Sound Investment Climate?

Jacques Laurelut

GTE PresidentCEO of GRTgaz

Bratislava, 28 September 2006

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Market analysis

1. High market prices last winter and currently long term contracts are cheaper than the market (12 month flat basis)

2. Important price differentials between NW Europe and N Europe

3. Price differentials are lower within regions(e.g. UK, Belgium and France versus The Netherlands)

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Towards an attractive European market

Europe needs to be more attractive for producers and suppliers Providing them long term visibility could reduce their risks,

enabling lower margin expectations They have long term projects What is the market size and depth? Producers claim for Security of Demand

European Energy Supply Observatory: could provide transparency and predictability (at least next 10 years)

By monitoring demand and supply patterns and providing statistics to stakeholders

By providing visibility on the existence of appropriate infrastructures

The regulatory framework has to be stable

1. Prices are and will remain high if the market is short of gas (or perceived to be so)

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Target: no major congestion within European gas Network

2. Important price differential is the result of congested pipe through the Netherlands

Congestion has to be avoided: splits the market, make it less attractive and introduces excessive and durable spreads

Investments have to be timely and efficient: identification and funding of investments are issues (e.g. Non Domestic Investments - NDI)

At least when there is no pipe to pipe competition:

Open seasons lead to a tight network Short term contracts with end users

Few suppliers are able/willing to take a long term view and signal investment need

TSOs build to the signal

Transnational coordination should be improved (regulators and transmission operators are involved)

How to achieve a trans-national and trans-regional cooperation?

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Improving cooperation between regulators

Possible alternatives:

A European Regulator above national regulators? Decision rules could be a problem

No political responsibility?

ERGEG? National regulators: more interested in short term and national

conditions

Investment and NDI are not priority items in the Gas Regional Initiative (NW)

When there is no pipe to pipe competition: a solution somewhere in-between should be found GGPs on investment?

GGPs on operators’ revenue determination?

…

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A question of priority…

3. No congestion: price differentials are relatively low between two markets

Improving the access conditions to European transmission networks could have a positive impact on gas prices

A lot of work has been done: numerous initiatives and actors involved in improving these operational and commercial conditions European Commission, ERGEG, Eurogas, EASEE-gas… GTE promotes full implementation of existing measures

Some areas without market price published

BUT No need of new rules

Priority should be given to issues that have a huge market impact: gas price, investment and NDI

Lead time: 5 years are necessary to build a new pipe… and even more for a complete supply route

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GTE Action Plan

GIE: Response to Commission’s Green Paper Public hearing on the Strategic EU Energy Review Contacts with DG Tren (C. Jones) Experts meeting PIP

By the end of September, GTE Will define its priority tasks (e.g. Investment, Transparency,

Capacity…) Will elaborate and publish a Working Program Should send a draft to DG Tren

By the end of 2006, GTE Will organise two workshops

Investment Transit (with ERGEG)