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Unbundling & Liberalisation. Creating new challenges and opportunities The ‘Belgian case’. Rudy Van Beurden. GAS TRANSPORT Existing company with a new name: Fluxys. GAS SALES & SUPPLY New company with an existing name: Distrigas. FLUXYS: PROACTIVE UNBUNDLING 11-2001. Former Distrigas.

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unbundling liberalisation

Unbundling & Liberalisation

Creating new challenges and opportunities

The ‘Belgian case’

Rudy Van Beurden

fluxys proactive unbundling 11 2001

GAS TRANSPORT

Existing company with a new name:Fluxys

GAS SALES & SUPPLY

New company with an existing name:Distrigas

FLUXYS: PROACTIVE UNBUNDLING 11-2001

Former Distrigas

Why proactive unbundling :

  • Draft proposal 2nd EU directive included legal unbundling
  • Market perception: legal unbundling most effective to ensure level playing field
  • Strategic move: organise rather than undergo changes
shareholders
SHAREHOLDERS

SUEZ

100%

SUEZ-TRACTEBEL

PUBLIGAS

  • Board and Executive Committee:two federal government representatives in an advisory capacity
  • Right to oppose to decisions about and transfers of strategic assets if considered prejudicial to federal energy policy

57.25%

31.25%

FLUXYS

11.50%

(+ 5.21% shares owned by Suez-Tractebel)

1 share

FIRST MARKET OFEURONEXT BRUSSELS

BELGIAN STATE

GOLDEN SHARE

unbundling the challenges
Unbundling: the challenges
  • Strategical: establish new objectives
  • Contractual: need for formal agreements between an increasing number of players
  • Commercial: setting up new relationships and obtain information from the market
  • Changing/unstable regulatory environment
  • Operational: Gas flow management & grid balancing
  • Investment planning: obtaining market information and commitments in due time
fluxys challenges in the liberalised gas market
FLUXYS’ CHALLENGES IN THE LIBERALISED GAS MARKET

interconnection

connection

End-consumers

Fluxys

Adjacent operator

  • Put into practice framework to install level playing field for suppliers: Code of conduct
  • Arrive at regulated tariffs providing sufficient return to justify investment
  • Cope with highly complex interfaces in a multi-shipper environment

Open access to system

Supplier

Supplier

Supplier

Free choice of supplier

transportation agreements new relationships

ConnectionAgreement

Exploring the Current Legal Environment

Transportation agreements: new relationships

Gas supply licence

Shipper/

Trader

Transport ServicesAgreement

+ (with connection procedure)

AllocationAgreement (at Supply Point)

End-consumer

Transporter

Transport licence

Eligible

regulatory environment
Regulatory environment
  • The ‘Belgian case’
    • 1 federal regulator
    • 3 regional regulators
    • Different levels of market opening in each region
    • Public distribution zones sometimes covering more than 1 region
  • Continuous changes asked by different authorities  challenge of coping with system changes
  • Low profitability on transport and storage activities  reduces entrepreneurship
  • Annual  multi-year tariffs as from 2007
belgium proactive acceleration of market opening

A strong acceleration

100%

100

92%

90

83%

07.07

80

07.04

70

65%

58%

60

07.03

01.03

47%

50

08.00

07.01

40

30

20

1998 EU Gas

10

Directive

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Belgium: proactive acceleration of market opening

100% opening in Flemish region

gas flow management grid balancing
Gas Flow Management & Grid Balancing
  • Exponential growth of data to be interchanged in a multi-shipper environment
    • Hourly flow nominations by shippers enabling Fluxys to set grid configuration
    • Hourly matching information with adjacent operators to facilitate cross-border transactions
    • Hourly flow allocations + metering data services by Fluxys enabling shippers to stay within balance and thus avoid balancing charges
  • Residual balancing by Fluxys far more complicated:
    • Gas price is main flow driver for shippers
    • Shippers can arbitrage between balancing charges in different systems
    • System integrity factors (stable inflow and gas quality) considered pure TSO concern
investment planning a complex issue in an unbundled and regulated environment
Investment planning: a complex issue in an unbundled and regulated environment
  • Shippers uncertain as to their market share in the future  fear for ‘open positions’:
    • larger part of supply portfolios is short-term
    • hence: more shorter term transportation contracts
  • Fluxys uncertain about regulatory environment and profitability  financing more complex
  • Belgian gas demand 2000-2014 to rise by 46% ➔huge investments needed
  • Shippers’ behaviour increasingly unpredictable + unpredictable regulatory environment ➔lack of adequate investment signals➔increasing risk of stranded investments
new opportunities
New opportunities
  • Zeebrugge Hub: created proactively in 1999
    • Hub services  Huberator
    • Cleared spotmarket  APX Gas Zeebrugge B.V.
  • Shipper & ICT services  GMSL
  • Becomes a catalyst for further infrastructure investments
    • LNG terminal expansion by Fluxys LNG
    • BBL pipeline  BBL Company B.V.
    • Futher investments in transit capacity (open season launched)
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