Download PPT - Gas Infrastructure Europe

GSE Investment Workshop
“ Role of gas storage in the market
place”
Brussels, 24 May 2007
GSE - Gas Storage Europe
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Agenda
• Introduction – The traditional roles of gas storage
• Commercial storage
• Strategic storage ?
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The traditional roles of gas storage
Balancing
Seasonal variations
in consumption
Securing gas supply
in case of interferences
in production,
transport or supply
Security
Of
Supply
Enhancing
Cost effectiveness
of gas transport
Covering
demand peaks
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Agenda
• Introduction – The traditional roles of gas storage
• Commercial storage
• Strategic Storage ?
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Commercial storage
Matching Supply & Demand
Supply
Daily demand
• Indigenous
• Long distance pipeline import
• LNG
J
Demand
• Fluctuations on various time scales
(hourly up to annually)
F
M
A
M
Inject excess
gas
J
J
A
S
O
N
D
High demand
‘Constant’
supply
Produce gas
Low demand
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Commercial storage
Flexibility patterns
Flexibility Instrument
Annually
Seasonal
Weekly
Daily
Hourly
Long distance production flexibility
Yes
Yes
Yes
No
No
Short distance production flexibility
Yes
Yes
Yes
Yes
No
Underground storage (fields &
aquifers)
No
Yes
Yes
Yes
Yes
Underground storage (caverns)
No
No
Yes
Yes
Yes
Interruptible contracts
No
No
Yes
Yes
Yes
LNG storage (peak shaving)
No
No
No
Yes
Yes
Small scale local compressed gas
No
No
No
Yes
Yes
Line pack
No
No
No
No
Yes
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Commercial storage
Value and flexibility needs
Commercial gas storage value can be distinguished in:
 Intrinsic value: price spreads in the forward market
– Long duration (seasonal)
• Increase capital efficiency of long distance import systems
• Contribute to security of supply
 Extrinsic value: volatility in spot and forward markets
– Short duration (hours/days / weeks)
• Trading activities and portfolio optimization
• Balancing the transmission systems
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Commercial storage
Extrinsic value
Increased trading activity,
increased value potential,
increased complexity and risk
value
extrinsic
intrinsic
Intrinsic
Rolling
intrinsic
Optimal,
no
hedging
Optimal,
dynamically
hedged
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Commercial storage
Significance of forward price curves?
2012
2013
Permits, Design & Construction
Lead time: 5 – 8 years
2014
2015
2016
2017
2018
…..
Commercial operations
Generating income
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Agenda
• Introduction – The traditional roles of gas storage
• Commercial storage
• Strategic Storage ?
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Strategic Storage ?
Who will bear the
costs?
What does
strategic
storage cost?
How will commercial
storage be
influenced?
Do alternatives
exist to ensure
supply security?
When will
strategic capacity
be released?
GSE - Gas Storage Europe
Will the
investment climate
be affected?
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Strategic Storage ?
• The European Parliament “agrees with the Commission's
assessment that, in relation to gas, considering the
present technology, it is better to diversify supply routes
and technologies, such as degasification plants and LNG
terminals, than to create massive gas stocks as this
option is too expensive, could be used to influence
market prices and its use is less flexible than oil stocks”.
European Parliament Working Document, 16 April 2007
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Strategic Storage ?
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Thank you for your attention!
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