Spanish Gas Market. Strengthening the Bulgarian energy regulator. Francisco Laverón. Sofia February 2006

Transcription

1 Spanish Gas Market Strengthening the Bulgarian energy regulator Francisco Laverón Sofia February 2006

2 Index I. Spanish natural gas sector II. III. Legislation New strategies in the gas sector 2

3 Characteristics of Spain's natural gas industry before liberalization Lack of national production Gasification didn t start until the early 1970 s Industry in expansion: strong increase in demand Continuous need for new infrastructures Development of LNG Scarcity of interconnections with European countries Long distance from traditional suppliers to Europe Concentrated market structure Liberalization in 1998 departed from a strongly regulated and concentrated sector 3

4 Characteristics of Spain s natural gas industry before liberalization Transmission ENAGAS (100%) Distribution GAS NATURAL (85%) NATURCORP (10%) ENDESA (5%) Imports ENAGAS / GAS NATURAL (100%) GAS NATURAL owned 100% of ENAGAS 4

5 Geographical situation Iberian Peninsula is close to the an important producer (Algeria) 6, ,7 17 Data in thousand bcm and in the middle of the main LNG Routes 5

6 Gas imports 2004 In GWh Gas origin by country National Algeria NG Algeria LNG Libya Norway Australia Countries of the Gulf Trinidad and Tobago Nigeria Other Trinidad and Tobago 0% Countries of the Gulf 19% Nigeria 17% Australia 0% Norway 8% Other 2% National 1% Libya 2% Algeria NG 28% Algeria LNG 23% National Algeria NG Algeria LNG Libya Norway Australia Countries of the Gulf Trinidad and Tobago Nigeria Other 50% of the imports came from Argelia 63% of the imports were LNG Source: Boletín Mensual de Estadísticas de gas natural. Marzo 2.005, CNE. 6

7 Gas market 2004 Prediction of the demand bcma 44 bcma Major increase CCGTS: % % % Demanda convencional (Mte) Demanda CCGTs (Mte) Other consumers will have a moderate increase in demand Demanda real (Mte) Source: Planificación de los sectores de electricidad y gas. Desarrollo de las redes de transporte , Ministerio de Economía, Sept y boletín mensual est. GN enero Important growth of the demand. According to the Ministry of Economy, the average annual growth will be 9.5% ( ) 7

8 Current infrastructures 6 bcma Gaviota Working storage: 0,7 bcm 2 bcma Serrablo Working storage: 0,5 bcm 9 bcma -2,6 bcma 0,3 bcma 6,7 bcma 6,7 bcma 8 9,2 bcma

9 Gas Market 2004 Progress of liberalization Gas prices 100% 80% 60% 40% 20% 100% 91% 62% 38% 45% 55% 29% 71% 20% 80% Euro/MWh small users ES 0% 0% 9% Free Market Tariff Market Euro/MWh large users Source: Boletín Trimestral del mercado del gas natural: Cuarto trimestre 2.004, CNE. Source: Report from the Commission on the Implementation of the Gas and Electricity Internal Market Liberalization is moving forward 9

10 Gas market 2004 Consumption TWh ,95 TWh Customers (Thousands) ,95 TWh ,12 TWh ,9 TWh 2 91 clientes 37 clientes GROUP 1 GROUP 2 GROUP 3 INTERR + MP Consumption Customers Source: Boletín Trimestral del mercado del gas natural: Cuarto trimestre 2.004, CNE. 10

11 Gas market % 80% 22% 0% 60% 40% 99% 92% 78% 100% 20% 0% 1% 8% Group 1: 91 customers Group 2: customers Group 3: customers Group 4+interr: 37 customers Regulated Market Liberalized Market Source: Boletín Trimestral del mercado del gas natural: Cuarto trimestre ; CNE 11

12 Market structure in 2004 Liberalized Market 80.2% GAS NATURAL 53.6% IBERDROLA 13.5% BP 8.8% UF/ENI 4.9% ENDESA 4.6% CEPSA 4.2% Former monopolist has reduced progressively its market share Regulated Tariffs 19.8% NATURCORP 3.9% BEE 3.3% SHELL 2.7% OTHERS 0.5% Source: Boletín Mensual de Estadísticas de gas natural. Dic 2.004, CNE. New entrants with significant market shares Successful new players are electricity and large oil companies 12

13 Gas market 2004 Gas flows Distribution Retribution GAS NATURAL 82,1% NATURCORP 10,9% ENDESA 5,5% OTHER 1,5% GAS NATURAL 84,5% NATURCORP 10,3% ENDESA 5,1% OTHER 0,1% Source: Boletín Trimestral de Estadísticas de gas natural (IT,IIT,IIIT,IVT) CNE. Source: Orden ITC/102/

