Transcript Slide 1
INTERNATIONAL ENERGY AGENCY Security of European Gas Supply What are the important issues for the future? SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT Sylvie Cornot-Gandolphe Principal Gas Expert International Energy Agency GTE 2nd Annual Conference, 23-24 September 2004 Outline INTERNATIONAL ENERGY AGENCY 1. SECURITY OF GAS SUPPLY IN OPEN MARKETS European Gas Supply/Demand at a Turning Point Growing use of gas in the electricity mix Growing imports Imported gas-to-power 2. Major Security of Gas Supply Issues Growing import dependency/Access to resources Transit/facility concentration Substantial gas investment Investment drivers in open markets Market fragmentation 3. Conclusion LNG AND POWER AT A TURNING POINT INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT European gas supply and demand at a turning point Gas Demand in OECD Europe SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT mtoe INTERNATIONAL ENERGY AGENCY 800 700 600 500 400 300 200 100 0 1971 2000 2010 2020 Other Industry Power Source: World Energy Outlook 2002 2030 OECD European Gas Balance INTERNATIONAL ENERGY AGENCY 800 bcm 700 SECURITY OF GAS SUPPLY IN OPEN MARKETS 600 LNG AND POWER AT A TURNING POINT 400 500 300 200 100 0 1990 2000 Indigenous production Africa 2010 2020 Transition economies Source: World Energy Outlook 2002 Middle East 2030 Other INTERNATIONAL ENERGY AGENCY Imported Gas for Power OECD Europe 800 SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT 2030 2000 mtoe 700 600 Power Imports 500 400 Power Import s 300 200 Industry Production 100 Industry Others Production Demand Supply Others 0 Demand Supply Source: World Energy Outlook 2002 Drivers/Challenges for gas to power INTERNATIONAL ENERGY AGENCY Drivers for gas to power Economic SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT growth Better electric efficiency / environmental performance Low economies of scale / better fit to open power markets Uncertainties Gas/Electricity interface More market response, but Risk of domino effect Volatility of gas prices/high fuel costs Contractual arrangements Taxation-CO2 price INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT Major Security of Supply Issues Adequacy of Gas Supply INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS Global Gas Reserves by Regions (tcm) 56.4 7.5 7 LNG AND POWER AT A TURNING POINT 71.5 13.8 16.9 7.5 World Total: 181 tcm as of 1 January 2003 Source: Cedigaz Access to Gas Resources INTERNATIONAL ENERGY AGENCY Revenue sharing: incentives for countries SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT to develop their resources for export Incentives for investment into export infrastructure Financing and risk mitigation Long-term contracts - proven instruments Adaptation to new competitive conditions JVs/partnerships: integration along the gas chain (physical and financial) Access to open liquid markets Transit/Facility concentration INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT 80% of Russian gas production from three fields (Urengoi, Yamburg and Medvezhye) The Yamal-Nenets corridor transports 90% of Russian gas Ukraine transits 80% of Russian gas exports to central and western Europe Transmed (Algeria/Italy) transports 33% of Italian consumption GME (Algeria/Spain) transports 30% of Spanish consumption More than half of Norwegian production and exports from Troll and associated pipelines (Norway). LNG: 11 regasification terminals in Europe Substantial investment will be needed INTERNATIONAL ENERGY AGENCY Annual gas investment in OECD Europe 18 LNG AND POWER AT A TURNING POINT 16 14 billion dollars per year SECURITY OF GAS SUPPLY IN OPEN MARKETS 12 10 8 6 4 2 0 2000 2001-2010 2011-2020 2021-2030 Exploration & development LNG regasification & liquefaction Transmission & storage Distribution Source: World Energy Investment Outlook 2003 Price Signals in Open Markets INTERNATIONAL ENERGY AGENCY US Spot and Forward Prices – Henry Hub 12 SECURITY OF GAS SUPPLY IN OPEN MARKETS 8 $/million BTU 6 4 2 0 Ja n M -0 0 ay -0 Se 0 p0 Ja 0 n M -0 1 ay -0 Se 1 p0 Ja 1 nM 02 ay -0 Se 2 p0 Ja 2 nM 03 ay -0 Se 3 p0 Ja 3 nM 04 ay -0 Se 4 p0 Ja 4 n M -0 5 ay -0 Se 5 p0 Ja 5 n06 LNG AND POWER AT A TURNING POINT 10 Source: Energy Intelligence Major pipeline and regas projects INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT Amber INTERNATIONAL ENERGY AGENCY Challenges for Investment in Open Gas Markets Do not regulate when competition works SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT US Hackberry decision: LNG terminals not subject to TPA UK: LNG terminals/BBL exempted from TPA When regulated, make sure the rate of return is competitive Do not exclude long-term contracts auctions for capacity INTERNATIONAL ENERGY AGENCY Unbundling of Functions/ Responsibilities Multiple players, longer chains, more interfaces Unbundling between infrastructure and supply SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT Unbundling of responsibility Main responsibility vis-à-vis customers AND shareholders Responsibility for own customers, not the whole market Coordination of responsibility along the chain Unbundling of investment decisions Transportation capacity to fit future supplies Investment incentives for a regulated private business Investment in insurance assets (for low-probability/highimpact events) INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT Conclusion Key messages INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT The European (and global) supply and demand balance is at a turning point Markets play their role but cannot play it alone Governments have an important role: To define clear security of supply policy objectives (for both supplies and infrastructure) To define clear responsibility of the various stakeholders To ensure consistency of the regulatory framework with policy objectives Leave instruments to the market players Mix of supply-side instruments, storage, demandside response, spot and trading instruments INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT INTERNATIONAL ENERGY AGENCY SECURITY OF GAS SUPPLY IN OPEN MARKETS LNG AND POWER AT A TURNING POINT www.iea.org