Thomas Kleefuß (NET4GAS CEO): The Gas Target Model – Requirements and consequences for the CEE Region, 18th Euroforum Annual Conference, Berlin, October 23rd 2012

1. Connecting Markets
The Gas Target Model – Requirements
and consequences for the CEE Region
Thomas Kleefuß, CEO
18th Euroforum Annual Conference
Berlin, October 23rd 2012

2. AGENDA
Overview of Infrastructure developments in CEE
Making the European Gas Target Model work
Requirements for a new market design
Conclusion

3. Gazelle will transport from January Nord Stream
gas to Waidhaus and change gas flows in CEE
Commentary
Nord Stream
 Capacity 30 bcm/y
 Length 166km, size DN
Gaspool 1400, pressure PN 84
OPAL
 Budget €377mm (CZK 9,378mm)
 NET4GAS delivers projects on time
and within budget:
 1,035 easement contracts
negotiated and signed
 Transfer station in Brandov
started-up in October 2011
NCG
 First 20km will be completed by
Gazelle
November 1st 2012
VTP  This will guarantee full entry
capacity for all volumes from the
GE contract and OPAL
 Start-up date January 1st 2013

4. Liquidity in CEE will improve by new gas supplies
from the southern corridor and the north south
connections enable market integration
The southern corridor will
trigger upstream
competition against
russian gas where as the
new North-South
Corridor(s) are will enable
to connect neighbouring
markets with just two
PL- SK
(smaller) projects: a)
b)
a) Poland connection
(using the SK-HUN
SK-HUN
connection or existing TGL
lines)
b) Oberkappel
connection (in
cooperation with TGL)
NB: a new corridor more East would
just create an additional route for
Russian Gas what isn‘t needed

5. The „Turn Table“ for Gas in Central Europe supports
east-west and north-south transits
Sayda
35 mil m3/d 18 mil m3/d
35 mil m3/d
Brandov
Olbernhau
35 mil m3/d
92 mil m3/d Gazelle Hospozín
93mil m3/d
0,5 – 2,5 mil m3/d
93 mil m3/d
Český Těšín
Waidhaus
30 mil m3/d
70 mil m3/d
93 mil m3/d
30 mil m3/d
180 mil m3/d
HPS Lanžhot
Významné předávací stanice 25 mil m3/d
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6. NET4GAS is committed to develop and
connect markets
NET4GAS the Turn Table for Gas in CEE
Pro-actively
Develop innovative design the market
Transform our
strength into growth products Influencing the market
Pillars of Fast, flexible and
rules shaped by
Development of assets: transparent support of
improvement, EU, ENTSOG and ACER
New connections and traders & suppliers and
development interconnectors, other network operator
Develop new tariffication
and growth efficient redesign of business by innovative
methods which allow
existing capacities and customer-oriented
financing of SoS
products
Asset Management Sales & Regulation
NET4GAS Operational and commercial excellence for a safe, reliable and
foundation environmentally friendly transport service
Performance-driven culture that inspires,
develops and challenges employees
6

7. “GATRAC” Bundled Hub-to-Hub products
as a role model for Europe
cross border gas transports
can be met rather quickly by
expansion of the GATRAC
Benefits:
TTF
No need to amend legal
framework if national legal
rules are not mandatory
for cross border capacities
Similar procedures and
contracts for all routes
Compatible with TRAC X
VTP
NCG
VP
PEG
CEGH current scope
of cooperation
possible future
routes
7
F-BD

8. Our strategic vision was implemented in the Gas Target
model – NET4GAS promotes market integration in CEE
NET4GAS Vision and Methods
 9 – 11 functional gas market areas within the EU
(instead of 30+ today) 
European Gas
 Integration of trading regions via TSO consolidation with
Target Model
of
strong focus on synergies

CEER / ACER  Remaining functional markets are sufficiently physically
connected – as long as congested connections
exit, market coupling procedures are applied 
 Appropriate EU-wide tariffication methodology for TSOs
to be established (with cross-border cost allocation) 
8

9. Gas Target Model
EU Border LNG
VP
Production Storage
Endcustomer
Gasinfrastructure - EU Marktarchitecture
today: tomorrow:
28 E/X-Systems 1) > 10 E/X-Systems 2) One european
As premises for functional E/X-System
(national, sub-national) markets
6 national Systems: 40 bcm < x < 100 bcm
4 national Systems: 12 bcm < x < 18 bcm To difficult and to long for
15 national Systems: 1 bcm < x < 9 bcm realisation
(x = annual consumption)
1) after implementation of 3rd package
2)no congestion or restriction in combination of Entry and Exit
9

