Winter Outlook

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1 Winter Outlook GRTgaz SA and TIGF SA may not be held liable for direct or indirect prejudice of any type that should result from the use or processing of any of the information herein, in particular any operating, financial or commercial loss. 18 November 2016

2 The French TSOs GRTgaz and TIGF must ensure on their respective networks safety, efficiency and balancing at all time. 1 In accordance with incumbent obligations on natural gas transmission operators, the GRTgaz and TIGF networks have the required capacity to ensure continuity of transmission, up to peak periods 2. The design of the French networks is based on diversified entry points (interconnections, LNG terminals and underground storage facilities), offering to their users a choice between various combinations of supply. However, the proper operation of gas system in winter relies on an optimized and diversified management of these supplies. For the first time, GRTgaz and TIGF are jointly releasing a common Winter Outlook, to inform French gas market players of the strain situations that may arise on their networks and the specific measures for Winter French Energy Code, L "P2", i.e. an extremely low temperature over three consecutive days, as occurs statistically once every 50 years: Decree No of 19 March 2004 related to public service obligations in the gas sector November 2016

3 CONTENTS BALANCE COVERAGE NETWORK BALANCING NEW CAPACITIES AND NEW FACILITIES SPECIFIC MEASURES APPENDIX 1: CUT-OFF MECHANISM (PUG) APPENDIX 2: GRTGAZ VIGILANCE MECHANISM 3 18 November 2016

4 BALANCE COVERAGE Firm capacities available to the PIR and PITTM facilities (LNG Terminal Interconnection Point) added to capacity subscriptions at the PITS for Winter enable to overcover gas demand during cold peak periods at a 2% risk level. Anyhow it is reminded that peak coverage and balance coverage in general imply a sufficient supply of LNG during cold peak periods. In addition, despite a good level of storage injection on 1 st November 2016, GRTgaz and TIGF underline the utmost importance of well managing the withdrawal campaign to preserve sufficient withdrawal capacities all along winter and at peak periods. Calculation assumptions: Gas demand for the cold peak at 2% risk level on the GRTgaz network DK LNG to North PEG: 250 GWh/d subscribed Obergailbach entry: exit firm capacities sold on German side Oltingue exit at the subscription on 31/10/2016 Alveringem exit from PEG Nord at 0 GWh/d Gas flows between France and Spain at Pirineos 4 18 November 2016

5 NETWORK BALANCING Since 1 st April 2015, TIGF and GRTgaz each have a balancing mechanism to carry out intervention meant for balancing purpose. These mechanisms are similar and adapted to each network. The associated conditions have been discussed in Concertation Gaz and agreed with the Regulator. These mechanisms consist of a marked based balancing of the network through interventions on the stock exchange. Both TSOs publish on their respective website an indicator called projected closing linepack which allows the market to follow network balancing. (See Data Gas 3 for TIGF and SMART GRTgaz 4 for GRTgaz). The greater the imbalance, the more significant the balancing actions made by GRTgaz and the more offensive and stronger the action mode will be. The intervention on the stock exchange allows to fix a marginal buy price and sell price. At the end of the given gas day, the daily imbalance is cashed-out at the marginal price or at the average price if any optional balancing tolerance has been signed up. GRTgaz and TIGF would like to draw attention of the shippers to their commitment to be balanced on a daily basis, and incite them to do it promptly. A strong imbalance may lead to significant interventions with potential strong impact of market prices November 2016

6 NEW CAPACITIES AND NEW FACILITIES For this winter, the North zone will welcome the commercial commissioning of the Dunkerque PITTM. The Arc de Dierrey pipeline (from Cuvilly station to Voisines station) is in operation and can absorb the entry capacities from the Dunkerque PITTM. This major pipeline facility improves France security of gas supply and flows from west to east. As a consequence, it put an end to the West-East bottleneck which was part of the vigilance mechanism the previous years. An important step has been taken in December 2015, with the reinforcement of the West corridor and the commissioning by TIGF of the Adour pipeline. This new link increases interconnection capacities between France and Spain in the West of the Pyrénées. SPECIFIC MEASURES On 28 th November 2013, the French Minister in charge of Energy (Ministre de l Écologie, du Développement durable et de l Énergie) issued a decree implementing the Plan d Urgence Gaz (PUG, the French gas emergency plan, in application of EU Regulation 994/2010 from 22 nd October 2010 on the security of gas supply). This mechanism is explained in appendix 1. In addition to this national mechanism, GRTgaz puts in place each year a vigilance mechanism in order to anticipate strain situations on its network (see appendix 2). Such a mechanism is not necessary on TIGF s balancing zone because of its network s designand thanks to withdrawals capacities at Lussagnet allowing to cover peak periods November 2016

7 APPENDIX 1 : CUT OF MECHANISM (PUG) The French gas emergency plan is design to be rapidly implemented to prevent from or delay a supply crisis that could lead to not being able to fully meet gas needs in France or in part of the territory. The national gas emergency plan sets measures by order of priority in a case of crisis: 1. measures focusing on demand, 2. measures reducing public service obligations, 3. protective measures taken by French authorities, 4. measures and actions concerning urban heating, 5. last resort measures: selective service cut-offs. A service cut-off survey was undertaken to quantify the potential cut-offs as well as necessary timeframes. In case of a major supply crisis or local gas deficit making it impossible to provide natural gas to all customers in the concerned area, the operators of natural gas distribution and transport networks will, as a last resort, implement selective service cut-off measures to their customers (except MIG) according to the following principles: Network operators will alert their respective clients as soon as a major risk of supply interruption appears; Network operators will determine need of selective service cut-offs and potential cut-offs (depending on the results of the survey and the observed levels of consumption); Network operators will ask their clients to reduce their consumption following the priority order defined by the said mechanism November 2016

