European Economic Congress, Katowice, 17 May 2011

Challenges in Gas Transmission:The V4+ Perspective

Andreas RauMember of the Board of Directors

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100%

100%

56%

35%

HoldingTrade & Sales

Transmission

Distribution

StorageE&P

Storage

Employees 893

Turnover > € 800 million

Transmission volume 71 bcm

Key Business Data

transmission contracts for 90bcm/a

2,270 km of pipelines

four compressor stations (aggregated power >1,000 MW; Veľké Kapušany biggest compressor station in the EU)

Facts and Figures 2010

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About 75% of today’s gas flow from Russia toWestern Europe is passing through Slovakia

Kiev

Minsk

Moscow

Vienna

Warsaw

St. Petersburg

Berlin

Prague

Budapest

Existing Eustream 90 bcm/a EuRoPol Gaz 33 bcm/a

New Nord Stream 2 x 27.5 bcm/a South Stream 30-60 bcm/a Nabucco 31 bcm/a

New projects can easily double existing pipeline capacities!

New challenges due to increasing pipe-to-pipe competition!

Bratislava

Market Position

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Development of Transmission Capacities in Slovakia

Capacity 2009=100%

contracted capacities max. technical capacities (acc. to decommissioning plan)

expected impact of Nord Stream

How reasonable are new routes if they lead to stranded investment elsewhere?

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Our Vision: A Central European “Gas Turntable”

Czech Republic reverse flow (capacity

of 25 mcm/d via Lanzhot)

Ukraine gas storages and E&P? technical cooperation SK/UA? reverse flow at SK/UA border

(capacity cca. 85 mcm/d)

Hungary SK/HU Interconnector

(“bridgehead” for Nabucco) access to LNG (Krk)?

Poland interconnection PL/SK? access to LNG (Świnoujście)?

Austria development of Baumgarten Hub reverse flow (capacity of cca.

40 mcm/d via BOG)

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0

1

2

3

4

2006 2007 2008 2009 2010

0

2

4

6

8

10

12

14

16

18

20annual capacity [bcm]

no. of contracts

Short-term / Short-haul Gas Transmission

• increasing no. of hub related transactions in SK (e.g. arbitrage NCG/CEGH)

• sufficient transmission capacities available in Slovakia in the long run (no investment need)

• new products (e.g. title transfer, VTP prepared)

• positive impact expected from SK/HU interconnector

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TSO Cooperation : GATRAC

7

Cross border VP2VP products – Overview

Direct connection between respective VPs

Bundled products with one single contract (similar “train tickets”)

Bookable with each participating TSO on FCFS-principle

First product:

Firm daily capacity

Bookable one to more days ahead*

No renomination

* More days ahead will be used to allow bookings over the weekend and holidays and to align capacity booking periods with trading times on the EEX Gas Spot Market

VP

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The North-South Gas Corridor

• discussion triggered i.a. by 2009 gas crisis

• strong political support by V4+ initiative (six countries directly involved)

• 2,300 km of pipelines (+upgrade of existing lines)

• 900,000 t of steel

• investment approx 3,800 MEUR

• financing under EU programmes: 220 MEUR

• access to two LNG terminals (Świnoujście, Krk)

Realistic concept for enhancing market liquidity and security of supplies or wishful thinking?

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SK/HU

The Hugarian/Slovak Interconnector I

• 115 km of pipeline length

• 5 bcm/a of (design) capacity

• bidirectional flow

• investment app. 120 MEUR

• financing under EERP (30 MEUR)

• start of operations initially planned for 2013

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6/2009 MoU signed by FGSZ and Eustream7/2009 EEPR application

12/2009 end of non-binding open season

6/2010 end of binding open season I

12/2010 end of binding open season II (start of operations postponed to 2014)

4/2011 FGSZ withdraws from project, OVIT new partner on Hungarian side

10/2010 EEPR grant decision by EC

Requested capacity in direction SK-HU

-1

1

3

5

7

9

11

13

15

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Duration of the booking period

Da

ily

flo

w r

ate

[m

il.

Nm

3]

Total requested capacity

Technical capacity

Requested capacity in direction SK-HU

0,000

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Duration of the booking period

Da

ily f

low

ra

te [

mil.

Nm

3]

Total requested capacity

Technical capacity

0

1

2

3

4

5

6

7

8

9

10

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

Da

ily fl

ow

ra

te [m

il. N

m3

]

Total requested capacity

The Hungarian/Slovak Interconnector III

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Conclusions

• further diversification of transmission routes and supply sources (e.g. Nord Stream, Nabucco, South Stream ) – mainly enhancing east-west capacities

• huge efforts of TSOs to increase transmission capacities and implement new interconnections (forward and reverse flow)

• special focus on establishing a north-south corridor in Central Europe

• significant financial support of EU and political support by V4+

• TSOs introducing new products (e.g. GATRAC)

• some uncertainties as to development of commodity markets

• some routes already having spare capacities today

Start with realistic projects (e.g. HU/SK) and then follow a step-by-step approach (always verifying market demand, needs in terms of security of supply and cost/benefit ratio)

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For further information: www.eustream.sk

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pipe-to-pipe competition

EU gas demand stagnating?

stricter environmental

regulations

new unbundling requirements

short-term bookings and increased speed of

shipper transactions

consolidation among European TSOs?

Strategic Challenges

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1 - CZ/SK reverse flow Lanžhot2 - AT/SK reverse flow WAG3 - AT/SK reverse flow TAG4 - SK/HU interconnector5 - Internal reverse flow SK6 - Gazelle7 - EuRoPol Gaz / Jamal8 - Nord Stream9 - LNG PL10 - LNG CRO11 - OPAL12 - HU/CRO interconnector13 - Nabucco / South Stream

1

4

5

6

7

8

9

10

11

2

3

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Back-up: Main Gas Corridors in Central Europe

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