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Demand-Supply Balance Will Tighten 3 The economic crisis has slowed down demand -But this will only give a short breathing space before a post- crisis recovery boosts demand again Declining Oil and gas production -European production of oil and gas will decline and import dependency will increase -Uncertainty about increased production in the large gas exporting countries in the region Deteriorating assets and inadequate addition of generation capacity -In South East Europe a net loss of generation capacity of 1 GW occurred between Slack created by the break-down of centralized economies has now disappeared
Citation preview
BulgariaKey Energy
Challenges: Energy Security
Presentation at Kapital Energy Conference
Sofia, February 23, 2010
Peter Johansen and Claudia VasquezEurope and Central Asia Region, World Bank
Key Energy Challenges 1. Tightening demand-supply balance
– Economic crisis provided only temporary “relief” as demand declined while supply surplus has eroded
2. Gas supply security concerns – Ukraine-Russia gas crises demonstrated the vulnerability of the
Bulgarian gas sector to external shocks
3. High energy intensity – Bulgaria is the most energy intensive country in the EU and in the
Balkans. This hurts competitiveness
4. Underdeveloped regional energy market– Low electricity prices encourage wasteful energy use and discourage
investments. Low gas penetration. Need for regional cooperation in gas transport and power trade.
Demand-Supply Balance Will Tighten
3
• The economic crisis has slowed down demand- But this will only give a short breathing space before a post-
crisis recovery boosts demand again
• Declining Oil and gas production- European production of oil and gas will decline and import
dependency will increase- Uncertainty about increased production in the large gas
exporting countries in the region
• Deteriorating assets and inadequate addition of generation capacity- In South East Europe a net loss of generation capacity of 1
GW occurred between 1995-2005- Slack created by the break-down of centralized economies
has now disappeared
Key Energy Challenges
1. Tightening demand-supply balance
2. Gas supply security concerns – Ukraine-Russia gas crises demonstrated the vulnerability
of the Bulgarian gas sector to external shocks
3. High energy intensity
4. Underdeveloped regional energy market
Security of Supply is a Key Priority
• The 2009 gas crisis affected the Bulgarian economy severely
– Bulgargaz had to stop domestic gas supply– Major industrial consumers of natural gas had to shut down, including
240 MW gas fired power capacity– Estimated loss to the economy > €250M
• There were regional impacts– Electricity exports suspended to supply the domestic market– Gas transit to Greece, Turkey and Macedonia was interrupted
• Ordinary consumers were also hit– Household consumers encouraged to use electricity and wood for
heating and cooking – Increases in wood and fuel prices
• Loosing access to energy has dramatic consequences
High Reliance on Gas Imports• Gas demand
- Domestic consumption 3.2 bcm/y evenly divided between district heating, the chemicals industry (principally fertilisers) and households
• Gas supply- Limited domestic gas reserves (about 6 bcm*)- Limited internal production (5 percent from offshore Galata
field)- Import dependency: 95 percent of gas imported from
Russia - Limited storage capacity: Chiren 0.35 bcm (plan to increase
to 0.8 bcm)
* bcm=billion cubic meters
Gas only Flows in One Direction
• Extensive gas pipeline infrastructure:- High pressure network 1,700 km- Transit pipeline 950 km
Chiren UGS
Legend:Main gas pipelineGas pipeline branchTransit gas pipelineCompressor stationGas reduction station
CS Kardam 1CS Kardam 2
CS Lozenetz
CS Strandja
SevlievoLovech
Zlatna Panega
Roman
Botevgrad
Elin Pelin
Pleven
Sofia
Pernik
Vratza
MontanaRusse
Razgrad
IsperihKubrat
Turgoviste
BialaLevski
Varna
Dobrich
Gen. Toshevo
Burgas
DebeltIambol
Sliven
Rakovski
PlovdivPazardjik
Asenovgrad
Parvomaj
Stara Zagora
Dimitrovgrad
HaskovoCS Petrich
ROMANIA
SERBIA
GREECE
TURKEY
CS Polski Senovetz
CS IhtimanNova Zagora
CS Provadia
MACEDONIA
CS Valchi dol
Source: http://www.bulgargaz.bg/en/
Diversification of Gas Supply Sources and Routes will be Possible in the Long Term
8Source: South East Europe Regional Gasification Study
Options to Improve Security of Gas Supply in the Short to
Medium Term
• No major new supply sources within this time frame
• National solutions:– Improving efficient use of gas, e.g., in district heating on both
supply and demand side (home insulation)– Increasing underground gas storage capacity
• Regional solutions:– Construction of new or expanding of existing interconnections
(incl. reverse flow capability) with neighboring systems:• Romania • Greece • Turkey• Serbia
9
Key Energy Challenges
1. Tightening demand-supply balance
2. Gas supply security concerns
3. High energy intensity
4. Underdeveloped regional energy market– Low electricity prices encourage wasteful energy use and
discourage investments. Low gas penetration. Need for regional cooperation in gas transport and power trade.
11
Energy Shortages Could Threaten the Region
• Deteriorated energy infrastructure
• Regulated tariffs in the region are still relatively low compared to EU countries– Tariffs do not support new generation investment– Encourage wasteful energy usage
Electricity tariffs for residential consumers
The Unfinished Reform Agenda Limits Effective Regional
Cooperation
• Countries have opened their energy markets, but:
– National utilities dominate national markets
– Eligible customers prefer to stay under their (relatively low) regulated tariffs
– Effective opening and switching of suppliers is limited
12
Bulgaria in the Regional Gas Market
• Important gas transit country– 16 bcm/y (Turkey)– 2.4 bcm/y (Greece)– 0.1 bcm/y (Macedonia)
• Potential regional role in gas storage and transit: – Galata gas field can be converted into UGS of up to 1.8 bcm– Possibility of status as a regional gas hub– Facilitate creation of regional gas market – South East Europe
gas ring
Energy Community Ring Concept
14Source: South East Europe Regional Gasification Study 2008
Bulgaria: Key Electricity Exporter
in South East Europe (GWh, 2007)
Source : UCTE
Energy Community: Regional Market Approach
IPS/UPS
CWE
Nordic
UK/IE
CEE
SWE CSESEE
Baltic
17
Electricity Trade in the Energy Community
• A regional market for network energies is the objective of the Energy Community Treaty
• Bilateral trading will continue – but needs improvements and a functioning regional market should be developed
• Bulgaria could consider a decentralized approach to electricity trade:– Bulgaria and Serbia develop their national markets– Bulgaria and/or Serbia couple their markets with the already
functional Romanian market (OPCOM PX)