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Indira KaliaskarovaBG Group
Energy Security: Overview of the UK Gas Market
Interdisciplinary Seminar on Recent Developments in Euro-AsiaNovember 17 2004, Reading
European Market Overview – Headlines
• Growth in gas demand is driven by economic growth and modest levels of new gas to power
• Market Integration of UK, Northern Europe and Italy
• The Triumvirate of dominant suppliers: Norway, Russia and Algeria look to be joined by a fourth: Exxon/Qatar; with dominant buyers Eon/Ruhrgas, ENI, Gasunie, GdF and Centrica
• Gasunie and Statoil look to control flows in Northern Europe as markets and distribution becomes more accessible - unpredictably
Interconnected European Markets
1. Interconnected markets: EU7 UK & Ireland, Belgium, Netherlands, France, Germany, Austria, Italy
2. Island markets Southern France, Spain, Portugal
3. Transit countriesPoland, Czech Republic, Slovakia, Austria
4. Other accession countriesRomania
Markets along the UK
Demand 2003There are 4 Markets
EU7 Market 2003-15
1018976444216
9377
27
bcmaUKGermanyItalyNetherlandsFranceBelgiumAustriaTotal EU7Spain
2003 2015Power 90 130Other 287 360Total 377 490 aai 2.2%
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bcm
a
Uncontracted NWEPipe
Other
Qatar LNG
Med LNG/Pipe
Norway
Russia
Indigenous Supply
Demand
NW Europe Supply - Demand
Challenge to supply Northern Europe after 2008
EU7: UK, Belgium, Netherlands, Germany, France, Italy, Austria
European Supply /Demand EU7
Source: BG View
Access to Markets: Neither closed nor open
GoodModeratePoor
• EU liberalisation progressing but at different speeds
• National policies a balance of
• EU and Member State issues
• Regulation and competition law
• Price vs security• Control vs market
UK: Accessible and competitive marketBecoming less liquid.
Belgium: Effectively closed
Germany: No effective competition but competition law may provide opening in mid term
France: prospect of competition for large industrials in NW France
Source: DG TREN, 2004
Netherlands: limited competition amongst large industrialsGasunie de-merger stalled
Italy: competition restricted to wholesale market and large industrials
Today: Markets and transmission becoming more accessible, but sporadically
Overview of Market Access Liberalisation
Spain: Island market with Gas to Gas competition
Incumbents Response to Competition
EU7: UK, Belgium, Netherlands, Germany, France, Italy, Austria
German companies vertically integrating to East, and into the UK
Centrica - concentrating on UK
Gaz de France - expanding into Germany through acquisition ENI – protecting
Italian markets by exporting supply
Gasunie - Main buyer in NL; aims to be
dominant producer and supplier of swing in
Northern Europe
Incumbents Actions
Share of contracted gas - 2010 - bcma
Other, 123
ENI/ENEL, 83
Eon/Ruhrgas, 81
Gasunie, 80
GdF, 56
New, 27
Centrica, 21
Wingas, 18
Exxon LNG, 16
Distrigas, 15
Uncontracted, 12
Source: BG View
2010 Contract Share in EU7
Summary
Underpinned by oil-related gas pricing
•Managing Price Risk
•Accessing new markets
•Competing on value
•Managing Volume Risk
•Niche under incumbents’ umbrella
•Creating new markets, eg power
Incumbents IntegrateCompetitive Market
Key Play: Key Play:
Gas demand
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Belgium otherBelgium powerAustria otherAustria powerNetherlands otherNetherlands powerFrance otherFrance powerItaly otherItaly powerGermany otherGermany powerUK otherUK power
EU7: UK, Belgium, Netherlands, Germany, France, Italy, Austria
EU7 Gas Demand• EU7 market
growth 2003 to 2015 is 2.0% aai
• Upside new generation could add xx bcma by 2015
EU7: Comments
2003: bcmaTotal 378Power 90Other 288
2015: bcmaTotal 490Power 130Other 360
Spain
• Spain could grow from 27 to 45 bcma over same period
Source: BG View
Section 1
Players/ownership - notes
PAST - Who was who CURRENT - Who is who
DISTRIGASBelgian monopoly energy operator and owner of network. Distrigas was split into Distrigas - natural gas marketing and trading, Fluxys – grid owner and operator, and Electrabel – electricity production / distribution / marketing
SUEZOwns 47% of Distrigas and 47% of Fluxys. Owns 55% of Electrabel through its subsidiary Tractebel. Electrabel is active in power generation in Belgium, the Netherlands, Spain, Hungary, Italy, Poland and Portugal
EdF Electricity production, distribution and marketing in France
EdFOwns 34.5% of German utility EnBW, 15% in Italian utility Edison, 100% of UK utility EDF Energy (formerly London Electricity), and has stakes in two Hungarian gas distribution companies
ENIEnergy production, transmission and marketing in Italy. Some activities were split off: Italgas – gas retail, - Snam Rete Gas – gas storage and transmission, and Enipower – power generation and marketing
ENIOwns 100% of Italgas, 50.07% of Snam Rete Gas, 100% of EniPower. Jointly with EnBW, owns almost 100% of German gas distributor GVS. Owns stakes in utility companies in Hungary, Slovenia, Spain, Greece
GdFGas exploration, production and supply in France
GdFIn addition to activities in France, has acquired stakes in upstream and downstream in Germany, and has further downstream interests in Hungary, Slovakia, Italy, Belgium, Austria, Portugal
VEBA – Vereinigte Elektrizitaets- und Bergwerks ACVAIG – German conglomerate(merged into EON in 2000)
EON-RuhrgasEuropean energy supplier. Dominates large part of German market, acquired gas giant Ruhrgas, owns Powergen in UK, and owns stakes in players in Swedish and Dutch electricity market, and in energy markets in Czech Republic, Slovakia, Hungary
RWE Established in 1898 as the Rheinisch-Westfälischen Elektrizitätswerks Aktiengesellschaft (RWE), Essen, (Power station cooperation Rheinland Westfalen, Essen)
RWEFully owns Thyssengas in Germany, Innogy in the UK, Transgas in Czech Republic. Owns significant stakes in energy utilities in the Netherlands, Hungary, Slovak Republic, Poland, Austria
VNGVerbundnetz Gas Aktiengesellschaft, Leipzig, a supra-regional gas merchant company primarily active in the east German states and the German capital city of Berlin
VNG48% owned by German regional gas supplier EWE of Oldenburg. Remaining shares owned by local authoritiesVNG has significant stakes in Polish and Slovak energy companies
Section 1