The Global Gas Quality Perspective: The “European NGC” View

1. The Global Gas Quality Perspective: The “European NGC” View Presentation to Platts 2nd Annual Gas Quality/Interchangeability Forum, 13-14 November 2006 Wim Groenendijk Chairman EASEE-gas Executive Committee

2. European Commission Member States Regulators Industry European Association for the Streamlining of Energy Exchange- gas • Created in March 2002 at initiative of European Gas Regulatory Forum (‘Madrid Forum’) • Mission: “To develop and promote common practices to simplify and streamline business processes between the stakeholders that will lead to an efficient and effective European Gas Market” • Registered office in Paris, France

3. Producers Producers Producers Producers Associate Associate Associate Associate Members Members Members Members Traders & Traders & Traders & Traders & Shippers Shippers Shippers Shippers Transporters LNG Terminal and Storage Operators and Suppliers Suppliers Suppliers Suppliers Service Distribution Distribution Distribution Distribution Providers Network Network Network Network Retail Retail Retail Retail Operators Operators Operators Operators Suppliers Suppliers Suppliers Suppliers End Users End Users End Users End Users EASEE-gas membership segments • 78 full members and 22 Associate members • Six segments are currently Active

4. Members Members Producers Transporters Distribution Traders & Suppliers Retail End LTSOSP* Producers Transporters Distribution Traders & Suppliers Retail End LTSOSP* Network Ops Shippers Suppliers Users Network Ops Shippers Suppliers Users EASEE-gas Structure *LNG Terminal and Storage Operator Supervisory Board Board and Service Provider Advisory Executive Executive Advisory Panel Committee Committee Panel Working Group 1 Working Group 1 IT Communication Network IT Communication Network Working Group 2 Working Group 2 Real Real Time Data Exchange (not currently active) - - Time Data Exchange (not currently active) Working Group 3 Working Group 3 Edig@s Edig@s Message Codification and Maintenance Message Codification and Maintenance Working Group 4 Working Group 4 ebXML ebXML (not currently active) (not currently active) Working Group 5 Working Group 5 Business Rules Business Rules Working Group 6 Working Group 6 Harmonisation of units (work completed) Harmonisation of units (work completed) Working Group 7 Working Group 7 Message Specification Message Specification Working Group 8 Working Group 8 Gas Quality Harmonisation Gas Quality Harmonisation Working Group 9 Working Group 9 Codification and Definitions Codification and Definitions Working Group 10 Working Group 10 Business Process Model Business Process Model

5. Common Business Practices CBPs approved to date: 1. Harmonisation of Units (2003) 2. Harmonisation of Nomination and Matching Process (2003) 3. Edig@s Protocol (2004) 4. Harmonisation of Gas Qualities (2005) 5. Interconnection Agreement (2005) 6. Constraints Handling (2005)

6. Gas Quality HarmonisationBackground • Madrid Forum VII (2002) identified the need for removing technical obstacles for interoperability of different natural gas qualities. • Different requirements throughout Europe regarding natural gas quality are a potential and real barrier for the creation of an efficient European gas market. • Madrid Forum invited EASEE-gas to take the lead in discussions among stakeholders with the aim of streamlining interoperability for high calorific gases.

7. Balancing Policy Objectives Internal market/ competition EU Energy Policy Security of supply Protection of the environment Harmonisation of gas qualities affects all three policy objectives

8. Gas supply balance in the European Union Source: Roberta Luxbacher, Flame 2006

9. Source: Roberta Luxbacher, 2005

10. Gas Quality HarmonisationThe Approach Extensive industry consultation has taken place Technical advice received from Marcogaz, the technical association of the European Natural Gas Industry, reviewing the safety implications for household appliances in the interest of small consumers.

11. The Result: CBP 2005-01 CBP 2005-01 was approved by the EASEE-gas Executive Committee on 3 February 2005. • The CBP recommends natural gas quality specifications at cross border points in Europe and describes recommended gas quality parameters, parameter ranges and an implementation plan. • Natural gas arriving at cross border points in line with these proposed quality specifications can not be refused for quality reasons. • The CBP does not in any way restrict parties at a cross border point in agreeing other specifications.

12. High calorific gas without odorants European Cross Border points EU entry points LNG import terminals send-out Excluding areas of production and isolated systems where production, transportation and utilisation are combined. Application Areas

13. Gas Quality HarmonisationThe Arena Nearly 80 cross border points involved

14. btu/scf ~ 1250 ~ 1455 Approved parameters, values and ranges * EASEE-gas has organised an oxygen measurement survey, which will examine the maximum feasible limit equal to or at an alternative specified value below 0.01 mol %. ** At certain cross border points, less stringent values are used than defined in this CBP. For these cross border points, these values can be maintained and the relevant producers, shippers and transporters should examine together how the CBP value can be met in the long run. At all other cross border points, this value can be adopted by 1 October 2006.

15. The Gas Quality Harmonisation Common Business Practice

16. Implications CBP 2005-01 Harmonisation of Gas Qualities implies: • Harmonisation across Europe (giving optimal freedom to shippers to ship gas across Europe) • Each member state allowed to apply its own standards within the country • Each member state needs to decide how to deal with the possible difference between national quality specifications and those at cross border points

17. LNG quality ranges vs Market Specifications LNG Supplies

18. Current Status • EASEE-gas has invited EU Commission to initiate a study coordinated at EU level to address the major common technical issues raised (e.g., functioning of domestic appliances, efficiency, …) • Commission has issued CEN Mandate to arrive at common gas quality specification for Member States based on the work by EASEE-gas • EU Standard to be adopted within four years after acceptance of the mandate

19. www.EASEE-gas.org Wim Groenendijk Chairman EASEE-gas Executive Committee Wim.W.P.Groenendijk@shell.com