14 Gas market 2004 Transmission ENAGÁS 94,3% GAS NATURAL ( * ) 3,3% GAS EUSKADI 2,0% (*) GAS NATURAL has reduced its participation in ENAGAS from the former 100% to a 15% It has to be lowered down to 5% before Jan 2007 OTHER 0,4% Source: Orden ITC 102/2.005 y Enagas web 14

15 Gas market 2004 European energy Co. International Oil Companies Spanish Power Co. Former monopolies 15 at the beginning we had more than 30 new gas companies today, there are new active players

16 Spanish liberalization from de European Commission viewpoint Liberalization progress Gas prices Electricity Gas Euro/MWh small users ES Euro/MWh large users Source: Report from the Commission on the Implementation of the Gas and Electricity Internal Market, October 2005 Good balance of the Spanish liberalization 16

17 Índice I. Natural gas in Spain II. III. Legislation New strategies in the gas sector 17

18 European legislation Directive 90/377/EEC of 29 June 1990 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users Directive 91/296/EEC of 31 May 1991 on the transit of natural gas through grids Directive 98/30/EC of 22 June 1998 concerning common rules for the internal market in natural gas It liberalizes to create the internal market of natural gas It establishes minimums Big differences among countries Directive 2003/55/EC concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC Deepens and homogenizes the liberation Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply 18

19 European legislation Regulation 1775/2005 on access conditions to the gas transmission network Transparency and efficiency in TPA tariffs To avoid cross subsidies among different types of consumers Firm and interruptible transmission services Secondary markets The imbalances charges will have to be public and to reflect costs Operators will have to provide sufficient in-time information to all users about their balances, in order to correct their position in a timely manner 19

20 Main Spanish gas regulation Directive 2003/55/CE HC Law 34/1998 RDL 6/2000 Planning RD 949/2001 TPA and Econ. system RD 1434/2002 Activities & authorizations RD 1716/2004 Minimum stock and Diversification ITC/3126/2005 Grid Code OOMM Economic system TPA standard Contracts OM Settlements From january 1, 2003 The whole market is opened to free competition 20

21 Hydrocarbons Law 34/1998 (HCL) It establishes basic regulation Deepens the process of liberalization Eliminates the concesional regime Creation of the figure of the supplier in the free market Nowadays there are 24 suppliers registered, and ± 12 active Unbundling of activities Regulated third party access to the facilities Qualified consumers, suppliers and transcos Progressive opening of the market Creation of the CNE 21

22 Royal Decree Law 6/2000 It creates the figure of the System Technical Manager (TSO) Limits the participation in ENAGÁS (35%) Nowadays, Natural Gas has a participation of ±15% Later, it has been limited to 5% to fulfilling from january, 2007 Gas release program for the 25% of the pipeline gas coming from Argelia 4,24 bcm Winners of the auction: Iberdrola y BP (25%), Unión Fenosa (20%), Endesa (18%), Hidrocantábrico (10%) and Shell (2%) Speeds up the opening of the market Market 100% liberalized from Limits gas imports, per company group, up to 70% (from ) 22

23 New functioning of the market INTERNATIONAL MARKET (NG / LNG) GTS TRANSCOS IMPORT CONTRACT DISCOS TPA tariff SUPPLIERS SUPPLY CONTRACT TARIFF CUSTOMERS FREE MRKT CUSTOMERS ECONOMIC FLOW PHYSICAL GAS FLOW 23

24 RD 949/2001 Access to the facilities Qualified clients, suppliers and transcos Guarantees effective use of the contracted capacity a) first six months b) under-use c) denied access First-come first-served access system Causes of access refusal: a) Lack of capacity b) ToP c) reciprocity CNE settle conflicts Entry/exit access System If there is capacity entry, TPA shall be accepted for existing clients Principles for the NGTS (Grid Code) 24

25 RD 949/2001 Principles of economic system To assure the recovery of the investments To allow reasonable profitability To stimulate efficiency Remuneration Transmission: individualized form Facilities authorized by concurrence or directly Remuneration of the distribution: for the whole company It establishes a settlement system through regulated supply tariff and access tariffs that are homogeneous in all national territory 25

26 RD 949/2001 Remuneration of activities Access tariffs Supply tariffs Transmission Regasification Storage Transmission x x Distribution x x GTS (TSO) x x CNE? x x Cmp (Cost of gasl) Import Supply Cost of gas (with losses) + margin x x x Principles of sufficiency, cost caused to the system and parallelism between regulated and liberalized supplies 26