10. Trading Regions enable i.e. faster establishment
of functioning wholesale markets
 Trading Region AB = Cross-border
entry/exit system including all nominated
Trading Region model at a glance points on the transmission systems of
countries A and B
 End-user Zone = National balancing zone
for national final customers, no matter
Country A Country B the system (distribution or transmission)
they are connected to
Trading Region AB  Virtual point of the trading region serving
as the sole marketplace of the trading
VP region and all attached end-user zones.
Shifting of gas between trading region
and end-user zone is done by nominating
a virtual exit on the VP.
 A trading region allows shipper to
End-user End-user bundled their purchase portfolios but not
the supply portfolios of the countries
Zone A Zone B inside
 Storages and indigenous productions of
Final customers (A) Final customers (B) the countries inside the region are linked
to the VP
 The trading region model reduces the
E or X contract X contract
requirements of legal conditions between
participating countries for establishing of
cross-border markets as much as
NB: Trading regions can be developed also for more than two
, possible
countries and don’t hamper the establishment of full merged
markets later
-
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11. The pilot project of “Trading Region” is a
first step towards the Gas Target Model
Trading Region in Central Europe Commentary
PL-Hub  A Central European trading region would
Gaspool facilitate the creation of one common virtual
trading point and the establishment of a single
gas exchange, the benefits of which are:
 Establishing a functioning gas market with
hub-to-hub capacity products to all
neighbouring markets and potentially
NCG beyond
(CEGH+)  Cross-regional arbitrage opportunities and
HUN-Hub diversification of gas suppliers
 Increasing liquidity and pricing competition
 Shift of idle transit capacities to required
PSV intra-market capacities
 Reduction of pipe-to-pipe competition and
optimal application of existing pipeline
infrastructure within region
Trading Hubs

12. Connection to Oberkappel will support an
EU-North-South corridor and serve as a
backbone for a trading region CZ-A-SK-HU
Oberkappel connection  Most efficient investment
compared to WAG
extension
 N4G North-South-corridor
to Poland is already
reflected in the European
2 Investment plans (#1).
1 (Moravia Project)
Oberkappel
 N4G now tries to include
connection Oberkappel connection in
the regional and European
Eustream investment plans (#2)
Baumgarten
UGS Interconnection point Compressor station
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13. 13

14. Market Survey 5GL was promising with regard
to the connection between Austria and Italy
Partner (TSOs) and necessary investments
 Tauerngasleitung GmbH, TGL GmbH: Tauerngasleitung from Haiming (D) to Tarvisio (I) and
connection to Slovenia (app. €1,2 bn )
 NET4GAS. s.r.o.: N4G-Oberkappel Interconnection, ONI (app. € 150 mio )
 Bayernets GmbH: “Monaco-Pipeline” (intra national grid extension)
 Geoplin Plinovodi: Interconnection to the Tauerngasleitung
 Interconnecting five gas markets
o Germany (NCG, Gaspool)
o Austria (VTP = CEGH)
o Italy (PSV)
o Czech Republic (VOB)
o Slovenia (VTP)
 Market Survey
o Start: August 2011
o End: November 2011
o More than 230 shippers informed
o Results expected soon
• Supported by
o National Regulators
o EC DG Energy
 Implementation
o Depends on the results of the recent market
survey and a possible open season procedure
o Not before 2016/17

15. The Gas Target Model will work, if….
 Regulators will offer a stable outlook and leave TSOs incentives for cooperation
 Regulators will take a long term view and develop new financing mechanisms for
sufficient transit and SoS capacities
 TSOs and shippers take an active role in regional markets developments
 the development and implementation of Hub-to-Hub capacity products e.g. (GATRAC)
will be supported by all stakeholders incl. shippers and producers
 Efficient Investments will made
 Based on integrated grid and capacity mapping
 in line future market design (gas target model)
 more integration (include existing assets) than „in addition“ (avoiding asset
competition)
 TSO consolidations will take place - also cross border
 regulatory regimes for all infrastructure will be harmonized

16. Connecting Markets
Thank you for your attention!
Berlin, October 23rd 2012