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Fluxys GTE 23Oct03

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					FLUXYS EXPERIENCE
TOWARDS LIBERALIZATION

          P. Wailliez - COO Fluxys




                2003204PW - GTE Paris 22.10.03 - 1
                                                          Liberalization: Fluxys experience


MARKET OPENING IN BELGIUM: a unique example in Europe

 %                      A strong acceleration
100
90
Less than 6 months   2002 FL Gas
 between decision
80                     Decree
 & implementation                  2001 B Gas Law
70
 60
 50                                             1999 B Gas Law
 40
 30
 20                                                            1998 EU GAS
 10                                                              Directive
  0




                                   2003204PW - GTE Paris 22.10.03 - 2
                                              Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY


• Regulation

• Actors

• Market and Network

• Costs




                       2003204PW - GTE Paris 22.10.03 - 3
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Regulation
BEFORE
• Clear Objectives
• Infrastructures enabling
  Gas Market Development
• Continuity of Supply
• Safety




                             2003204PW - GTE Paris 22.10.03 - 4
                                                          Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Regulation
NOW
• Same clear objectives but
• Regulators at Federal
  & Regional level in Belgium
  – Risk of regulatory pancaking
• Important impact on:
  – Value creation
  – Complexity
    (potential dis-optimization)


                                   2003204PW - GTE Paris 22.10.03 - 5
                                                      Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Regulation
THEREFORE
• Take initiative
  – Unbundling
  – Publishing Tariffs
  – Coordinate modalities
    of opening with Distributors.




                               2003204PW - GTE Paris 22.10.03 - 6
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Actors
BEFORE
• Integration
• Non-detrimental Decisions for Transport
  (molecule decisions taking into account network
  integrity)




                             2003204PW - GTE Paris 22.10.03 - 7
                                                            Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Actors
NOW
• Transport not under
  the umbrella of incumbent
  (incumbent decisions not granted)
  – Revenues
    (tariff hypothesis <> reality)
  – Continuity of Supply
    (network integrity <> portfolio optimization)




                                     2003204PW - GTE Paris 22.10.03 - 8
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Actors
THEREFORE
• Anticipate shippers Behavior & Needs
• Careful design of Access Rules.




                             2003204PW - GTE Paris 22.10.03 - 9
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and Network
BEFORE
• Long-term contracts
  & Easy forecasts
• Infrastructure Developed around Contracts




                            2003204PW - GTE Paris 22.10.03 - 10
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and Network
NOW
• Shorter Terms
  & Uncertainties
• Infrastructure Projects
  not tied to Molecule




                            2003204PW - GTE Paris 22.10.03 - 11
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and Network
THEREFORE
Develop
• Performant Forecasting Tools
• Probabilistic above Deterministic Approach.




                            2003204PW - GTE Paris 22.10.03 - 12
                                                     Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Costs
BEFORE
• Transport costs included
  in Commercial Margins




                             2003204PW - GTE Paris 22.10.03 - 13
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Costs
NOW
• Revenues models not always favouring an
  Entrepreneurial Behaviour
• Deregulation <> Optimisation




                            2003204PW - GTE Paris 22.10.03 - 14
                                                   Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY

Costs
THEREFORE
Further develop
• Cost Consciousness
• Customer-mind and Innovations




                           2003204PW - GTE Paris 22.10.03 - 15
                                                   Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY
Regulation - Actors - Market and Network - Costs




         Be Proactive & Innovative!



     One Example: Hub in Zeebrugge
    (and this happened before Liberalization)



                           2003204PW - GTE Paris 22.10.03 - 16
                                                                  Liberalization: Fluxys experience


             UNITED               NORWEGIAN
           KINGDOM                GAS FIELDS                         NETHERLANDS

                                                                      Zebra

                                                                      GTS


           Transco

          OVERSEAS
                               HUB                                    Ruhrgas
         LNG sources
                                                                      Wingas


    Gaz de France


                       Fluxys launched in 98-99
FRANCE                    the Zeebrugge Hub                                      GERMANY

                                               Soteg
SPAIN    SWITZERLAND                                      SWITZERLAND             EASTERN
                              LUXEMBURG
             ITALY                                               ITALY           COUNTRIES


                                          2003204PW - GTE Paris 22.10.03 - 17
                                                                                    Liberalization: Fluxys experience


         ZEEBRUGGE HUB: LIQUIDITY
         1999             2000                 2001                      2002                      2003
TJ/day
  6000

                                     OUT
                                                                                          55 Customers
                     IN
  5000



                Net Churning = 3      9
  4000
                                                                                     Market Evolution
              Gross Traded Volumes (*) up to 15 106 m³(n) / h                            (// UK)
  3000        [6 x Transport Capacity between UK & Continental Europe]
                           [3 x Belgian Peak Consumption]

  2000


     5 Customers
  1000




    0
         99     00                     01                    02                           03



    (*) estimated                Physical Volumes     Net Traded Volumes        Trend




                                                            2003204PW - GTE Paris 22.10.03 - 18
                                                        Liberalization: Fluxys experience


HUB CONTRIBUTION TO AN EFFICIENT GAS
MARKET

• Opportunities for optimizing Gas Supply
  Portfolio through Arbitrage

      Spread Trading
       – Location (Zeebrugge  Bacton)
       – Spot / Long Term
       – Spark (Gas  Electricity)
       – LNG / Pipeline Gas



                                2003204PW - GTE Paris 22.10.03 - 19
                                                                                                                         01




                                                                                                                                 0
                                                                                                                                     1
                                                                                                                                         2
                                                                                                                                             3
                                                                                                                                                   4
                                                                                                                                                        5
                                                                                                                                                             6
                                                                                                                                                                   7
                                                                                                                                                                        8
                                                                                                                                                                             9
                                                                                                                           /9
                                                                                                                         03 7
                                                                                                                           /9
                                                                                                                         05 7
                                                                                                                           /9
                                                                                                                                                                                 EUR/GJ