27 RD 949/2001 International Gas pipeline Access tariffs Regasification Plant Underground storage REGASIFICATION tariff Maximum nominated flow (*) kwh regasificated STORE LNG tariff GNL Storaged Volume 5 days Operative store UNDERGROUND STORAGE tariff Contracted capacity kwh injected or extracted Trc System of Transmission and Distribution 1 day Operative store Trc Net 60 bar Net >4 y < 60 bar Net 4 bar Tc Tc Tc Group 1 (> 60) Group 2 (>4, 60) Group 3 ( 4) T&D tariff ( Trc: capacity Reservation) Maximum nominated flow (*) T&D tariff ( Tc: Conduction) Group 1 and Group 2 with telemeter Maximum measured flow (*) kwh consumed Group 2 without telemeter Contracted capacity kwh consumed Group 3 Fix amount per client kwh consumed International High pressure Secondary transport (>16 y < 60 bar) and Distribution ( 16 bar) (*) Mín 85% contracted, > 105% penalized. (Each tariff is paid to the facility operator) 27

28 Royal Decree 1434/2002 It regulates: Transmission, Distribution, supply and Consumers Definitions, requirements, rights and obligations Connections regime, general conditions of supply, 2003 liberalization (supplier s changes, supply interruptions), IT Systems and service quality Facilities authorizations procedures for Regas, T, S and D construction, extension, modification, operation, transmission and closing Administrative files Files of transcos facilities and file of distributors, suppliers and qualified consumers 28

29 RD 1716/2004 It develops the HCL in relation to the security of supply Maintenance of minimum security stock equivalent to 35 days of the sales or consumptions 12 months of reference 3 months Accounting month Diversification of the gas provisionings when in the sum of all of them, the proportion of those who come from the same country is superior to 60% CORES: official body for the inspection and control of these obligations 29

30 RD 1716/2004 Minimal stock Valid Stocks regasification plants (GNL) Underground storages: average of last 12 months. Operating linepack LNG in ships, fulfilling some conditions Non valid Stocks Deposits Included in gas pipelines (except operating linepack ) Army 30

31 RD 1716/2004 annual accounting of AASS Useful gas Stored gas JUN Total demand Domestic Commercial Demanda Doméstico/Comercial 12 months Average annual stored gas JUN The security of supply is not encouraged the moments of high demand Suppliers with seasonal demand (domestic/commercial) fulfill the obligation with their seasonal stock (summer) and without obligation to have physical stock in peak demand (winter), although this is the demand having major increases in the consumption caused by cold waves 31

32 RD 1716/2004. Sufficiency of the facilities (1) Capacity of storage facilities GWh GWh LNG GWh GWh Underground storage GWh GWh Gas pipeline 744 GWh 791 GWh Firm annual estimated demand GWh GWh Maximum storage capacity 40 days 48 days Operativing storage 18 days 18 days Other 22 days 30 days Gas off-take at 100% capacity 155 days 122 days 32 (1) Informe sobre el Proyecto de real decreto [1716/2004], CNE. 22 de diciembre de 2003

33 RD 1716/2004 Diversification of the supply Trancos, suppliers and consumers with demand/ consumption > 10GWh/year: Imports coming from the main Spanish origins will not overcome 60 % of the whole of supplies The quantities for interruptables supplies and international trading will not be taken into account Exceptionally anyone will be able to exceed 60% if: 1. It favors the competition 2. It improves the safety of supply 3. It does not diminish the effective functioning of: a) Infrastructures b) Markets 33

34 Network Code (NGTS) The Normas de Gestión Técnica del Sistema (Spanish gas Network Code) was approved on October 5 th, 2005 Fluid and productive communication, before its approval, between the administration and all sector agents NGTS supposes a very important step towards the good functioning of the market To reduce legal and operative uncertainties To incorporate several years of liberalized experience We have completed the regulatory framework for a fully liberalized sector 34

35 Conclusions The conditions of market and the regulation have allowed a fast liberalization of the sector of the natural gas in Spain Nevertheless, recent events (basically regulative) are impeding the development of the competition Some suppliers are reducing their activity!! Are we turning to the right direction? It is necessary to finetune the regulation To stimulate the flexibility and safety of the system Equality of conditions for all the participants Trancos, suppliers and consumers The tariff must not suppose a barrier to the free competition 35

36 Índice I. Natural gas in Spain II. III. Legislation New strategies in the gas sector 36

37 Starting point Iberdrola s strategy in the sector of the gas is based on three pillars: Strong growth in Generation with CCGTs Iberdrola is a great consumer and gas buyer Liberalization of the gas market Great portfolio of energy clients Opportunities of the process of liberalization Increase of the gas demand on the part of the electrical consumers Objective: 20% Market in 2006 In 2004 Iberdrola has reached a porcentage of 10,8% of the whole market of the gas in Spain, including their consumptions in CCGTs 37

