Flame conference amsterdam 13 th march 2007
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Flame conference, Amsterdam, 13 th March 2007. Liberalisation and Security of Supply. Steve Surrall, Director Business Development, Europe Downstream. Legal notice. This presentation includes forward-looking statements. Such statements are only predictions and actual events

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Flame conference, Amsterdam, 13 th March 2007

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Flame conference amsterdam 13 th march 2007

Flame conference, Amsterdam, 13th March 2007

Liberalisation and Security of Supply

Steve Surrall, Director Business Development, Europe Downstream


Legal notice

Legal notice

This presentation includes forward-looking statements.

Such statements are only predictions and actual events

or results may differ materially. For a discussion of

important factors which could cause actual results to

differ from the forward-looking statements, please refer to

BG Group plc’s Annual Report and Accounts 2005.


Introduction

Introduction

  • Changes in the UK gas market

  • Implications for the European gas market

  • European consumers able to seize opportunity?

Liberalisation and security of supply


Changing composition of uk gas supply 2003 07

400

350

300

250

million cubic metres / day

200

150

100

50

0

2004

2005

2006

2007

UK production

Norway

IUK imports

BBL

LNG terminals

Stock withdrawals

Changing composition of UK gas supply 2003-07

Source: National Grid

New import flows replace declining UKCS production


Investments decided in lower price environment

Investments decided in lower price environment

100

100

90

90

80

80

70

70

60

60

Langeled, BBL

50

50

Dated Brent ($/bbl)

UK NBP month ahead (p/therm)

40

40

30

30

20

20

Grain LNG

10

10

South Hook,

IUK

Dragon

0

0

2000

2001

2002

2003

2004

2005

2006

2007

UK NBP (p/therm) LH scale

Dated Brent ($/bbl)

Source: Argus

Capital deployed to supply growing import demand


Oil price indexation is it sustainable

100%

80%

Other

Other energy prices

60%

Electricity

per cent %

Crude oil

Heavy FO

40%

Gasoil

Gas price

20%

0%

UK

W.Europe

E. Europe

Oil price indexation: is it sustainable?

European Buyers’ Term Contract Indexation by Region

Source: Energy Sector Enquiry 2005-06

High oil prices may encourage revision of oil-indexed pricing


Implications for investment

Implications for investment

  • Competition and uncertain prices a challenge to investment?

  • UK and US examples prove this is not the case

BG Armada rig, North Sea


Transportation investment in infrastructure

Transportation – investment in infrastructure

  • Access to infrastructure remains problematic

  • Alternatives to unbundling must be demonstrated

BG pipe infrastructure

Unused capacity rarely released to market


Storage

Storage

  • Access to storage is key

  • Role of the regulator

    • incentivise new facilities

    • ensure fair access for new entrants

    • make storage available on non-discriminatory basis

Rough storage facility

TPA exemption can incentivise investment


Implications for new entrants and nocs

Implications for new entrants and NOCs

  • New entrants/NOCs seeking downstream role

  • European Commission recognises attributes of new entrants/NOCs

  • EU member states should welcome NOCs

Egyptian LNG


Conclusion

Conclusion

  • European Commission assert liberalisation and security of supply can co-exist

  • Open markets do not prevent the incentive to invest

  • Future UK gas supply position may have knock-on effects on aiding liberalisation


Flame conference amsterdam 13 th march 2007

Thank you


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