GAS TO POWER EUROPE. Eloy Alvarez Pelegry Secretary General UNION FENOSA gas 6 th June

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1 Eloy Alvarez Pelegry Secretary General UNION FENOSA gas 6 th June

2 Electricity demand and ageing of existing facilities drive new generation capacity development Environmental policies favour gas & renewables CCGTs are easy and complex Prices are now a concern Items for security of supply: Diversification (origins, gas infrastructures generation mix) Participation throughout the gas chain

3 Electricity demand and ageing of existing facilities drive new generation capacity development World Electricity demand (22-23) European Electricity demand (22-23) 25 2 X X Mtoe 1 Mtoe Source: IEA Source: IEA Spanish Electricity demand (22-23) Age of generation facilites EU 29 4, 35, 3, X 1.8 1% 9% 8% 7% 4% 44% 52% 11% 22% 37% 25, 6% 17% Mtoe 2, 15, 1, 5,, Source: EU, MITyC % 4% 3% 2% 1% Source: WEC % 38% 23% 48% 5% 19% 19% 4% 6% 6% Nuclear Coal Natural Gas oil <1 years 1-2 years 2-3 years >3 years

4 Environmental policies favour gas & renewables Kyoto Protocol Process European Level ETS Directive enters into force Commission to approve NAPs Final NAP approval? First trading phase ETS critical review Addition of other sectors and other gases? Second trading phase (First Kyoto period) March: EU countries to submit NAPs to the Commission May: Accession countries to submit NAPs to the Commission February: Kyoto Protocol enters into force April: Installations to surrender allowances for 25 emissions June: Countries to submit NAPs for second trading phase Country Level

5 CCGTs are easy Energy Efficiency (%) Estimated construction period (years) CCGT DIESEL COAL SUPERCRÍTIC GAS TURBINE COAL TRADITIONAL Nuclear Coal CCGT Typical Investment ( /kw) Land requirement (Ha) Ha NUCLEAR HYDRO COAL CCGT CCTT CCGT

6 CCGTs are complex NG & LNG Chains E&P International gas markets Source: Cera, Wood Mackenzie & Own elaboration Reserves: bcm EXISTING LIQUEFACTION PLANT PIPELINE TRANSPORT TREATMENT PIPELINE TRANSPORT Kenai Production: bcm LNG current production: 2,6 bcm/a Existing LNG trains: 4 Snohvit Shtokman LIQUEFACTION PLANT UNDER CONSTRUCTION PROBABLE LIQUEFACTION PLANT POSIBLE LIQUEFACTION PLANT LIQUEFACTION PLANT Ust Luga LNG STORAGE NORTH ATLANTIC Sakhalin Bethioua MARITIME TRANSPORT LNG STORAGE REGASIFICATION PLANT ASIA-PACIFIC (*) Atlantic LNG 1 Atlantic LNG 2 Atlantic LNG 3 Atlantic LNG 4 P. Deltana Arzew NIOC LNG Gassi Touil Idku Qatargas LNG 3 Iran LNG Skikda Qatargas LNG 2 Pars LNG Libya LNG Damietta Persian LNG Qatargas LNG Ras Gas 1 Abu Dhabi LNG RasGas 2 Ras Gas 3 Oman LNG Nigeria LNG Base RL 3 Qalhat LNG Nigeria LNG Expansion Mauritania Nigeria LNG Plus Yemen MAGREB - MIDDLE EAST MLNG MLNG Dua MLNG Tiga ASIA-PACIFIC TRANSPORT GRID UNDERGROUND STORAGE Perú LNG Bolivia LNG Brass LNG NLNG 6 Olokola LNG NLNG 7 Alba Guinea Ecuatorial SOUTH ATLANTIC Arun Brunei Donggi Tangguh Bontang Darwin Browse Basin Sunrise PRESSURE & METERING STATION DISTRIBUTION GRID CONSUMERS Reserves: bcm Production: 1.13 bcm LNG current production: 94,5 bcm/a Existing LNG trains: 32 (*) Includes USA and Canada Angola LNG Reserves: bcm Production: 29 bcm LNG current production: 22,7 bcm/a Existing LNG trains: 5 Australia NWS 1 Australia NWS 5 Australia NWS 2 Gorgon Australia NWS 3 Australia NWS 4 Reserves: bcm Production: 396 bcm LNG current production: 18,8 bcm/a Existing LNG trains: 4

7 Prices are now a concern Brent and MCIS price evolution Generation cost structure (high prices scenario ) $/t jan-91 sep-91 may-92 jan-93 sep-93 may-94 jan-95 sep-95 MCIS may-96 jan-97 sep-97 may-98 jan-99 sep-99 may- jan-1 sep-1 may-2 Brent jan-3 sep-3 may-4 jan-5 sep $/bbl 1% Indicative relationships gas,coal,co 2. 8% 6% 4% 2% % 12% 71% 5% 11% CCGT 37% 32% 9% 22% Coal Superc Capital O&M Fuel CO Natural gas CO2 5 /t CO2 4 /t Coal($/t) 7 2 Coal 2, 4, 6, 8, -3-8 Gas ($/ MMBtu)

8 Items for security of supply: Diversification (origins,infrastructure gen.mix) Natural Gas supplies to Spain North Atlantic 8% % Asia South Atlantic Spanish demand 25 32,3 bcm 15% 77% North Africa& Middle East Domestic Algeria Libya Egypt Middle East Norway T&T Nigeria Others bcm bcm Demand North Africa&ME North Atlantic South Atlantic Asia

9 Items for security of supply: Participation throughout the gas chain CCGT LIQUEFACTION SHIPPING REGASIFICATION NGS PROJECTS Palos SEGAS - Damietta Galicia Spirit Sagunto Aceca Damietta, Egypt (photograph) and QalhatLNG Oman QalhatLNG Oman Cádiz Knutsen Reganosa Sagunto Sabón GAS & POWER IN EUROPE

10 Thank you for your attention