

30%

2006

/07

2007/

08

2008

/09

2009

/10

2010/1

1

2011

/12

2012/

13

2013

/14

2014/

15

2015

/16

2016

/17

2020/2

1

Gas Coal Nuclear Wind Mothballed Plant Existing

Plant Margin – New Generation

Generation – output by fuel

0

50

100

150

200

250

300

350

400

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18

TW

h

Other

Wind

Gas

Coal

Nuclear

Nuclear power

� Closures

� 7.4 GW of plant to close by 2020 (assumes five-year extensions for AGRs) leaving 3.6 GW of existing plant.

� New Nuclear

� Connection agreements with British Energy

� 10.8 GW from 2016 at four sites

� Now a question of when and not if...

Climate Change Targets

EU renewable energy targets

� 20% of EU gross final energy consumption from renewable sources by 2020

� Includes heating, lighting, industry, agriculture, transport, distribution losses and energy used in energy production.

� UK target 15% (1.3% in 2005)

� 10% of vehicle fuels from bio-fuels

� Will require 30-40% of electricity generation from renewable sources

� Renewables to be given priority access to transmission and distribution networks.

Power Generation - renewables

EMO Sensitivities

60

80

100

120

140

160

180

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

An

nu

al

Gas D

em

an

d (

bcm

)

Outer Case Central Case Base Case

TBE 2008: Gas Supply Forecasting

National Transmission System

~ 420km pipe added for 07/08

Current NTS ~ 7,400 km

Milford Haven to Aberdulais- 128km

Felindre to Tirley pipeline – 186km

Pannal to Nether Kellet – 93km

NTS Charge average ~ 1.9p/therm (Entry/Exit & Commodity)

Average domestic charge ~ 85p/therm

Supply Performance (winter to date)

� All flows broadly in line with forecasts

� UKCS in line with forecast

� Norwegian imports marginally lower than forecast due to higher flows to Continent

� Continental imports in line with forecast with higher BBL offsetting lower IUK imports. Higher IUK post January 1st

� Intermittent LNG imports via Grain, no Teesside GasPort

� Storage flows in line with demands

� Release of discretionary interruptible capacity

� Interruptible scaleback at ASEPs

Summary

� Weather – warmer than average

� Gas � Dragon LNG, South Hook and Aldbrough delayed until 2008

� UKCS and storage use in line with forecast

� Introduction of Transfers and Trade, main impact at Isle of Grain

All Supplies

0

100

200

300

400

500

Oct-07 Nov-07 Dec-07 Jan-08 Feb-08

mc

m/d

UKCS Estimate inc Tampen Norwegian Estimate BBL IUK LNG Storage

Highest demand day December 17th, 419 mcm/d

Gas Demand vs Seasonal Conditions

0

100

200

300

400

500

01-Oct 01-Nov 01-Dec 01-Jan 01-Feb 01-Mar 01-Apr

mc

m/d

NDM* DM (excl. interconnectors)* Storage Injection

Interconnectors Export SND Cold demand

Warm demand

Remaining UKCS Reserves and Production

Import Requirement

Actual UKCS/Imports - March 1996 to

Present

5-10% Jan UKCS volume decline year-on-year

Grain LNG flows to date

0

2

4

6

8

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12

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18

20

Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08

mcm

/d

0

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200

SA

P p

/th

erm

Grain Flows SAP

July 05, first flows

Winter 05/06 and 06/07 consistent flows,

summer intermittentSummer 07, Winter 07/08

* More attractive prices/markets

* Increased Far East demand

* Tight LNG supply

* Commercial regime

Norwegian (est)

Langeled completion

Tampen operational

Average over Oct-Jan, near identical

Norwegian Euro Flows

BBL flows

BBL operational

Contractual ?

Additional compression

IUK

Base Case 2007

• UKCS declines continues

• Assume Norwegian volumes underpin import deliveries

• Troll project cancelled, lower long term volumes

to Europe/UK ?

• LNG flows more variable due to competition from

alternative markets, LNG supply tightness

• BBL volumes initially more certain pending possible reverse flow capability

• IUK more price/market driven

UKCS decline and potential import make up (Base Case)

UK Import Flows (Gas Year)

Import Capacity build-up

Grain expansion

Dragon

South Hook

Dragon expansion

Canvey

Teesside

Fleetwood

BBL expansion

Other

Import Capacity build-up (load-factors)

LNG, IUK @ 50%

Pipe @ 80%

Storage developments

Storage/Import changes

1:8

1:8

Supply Summary

• Increasing import dependency

• First phase of infrastructure projects have provided significantadditional capacity

• Requirement for additional capacity or high utilisation rates ofinfrastructure in place will be required

• UK Storage low as a legacy of domestic gas reserves

• Significant storage projects proposed but even if majority developed, storage level will only be comparable to major European importers

• Storage and Import projects face significant delays in planning process

• Significant price volatility