CHANGING EUROPEAN GAS MARKETS AND

THE IMPACTS ON PIPELINE PROJECTS

Outline

Impacts on EU Gas Markets

Security of Supply Russian Case Study
Competing Pipeline Projects
Conclusion

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Is there any correlation?

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Outline

Impacts on EU Gas Markets

Security of Supply Russian Case Study
Competing Pipeline Projects
Conclusion

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Global impact of US Shale Boom

LNG imports undermined in the US

LNG dumped on European spot markets (until
2010)
Cheap coal dumped on European markets (US coal
share in power generation dropped from 50% to
30%)
Will US shale gas triggers future US LNG
exports?
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

What About the Future?

4x more oil rigs than gas rigs (May 2013)

US natural gas production is on a plateau
Coal regained over 40% again in power generation
(2x higher gas price in a year + high eletricity
consumption)
There is low chance of US LNG exports in the
near future (regulatory + high capital cost + long
ROI + rising gas prices)
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Impact of US Shale Boom on Europe

Source: IPR

In Poland and Ukraine unconventional gas E&P is

ramping up
Low European spot market prices
Questions around oil price indexation
Price renegotiations with main suppliers
New Russian gas price formules
New European energy policy and regulation
Low coal prices new decarbonisation plans?
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Impact of US Shale Boom on Russia

Significant difference between spot and long term

contract prices question of legitimacy

Take-or-pay and resale prohibition clauses and oil

price indexation under attack

New price formules and higher share of spot

prices drop in export revenues

The antitrust clash will reshape the EU-Russia

relation EU iron fist
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Outline

Impacts on EU Gas Markets

Security of Supply Russian Case Study
Competing Pipeline Projects
Conclusion

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Myths

Without attempting to be comprehensive:

Source: Sergey Paltsev MIT

Unexhaustible natural gas resources

Ongoing monumental upstream projects

Trunk pipeline projects towards Europe as a must

Frozen inland consumption

Felxible export prices

Alexey Miller (25.07.2010): Shale gas is a well-organized and well-financed information

campaign, same as the global warming or biofuel. http://www.eegas.com/images/Miller_on_shale_gas_2010-0625.wmv

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Reality No.1

HIGH RISK
& HIGH
REWARD

LOW RISK &

HIGH
REWARD

Source: Gazprom

Enormous resources but low level of investment into gas upstream projects

Yamal and Shtokman are not meeting the expectations

Supplies towards Europe are not guaranteed without policy change

Skyrocketing inland consumption (well over the USSR peak demand)

6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

HIGH RISK
& NO
REWARD

Reality No.2

Dropping gas exports towards Europe (price + demand)

Shrinking export markets (Norway + LNG)

Less and less TOP and other clauses, LTCs and OPI (replacement: ship and pay contracts,
spot prices and different benchmarks)

Skyrocketing transportation costs and diminishing revenues

6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Reality No.3

Source: EEG

Skyrocketing transportation costs and diminishing revenues

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Reality No.4

Enormous potential in energy efficiency

140 million people consumig more gas than 500 million people

But without proper upstream business environment even investment into efficiency will not be
enough to keep up the level of gas exports in the future
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Outline

Impacts on EU Gas Markets

Security of Supply Russian Case Study

Competing Pipeline Projects

Conclusion

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

European Plans

Planned trunk pipelines:

Nabucco West: 10-23
Bcm
South Stream: 63 Bcm
AGRI (+LNG): 8 Bcm
Nord Stream: 55 Bcm
Blue Stream: 16 Bcm
ITGI/TAP: 10-20 Bcm
Yamal 2: 10-20 Bcm (?)
Existing FSU trunk lines:
Soyuz/Brotherhood:
30/120 Bcm
Yamal: 33 Bcm
Northern Lights: 28 Bcm
6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Nabucco West

SPV: NABUCCO Gas Pipeline

International GmbH
registered in Vienna / Austria
Shareholders: BOTAS (Turkey),
BEH (Bulgaria), FGSZ (Hungary),
OMV(Austria), Transgaz (Romania)
Length: 1.327 km
Bulgaria: 422 km
Romania: 475 km
Hungary: 383 km
Austria: 47 km
Transport capacity: 10 to 23
bcm/a
Pipeline diameter: 48 (DN1200)

2013 January:
Full cooperation and transparency assured to Shah
Deniz II Consortium
Cooperation Agreement and Equity Option and
Funding Agreement signed
50% share option for SDII consortium
Funding agreement for remaining development period
2013 March:
MoU signed between TANAP and NABUCCO
Full Cooperation to align timetables and assure swift
interconnection
Establishment of working groups
Pipeline Decision Support Package (PDSP) successfully
submitted in time and as
detailled as requested by NIC to SDII
Successful Political Committee Meetings in Sofia
(January) and Budapest (April)