                                                                                                                         07 7
                                                                                                                           /9
                                                                                                                         09 7
                                                                                                                           /9
                                                                                                                         11 7
                                                                                                                           /9
                                                                                                                         01 7
                                                                                                                           /9
                                                                                                                         03 8
                                                                                                                           /9
                                                                                                                         05 8
                                                                                                                           /9
                                                                                                                         07 8




                                                                                    Continental Beach
                                                                                                                           /9
                                                                                                                         09 8
                                                                                                                           /9
                                                                                                                         11 8
                                                                                                                           /9
                                                                                                                         01 8                    Nov ‘ 98 Start Interconnector
                                                                                                                           /9
                                                                                                                         03 9
                                                                                                                           /9
                                                                                                                         05 9
                                                                                                                           /9
                                                                                                                         07 9
                                                                                                                           /9
                                                                                                                         09 9
                                                                                                                           /9
                                                                                                                         11 9
                                                                                                                           /9




                                      Source: The Heren Report (ESGM) & Distrigas
                                                                                                                         01 9
                                                                                                                           /0
                                                                                                                         03 0
                                                                                                                           /0
                                                                                                                         05 0
                                                                                                                           /0
                                                                                                                         07 0
                                                                                                                           /0
                                                                                                                         09 0
                                                                                                                           /0
                                                                                                                         11 0
                                                                                                                           /0

                                                                                    Bacton Day-ahead - Midpoint
                                                                                                                         01 0
                                                                                                                           /0
                                                                                                                         03 1
                                                                                                                           /0
                                                                                                                         05 1
                                                                                                                           /0
                                                                                                                         07 1
                                                                                                                           /0
                                                                                                                         09 1
                                                                                                                           /0
                                                                                                                         11 1
                                                                                                                           /0
                                                                                                                         01 1
                                                                                                                           /0
                                                                                                                         03 2
                                                                                                                           /0
                                                                                                                         05 2
                                                                                                                           /0
                                                                                                                         07 2
                                                                                                                           /0
                                                                                                                         09 2
                                                                                                                           /0
                                                                                                                         11 2
                                                                                                                           /0
2003204PW - GTE Paris 22.10.03 - 20




                                                                                                                         01 2
                                                                                                                           /0
                                                                                                                         03 3
                                                                                                                           /0
                                                                                                                         05 3
                                                                                                                           /0
                                                                                                                         07 3
                                                                                                                           /0
                                                                                                                         09 3
                                                                                                                           /0
                                                                                                                             3
                                                                                    Zeebrugge Hub Day-ahead - Midpoint
                                                                                                                                                                                          ZEEBRUGGE HUB: ARBITRAGE OPPORTUNITIES
                                                                                                                                                                                                                                   Liberalization: Fluxys experience
                                                                                                     Liberalization: Fluxys experience


 ZEEBRUGGE HUB: THE UK BEHAVIOUR
     TJ/month
      30000             Net Seller                       Summer
      25000                                              Surplus
      20000
      15000
IN
      10000
       5000
          0
       -5000

OUT -10000
      -15000                                                                                 Winter
      -20000                                                                                Shortage
      -25000
             -01


                      -01


                               -01


                                        -01


                                                 -01


                                                          -01


                                                                   -02


                                                                             -02


                                                                                      -02


                                                                                               -02


                                                                                                        -02


                                                                                                                 -02


                                                                                                                          -03
          01


                   03


                            05


                                     07


                                              09


                                                       11


                                                                01


                                                                          03


                                                                                   05


                                                                                            07


                                                                                                     09


                                                                                                              11


                                                                                                                       01
                                                                From UK        To UK


                                                                         2003204PW - GTE Paris 22.10.03 - 21
                                                                                                      Liberalization: Fluxys experience


 ZEEBRUGGE HUB: ANOTHER BEHAVIOUR
     TJ/month
       6000                   Net Buyer
       4000                         Selling
                                in the Winter
IN     2000

          0

       -2000

       -4000
OUT
       -6000
                                                             Buying
                                                         in the Summer
       -8000

      -10000
             -01


                      -01


                               -01


                                        -01


                                                 -01


                                                          -01


                                                                   -02


                                                                             -02


                                                                                       -02


                                                                                                -02


                                                                                                         -02


                                                                                                                  -02


                                                                                                                           -03
          01


                   03


                            05


                                     07


                                              09


                                                       11


                                                                01


                                                                          03


                                                                                    05


                                                                                             07


                                                                                                      09


                                                                                                               11


                                                                                                                        01
                                                                   From        To


                                                                         2003204PW - GTE Paris 22.10.03 - 22
                                                    Liberalization: Fluxys experience


TOWARDS MORE COMPLEXITY / UNCERTAINTY
Regulation - Actors - Market and Network - Costs




         Be Proactive & Innovative!


     One Example: Hub in Zeebrugge
    (and this happened before Liberalization)
 (would have this happened after Liberalization ?)


                            2003204PW - GTE Paris 22.10.03 - 23
                                                                  Liberalization: Fluxys experience


HUB IN EUROPE : WHAT’S NEXT?
Criteria:
• Interconnected Grid                                              Communication
• Access to Sources                                                   Flows
• Flexible & Willing Operator
• Market Driven Generation




                       ?            ?
A new Challenge :
Harmonization of Business Practices for [multi-] Hubs Trading (EU Standard)
& avoid Temptation of sub-Regional Behaviours



                                          2003204PW - GTE Paris 22.10.03 - 24
                        Liberalization: Fluxys experience




2003204PW - GTE Paris 22.10.03 - 25

				
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