8 APPENDIX 2 : GRTGAZ VIGILANCE MECHANISM In order to alert the market and allow it to anticipate any strain situations, GRTgaz revives its vigilance mechanism by providing daily information on SMART GRTgaz website ( and by sent to shippers. The mechanism will be in operation from 16 November 2016 to 31 March The following strain situations will be studied for Winter : Insufficient balance coverage, North Bottleneck, South-East Bottleneck. The vigilance mechanism provides insight for the given day and the 5 following days. A vigilance indicator is daily published. It is composed of 3 levels with eventual recommendations determined by GRTgaz National Dispatching on a daily basis: Green : no strain identified Orange : orange alert in progress / likely network strain Red : red alert in progress / network strain observed or highly likely On that same day, in case a proven strain is not eliminated despite recommendations, GRTgaz will implement complementary measures. 1. The first level of action consists in using physical solutions available to GRTgaz such as the use of its line-pack, its safety stock or requests for help from other infrastructure operators. 2. When a bottleneck occurs, the case may be, the second level of action consists in publishing a notice on the capacities that will be reduced (interruptible capacity first) in order to rebalance supply and eliminate the bottleneck. This measure will only be taken on the current day. The interconnection points at stake are different according to the bottleneck: - North Bottleneck: Dunkerque PIR, Taisnières H PIR and Obergailbach PIR, Dunkerque PITTM, the North- South link. - South-East bottleneck: the North-South link, withdrawals from the South-Atlantic PITS. 3. The third level of action happens in the case of a local gas deficit on the network from a persistent bottleneck or overall global deficit in case of failure in balancing coverage. In these situations, GRTgaz will alert the department at the French Ministry for Ecology, Sustainable Development and Energy, who can activate the PUG (the French gas emergency plan) (see appendix 1). GRTgaz will then take all related measures prescribed by this plan under its responsibility November 2016

9 Bottleneck risks for Winter The South-East bottleneck depends on withdrawals from the South-East PITS and output from the Fos-sur-Mer terminals. Last winter feedback shows that the supply plan led GRTgaz to publish several orange and red alerts. The North bottleneck risk exists but is unlikely if LNG and South supplies are similar or higher than last winter. The West-East Bottleneck, part of the vigilance mechanism the years until now, disappeared thanks to the commissioning of the Arc de Dierrey (part 2) between Dierrey and the Voisines station. Reminder on bottlenecks In winter, GRTgaz daily set the overall capacity of the North-South link and the withdrawals from the South-Atlantic PITS. This capacity corresponds to the maximum capacity that can be transported on a given day by GRTgaz network from the North zone and from the South- Atlantic PITS towards the South zone. It is then distributed between the North-South link and South Atlantic withdrawals according to the rules defined in the Operational Network Code (CORE). The saturation of pipelines is based on several parameters, including the expected consumption and the provisional supply plan based upon the first day-ahead nominations at 2:00 PM. In normal network operating conditions, this overall capacity is higher than the sum of the firm capacities of the North-South link and of the withdrawals from the South-Atlantic PITS. Bottleneck appears when the maximum capacity said above is insufficient to meet the supply needs of the market: excess supply upstream of the bottleneck and supply deficit downstream of the bottleneck November 2016

10 South-East Bottleneck This bottleneck appears when weak output from the Fos-sur-Mer LNG terminals, low withdrawals from the South-East PITS, and high deliveries towards TIGF via the Cruzy interconnection point all happen. South-East bottlenecks appears in several areas, either on the Rhône pipeline, or at the Etrez compression site, or on the Centre-East and Berry pipelines providing West to East transit in the South zone. Recommendations: to ease this bottleneck, it is necessary to increase either output from the Fos-sur-Mer terminals or withdrawals from the South-East. The graph here on the left shows the situations of South-East bottleneck, with the consumption of the South zone on the X-axis and the supply downstream of the bottleneck on the Y-axis. This data is given for information purposes only. The red zone shows proven bottleneck situations. The orange zone corresponds to the situations where there is a bottleneck risk. The green zone is free of bottleneck November 2016

11 North Bottleneck This bottleneck appears when high supply in the North leads to saturate transit within the North zone of GRTgaz network towards the South zone. Dunkerque Taisnières Obergailbach The first bottleneck is located upstream of the Paris region and appears with high supply at Taisnières H and Obergailbach, and low deliveries at Oltingue simultaneously. Montoir Oltingue The second scenario is located more West, with transit saturation through Paris region with heavy supply in Dunkerque, Taisnières H and Obergailbach, and Dunkerque PITTM, combined with low deliveries at Oltingue and low withdrawals from the North-Atlantic and North-West PITS. Fos Recommendations: to deal with this bottleneck, supply must be reduced from the North (Dunkerque, Taisnières H, Obergailbach and Dunkerque PITTM), and withdrawals increased from storage facilities located downstream of this North bottleneck (North-West and North- Atlantic PITS), along with additional output from the Montoir-de-Bretagne LNG terminal or a reduced use of the North-South link with higher supply in the South zone. The graph here on the left shows the situations of North bottleneck, with the consumption of the North zone on the X-axis and supply upstream of the bottleneck on the Y-axis. This data is given for information purposes only. The red zone shows proven bottleneck situations. The orange zone corresponds to the situations where there is a bottleneck risk. The green zone is free of bottleneck November 2016