Transcript Slide 0

EUROGAS LNG TASK FORCE
Bilbao, 13 March 2009
Presentation by
Victor Tuñon, Chairman of LNG Task Force
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Victor Tuñon – Bilbao GLE workshop
Eurogas LNG group represents:
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Eurogas represents the most important LNG terminal users in
Europe, operating in the seven countries where LNG is present
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13 members from 8 countries
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Eurogas members imported 70% of the total EU27 LNG imports in
2008
Key objectives:
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Represent terminal users’ interests
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Ensure that the views of users are taken into account in all
relevant policy making activities.
Key Policy Principles
Access rules should meet users’ interests, in respect of
transparency, standardization of approval procedures,
harmonization of operating procedures etc.
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Victor Tuñon – Bilbao GLE workshop
General Observations to GGPLNG
 The existing policy framework as presented in the 2003 Gas Directive
has given favourable results for investments in LNG so far;
 Non discriminatory and transparency rules should apply across
Europe.
 Before implementing harmonised standards at EU level it should be
taken into account the different supply profiles across Europe
(example: Spain & UK);
 Each Member States should be precise in defining the TPA access
rules (test). It seems useful to have more precisions on allocation of
primary capacity;
 Some rules might be applied to exempted terminals, like
transparency rules, but for allocation of capacity, there are concerns
if the Guidelines become regulation.
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Victor Tuñon – Bilbao GLE workshop
Application of CAM to past capacity bookings
 Guidelines should focus on the general principles for LNG facility
access but be flexible enough to respect the various contractual
arrangements in place and the circumstances of each Member State.
 Accordingly, the GGPLNG must recognize the role that global prices
have on LNG market flows when designing primary and secondary
capacity allocation mechanisms. It should allow Member States and
LNG suppliers to develop mechanisms appropriate for the
circumstances present in its market, provided these are non
discriminatory and consistent with internal market legislation.
 The allocation of primary capacity should be subject to more detailed
procedural rules to ensure that the chosen allocation methodology
and implementation of such methodology is non-discriminatory.
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Victor Tuñon – Bilbao GLE workshop
Application of CAM to past capacity bookings
 The process needs to address models that require a certain
percentage of firm primary capacity to be set aside for new entrants
or short term services. Given the varied nature of individual Member
States, the focus should be on development of standard and robust
allocation procedures.
 The presence of a secondary capacity trading mechanism should not
cause any negative impact on utilization of LNG terminal capacity.
Optimal utilization will continue to be driven by global price signals
and the use of DES transactions to access different markets around
the world.
 If demand for capacity is much higher than the existing capacity,
actions to develop new capacity should have the highest priority.
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Victor Tuñon – Bilbao GLE workshop
Anti-hoarding rules
 Need for National regulatory authorities to define “capacity hoarding”
so that it can be applied across all Member States and be used for all
gas assets.
 The definition of the utilization of capacity should take into account
seasonal demand and the rump up of the new demand.
 It is difficult to strike a balance between the interests of primary
capacity holders and promotion of secondary capacity trading if the
two categories are given equal priority. NRAs must recognize that
primary capacity holders have made financial commitments that have
allowed the facilities to be built in the first instance.
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Victor Tuñon – Bilbao GLE workshop
Anti-hoarding rules
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The interests of primary capacity holders can be protected if
1) they are fairly compensated for the market value of the surrendered
capacity as well as any other reasonable costs and risks incurred
(e.g., liability associated with the negligent use of the facility by a
secondary shipper),
2) the details of the capacity hoarding mechanism are agreed by all
parties, including the NRA, prior to finalization of the relevant
commercial arrangements and
3) primary capacity holders are fully compensated for changes to the
agreed mechanism imposed by NRAs after commercial agreements
have been completed. Again, there is a danger that the interpretation
of what constitutes “optimal” utilization could be inconsistent with the
commercial realities of the global gas market.
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Victor Tuñon – Bilbao GLE workshop
Anti-hoarding rules
 The mechanism should not be unduly prescriptive by requiring an
auction for allocation of secondary capacity if it is clear that OTC
markets are sufficiently robust to achieve efficient use of capacity.
 The mechanism must address credit and liability issues associated with
use by the secondary shipper, including the cost to the primary
shipper of failing to deliver a cargo.
 The tariff charged to the primary capacity holder must reflect the
diminution of flexibility caused by adoption of a secondary capacity
mechanism.
 Secondary holders must be bound by the same rules designed to
prevent capacity hoarding.
 The GGPLNG should require that the relevant NRA has the burden of
proof to establish that the facility is not being used.
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Victor Tuñon – Bilbao GLE workshop
Other points to be considered
 The Gas directive does not impose obligations on system users, only on
various system operators for the benefit of system users. Therefore it
might be inappropriate for Regulation to impose such obligations for the
users
 The desire to protect « small » LNG players should not impose cost or
burdens on the LNG facility operator or primary capacity holder that are
not fully compensated, it should neither create cross subsidies among
players.
 GGPLNG should not address the issues of ship compatibility with terminals
and vetting procedures, which are covered by international organizations
 Quality standards can not be set by each LSO, but the relevant authorities
or specialized industry bodies
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Victor Tuñon – Bilbao GLE workshop
THANK YOU FOR YOUR ATTENTION !
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Victor Tuñon – Bilbao GLE workshop