6th Annual Pipe Tech World Summit

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Trans Adriatic Pipeline

Governmental Agreements:

TAP will reach the Italian virtual trading point

(PSV Puntodi Scambio Virtuale)
TAP can reach Baumgarten via TAG pipeline
TAP can reach Germany and France via Transit
gas pipeline in Switzerland
Interconnection options with IAP, IGB, DESFA
transmission system (reverse flow at
Kula/Sidirokastro)and integration into Western
Balkan Ring (WBR): energy security for SEE
region

MOU Albania-Italy-Greece
IGA Albania-Italy-Greece
HGA Albania Bilateral Agreement
IAP Countries:

Plinacro (Croatia)
Plinovodi(Slovenia)
BH-Gas (Bosnia-Herzegovina)
MoE Montenegro
METE Albania

DESFA (Greece)
6th Annual Pipe Tech World Summit TANAP (Turkey)
17th 19th June 2013, Barcelona

South Stream

Sources: Gazprom

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Pipeline infrastructures in comparison

Maximum interstate pipeline capacity (2000): ~3,4

bcm/d
Europe pipeline capacity (excluding FSU trunk
lines): ~1,7 bcm/d
Norway + Western Europe: ~1,1 bcm/d
CEE example: Poland: just ~5 mcm/d, very low
6th Annual Pipe Tech World Summit
capacity!
17th 19th June 2013, Barcelona

North-South Interconnector
North-South Interconnector
High EU priority
EU EEPR financing
Source- and import diversification
Swinoujscie LNG terminal
Operational:2014
2,5 bcm annual capacity
LTC with Qatargas (1,5 bcm/y
2014-2034)
Krk LNG terminal (Plan A onshore)
Operational:2017 (FID 2013)
10 bcm annual capacity (Phase 1)
No LTC
Krk LNG terminal (Plan B offshore)
Operational: 2015 (FID 2012)
6 bcm annual capacity
No LTC
Interconnectors
HU-RO (14.10.2010)
HU-HR (01.12.2010)
HU-SK (under construction)
SK-PL (planned)
PL-DK (planned)
HR-IT (operational in upstream)
Overall investment in the region: ~ 5-8
bn EUR
6th Annual Pipe Tech World Summit
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Source: EEG

IAP AGRI White Stream

Source:

Source: Edison
Source: TAP

Source: Pipelines International

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Nord Stream 1-2 (3-4?)

Source: Nord Stream

Source: EEG

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Trans Caspian Pipeline and Central AsiaChina Gas

Pipeline

Source: Interfaxenergy

No free transit routes through Russia for CIS countries (2010 Treaty?)
Possible transit provision under negotiation for accessing Gazprom and Transneft
pipelines
Turkmenistan, Azerbaijan and Uzbekistan are out of this treaty and urging for
implementation of Energy Charter Treaty
Turkish-Russian game: Turkey is keen getting Turkmen gas through Blue Stream
but Russia is pushing the CIS countries against it mainly because of Shah Deniz 2
Source: USCC

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Outline

Impacts on EU Gas Markets

Security of Supply Russian Case Study

Competing Pipeline Projects

Conclusion

6th Annual Pipe Tech World Summit

17th 19th June 2013, Barcelona

Conclusion European Gas Markets

Stagnating or declining Western European demand
Slightly increasing CEE-SEE demand
Declining domestic production stagnating if unconventional gas comes to
production
Possible North-American (Canadian) LNG shipments
More merged markets pointing towards a single European gas market
Less long-term-contracts, take-or-pay, resale and destination clauses
More spot prices, ship-and-pay contracts, stock trading
Less oil price indexation, more gas-to-gas competition with less benchmarks
Increasing transportation costs from long distances
Decentralization and diversification of supply routes
More integrated and uniformalised regulation
6th Annual Pipe Tech World Summit
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Conclusion Pipeline Projects

Less trunk pipe projects and more member state interconnectors and
domestic pipelines
As market mergers go forward the need for interconnectors can become
insatiable as more and more liquidity will be needed
In Poland, Ukraine and Baltics the shale gas projects can trigger a pipeboom
More offshore pipeline projects due to gas upstream moving offshore
(especially the Black Sea region)
More service pipelines related to offshore upstream activity
More market pipelines and less political pipelines

There aint no such thing as a free lunch Just Do It!

6th Annual Pipe Tech World Summit
17th 19th June 2013, Barcelona

Thank you
for your attention!
Andras Jenei
jenei@meltanyossag.hu