38 Gas Business Strategy Value Chain vs. Business Models E & P Long Term Contracts/ Trading Liquefaction Shipping Regasification Power Power Final Clients Misses the natural gas business opportunity for gas to power arbitration ELECTRIC CO. B E & P Long Term Contracts/ Trading Liquefaction Shipping Regasification Power Power Final Clients High risk gas supply (lack of origin and indexation diversification) IBERDROLA E & P Long Term Contracts/ Trading Liquefaction Shipping Regasification Power Power Final Clients Right balance between business opportunity and risk exposure 38

39 Demand of natural gas Foreseen demand Major increase CCGTS: % bcma % bcma % The growth of the rest of the consumers will be 30 stabler 18 bcma Foreseen demand IBE: CCGT Industrial Residential Source: Ministerio de Economía: Planificación y Desarrollo de las redes de transporte eléctrico y gasista Propuesta Final (Septiembre 2002). Datos en bcm Final clients CCGTs Real ,7 0,3 Total demand 1,0 Real Real Est ,2 0,8 2,0 1,5 1,4 2,9 3,0 4,0 7,0 20% Market in 2006 Important growth in the demand. According to the Department of Economy, the average annual awaited growth will be 9,5% ( ) 39

40 Contracts of LNG and NG Date Long-term bcma ) Spain December October January March 2002 ENI STATOIL (Snöhvit) Gas Natural Tr. Sonatrach LNG 1 April 2002 Nigeria LNG 26 July 2002 Trinidad & Tobago 7 July 2004 Sonatrach Medgaz Total 6.75 Mexico Brasil 24 June March March December July November July August 2002 Pemex ( Enertek ) Pemex (Monterrey) Pemex (Alfa - Pegi ) Pemex ( Altamira ) Pemex (La Laguna) CFE ( Altamira V) CFE (Tamazunchale) Petrobras (Termopernambuco) Total

41 Need of new infrastructures The development of the spanish market require the development of the infrastructures that guarantee the entry of gas to the system FERROL Capacity: 2,8 bcm/a (2005)+4,2 bcm/a(2006) BILBAO Capacity: 6 bcm/a New regasification plant LACQ Capacity: 2,2 bcm/a + 2,2 bcm/a (2007) Existent regasification plants Gas pipelines BARCELONA Capacity: 8,7 bcm/a + 3,9 bcm/a (2005) SINES Capacity: 5,25 bcm/a SAGUNTO Capacity: 5,6 bcm/a (2006) > 50 bcma in 2006 CARTAGENA Capacity: 5,2 bcm/a + 3,9 bcm/a (2005) +1 bcm/a (2007) + 1 bcm/a (2009) MEDGAZ Capacity: 8 bcm/a (2008) HUELVA Capacity: 3,9 bcm/a +4,3 bcm/a(2005) GME Capacity: 7 bcm/a bcm/a (2005) bcm/a (2011) Fuente: CNE The CNE estimates that the investment in new infrastructures will be placed between y M in

42 Important need for new infrastructure Iberdrola s Objectives To secure enough capacity access to the system To obtain adequate profitability in a regulated and stable environment To be present in one of the most important parts of the gas value chain (especially in Spain) To contribute to the gasification of the national territory through construction of transmission and distribution networks Investment Year M % Iberdrola BBG Regas Plant (6 bcma) % Sagunto Regas Plant (6 bcma) % Medgaz Submarine Pipeline (8-10bcma) % Transmission and Distribution Networks % 42 Iberdrola is the second-biggest Spanish investor in gas infrastructure.

43 Projects of regasification Port of Bilbao (IBE 25%) Capacity: 6 bcma In service: Desde nov Extendable to: 12 bcma Port of Sagunto (IBE 30%) Capacity: 6 bcma In service: 2006 Extendable to: 12 bcma Increase the capacity of entry to the basic net of gas 43

44 Project Medgaz (Argelia-España) Responsability Medgaz Sonatrach Enagás Albacete ENDESA 12% GdF 12% TOTAL 12% IBERDROLA 12% SONATRACH 20% BP 12% CEPSA 20% Enagás/ Medgaz? Station of compression Medgaz MEDGAZ Investment IBE a oct-03: 1,4 M Investment IBE a jul-04: 2.0 M HITOS Decision of investment: verano 2004 Put in march: 2008 CAPACIty: 8-10 bcma ampl. a 20 bcma SUBMARINE SECTION Length: ~ 200 km máx. depth : ~ m Range Investment (Fase 1): ~ 600 M TERRESTRIAL SECTION Algeria: ~ 550 km: Sonatrach Spain: ~ 270 km Range Investment: aprox. 500 (A) (E) M 44

45 Trading of gas Supply for CCGT S and final clients + Trading with third Balances the offer and the demand Optimizes the basket of contracts Comes to the spot markets Fits the gas supplies to the hydraulic cycles Arbitration among markets USA / EUR / ASIA Arbitration gas / electricity Management of the risk of the cuantities and prices Physical, not speculative trading, and with strict limits of risk 45