Sofia, Bulgaria, 30th January 2009

1. 5th SG Meeting Sofia, Bulgaria, 30th January 2009

2. Agenda 5th SG meeting

3. Agenda of 5th SG meeting

4. Review of Action Points

5. Update of Mailinglist • If you are missing on the GRI SSE Mailing list or think that somebody is missing, please write an E-Mail to • Konstantin.heiller@e-control.at • We are working to implement a “track keeping” tool in our webpage.

6. 1st Strategic Advisory Panel Meeting • 1st Panel Meeting on 29 Jan 2009 in Sofia • Fruitful discussion • Meetings planned twice a year • Outcome will be presented later under agenda topic work programme 2009

7. 2. Cooperation and coordination • Involvement of Gazprom in GRI SEE as an observer • e.g. on South Stream

8. 3. GRI SSE Draft Work Programm 2009- 1

9. 3. GRI SSE Draft Work Programme 2009 - 2

10. 4. The Bulgarian Gas Market • View of SEWRC • View of Bulgartransgaz Net

11. 5. Cooperation of TSOs • Memorandum of Understanding • Involvement of FSGZ, Bulgartransgaz, Transgaz

12. 6. Capacity, trading & transparency related issues • Conclusion of IPAs/OBAs in Baumgarten • Meeting of relevant TSOs this morning in Sofia

13. Liquidity and Gas Supply Security

14. What happened The recent supply disruption of a major gas source formally due to unclear and intransparent national (outside EU) transportation issues (like tariff regime and actual flow data) without internationally integrated oversight has lead to a major turmoil with economic and political consequences. It has been shown again (after early 2006) that national structures are not perfectly capable of overcoming the challenges of a more complex and international energy market. We would like to invite the EC, ERGEG and the relevant authorities to consider the following elements:

15. Some details of what happened It has been shown (particularly in SSE) that more liberalized markets tend to cope better with this supply disruption, e.g. in Austria the balancing market proved to provide sufficient balancing energy to keep the system stable. However, price response was rather opaque and not as expected in a fully liberalized market. The fact that the only nucleus of a market place in that area (CEGH) was shut down left many market participants with commercial and physical challenges to fulfill their obligations. Price level response was nearly inexistent in SSE, no transparent information on short term prices was easily available. Entry/Exit systems have proven to be more resilient and virtual embedded Hubs to be firm, other systems seem to be outdated considering modern challenges with multi market participants.

16. Multi TSO integration is necessary It has been shown that international TSO coordination is insufficient, also it has been shown that the current TSOs did not prepare for stronger multi system integration (e.g. also for physical west-east flows after 2006) despite being paid for back flow transport and to increase security of supply as requested amongst other occasions from EFET and GEODE during the 14th Madrid Forum, as can be seen on the relevant slide. We do attach the then issued joint letter of EFET and GEODE on the respective matter including a concrete time table and a phased and timed approach. This letter was also supported by other associations during the Madrid Forum.

17. Transparent liberalised market increase SoS Transparent markets automatically help security of supply as higher short term prices in a given area automatically attract different gas providers to that area as well as it frees up existing flexibilities within contracts, like voluntary customer shut down under predefined commercial conditions. The European market offers sufficient flexibilities from other sources including LNG to at least reduce significantly the supply risk exposure. This is possible to the extent of physical connection and interoperability. SSE markets are mostly small markets, so volumes are not so large compared to the rest of European market. 

18. Improving liquidity and gas supply security.In NW Europe, hub prices are well correlated Source: Eon Energy Trading

19. Improving liquidity and gas supply security. Gas trading may well retain a regional element • Large (virtual or physical) trading hubs are needed for sufficient liquidity. • Gas takes far longer to travel than electricity • High economic cost of full interconnection across whole of EU. • EU gas market will be a series of ‘pools’ rather than a ‘copper plate’ • LNG links some pools, as well as pipelines E.g. IEA view of possible gas market development

20. Actions to do We would like to invite the EC, ERGEG and relevant authorities to take concrete actions to strengthen international system resilience, system integration and establishing transparent markets if this is possible on a European level and particularly in GRI SSE as a quick start. A first step could be done via the commissioning of a study taking findings of the current situation, the request by market participants as expressed in Madrid also via the joint letters into account and delivering a proposal for clear measures as a result for short term (like reverse flow capabilities – measuring devices, sometimes compressor design, market rule compabilities, enhanced market transparency including prices, entry/exit systems…), mid term (small trunks of infrastructure connecting different systems were not sufficiently existent) and longer term actions (new supply possibilities and regionally operated systems with regional tariffication and regulation) to be executed by the relevant parties and member states for SSE (and potentially the energy community area outside the EU).

21. Actions to do (2), please do it really this time!! We

22. Improving liquidity and gas supply security. Different EU gas prices within regional grids?

25. Presentation by GDF Suez

26. 7. Effects of import cuts on the SSE region None >=25% 26%-49% South South-East region most affected by cuts in gas transit through Ukraine 50%-75% 75%-100%

27. 7. Impact of gas crisis on EU MS & EC MS

28. 7. Gas crisis – lessons learnt – 1 In general: Liberalized markets tend to cope better with supply disruptions • If the markets are allowed to function, even in emergency situations, the systems are capable to adapt more quickly • Transparent markets automatically increase security of supply as higher short term prices in a given area automatically attract different gas providers to that area Improving interconnections between markets • North-South connections • Interconnectors need to allow bidirectional gas flows • Southern corridor • Western Balkans connection

29. Coordination between TSOs Better coordinated Gas Dispatching between TSOs would enable faster reaction to disruptions Regional, coordinated infrastructure planning and better regional market integration would make the system much more resilient Regional planning of infrastructure and modeling of “emergency” situations and their effects on the grid would help to identify high priority investment projects Developing storage capacities in line with market requirements Access to storage must be provided through transparent and non-discriminatory capacity allocation mechanisms and congestion management procedures 7. Gas crisis – lessons learnt – 2

30. 7. Improving interconnections between markets • North-South connections • Poland – Slovakia / Czech Republic • Slovakia – Hungary • Romania – Hungary • Germany – Italy, Slovenia (Tauern Gas Pipeline) Physical reverse flows • Romania, Bulgaria, to Greece and Turkey (LNG) The Southern corridor • Nabucco • South Stream Western Balkans connection • Hungary and Croatia • Bulgaria and Serbia • Gasification and connections to Macedonia, Albania, Montenegro, BiH

31. Any other Business • Florence School of Regulation • Work shop:secure gas supply for Europe and solidarity issues • 3 April 2009, Vienna

32. Next Meetings • Proposal: second half of April second half of June • Venue

33. Contact • Konstantin Heiller • Gas Department • Konstantin.heiller@e-control.at • +43 1 24 7 24 810 • +43 664 966 7239 • www.e-control.at