Microsoft PowerPoint - Cairo Roundtable_Mashreq Energy Tariff

							  Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Mashreq Region: Energy Tariff Reform

                                   Paul Hunt


                            12 February 2008

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                        This project is funded by the European Union
    Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Overview
• Focus on Gas Price Formation
  – Global oil market exists; gas market is developing
  – Impact on electricity pricing
• The Economics of Gas Market Integration
• Gas Market Transition
  – Price alignment process
    Fuel po ert alleviation
  – F el poverty alle iation
  – Industry policy and legislation

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                          This project is funded by the European Union
   Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009



Overview of Mashreq Gas Networks
O    i    fM h      G N t     k




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                         This project is funded by the European Union
          Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




  The Economics of Market Integration
                                                  Price
                                                                               Government Revenue

                                                                               Revenue Forgone/Subsidy

                                                                               Deadweight Loss

               European Demand                                                 Additional Revenue




                                                                                           Internal
                                                   MVP                                     Demand
    Netback
                         LNG/Shipping Costs
                                                                                          Cost of Supply
                                                   CBP
              Cost of Production
                                                        Cost of Production
  MR                                                                            Internal Price


Volume             QX                                         Q1D                Q2D Q’          Q*         4
                                This project is funded by the European Union
     Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Gas Market Transition Policies

• Align the internal bulk supply price with a market-
  based valuation of gas

• Formulate and implement policies to alleviate the
  impact on low income consumers of increasing gas
  and electricity prices

• Establish gas industry structure and arrangements



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                           This project is funded by the European Union
    Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Price Alignment Process

• Egypt
  – Monetisation of “free gas”
     • Increase internal price to cost-based level
     • Then increase price to market value-based level
• Syria
                     free gas
  – Monetisation of “free gas”
     • Price related to netbacks and net forward from Egypt
• Jordan and Lebanon
  – Monetisation and capture of any implicit
    subsidisation

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                          This project is funded by the European Union
     Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Fuel Poverty Alleviation
             q
• Minimise requirement
  – General policies to promote economic growth and distribute
    benefits
• Funding
  – Monetisation and capture of surpluses in gas supply chain
• Implementation
  – Consistent with existing social protection policies and
    mechanisms
• Options
    Targeted direct payments or modified and subsidised tariff
  – T     t d di  t       t       difi d d b idi d t iff
    structures


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                           This project is funded by the European Union
     Roundtable on Energy Tariffs and Investment - Mashreq Region: Energy Tariff Reform 12 Feb. 2009




Gas Industry Policy and Legislation
• Remove exclusive rights to acquire
  and supply gas

• Define eligible consumers
   – Consumers who have access to a choice of
     suppliers

• Separate gas transmission and supply activities

• Establish effective and independent regulation

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                           This project is funded by the European Union