Shippers' forum. 8 June Hilton Copenhagen Airport Hotel Ellehammersvej Copenhagen

Transcription

1 Shippers' forum 8 June 2011 Hilton Copenhagen Airport Hotel Ellehammersvej Copenhagen

2 Agenda - 08 June Welcome Supply and demand situation Demand forecast Infrastructure development Gasunie Integrated Open Season update (Erich Jurdik and Thomas Lodzig, Gasunie) Lunch Development of a maritime LNG filling station structure for North Europe (Mogens Schrøder Bech, Danish Maritime Authority) International update Coffee Break Emergency supply New rules for balancing Internal revision of tariff structures and methods End of program

3 Follow-up on supply and demand Shippers' Forum JBJ, 8 June 2011

4 How to handle critical pressure levels in transmission? Lille Torup Denmark Stenlille Sweden Tyra Nybro Dragør Ellund Germany High flow and low pressure at Ellund are critical in combination with high offtake Dragør/Exit Zone/injection

5 Conclusions from shipper meetings January to April 2011 Some views and observations seem general: - High injection in April is very likely, which means that the capacity congestion incidents described may occur - Daily spread in gas prices is crucial to how shippers react - didn't occur - The capacity booking system in the North Sea pipelines is not flexible, and only monthly contracts are offered. Daily contracts could create great flexibility both upstream and downstream - Of course, shippers with customers in Sweden have a special focus on the point Exit Dragør and on storage/entry Ellund - To shippers with capacity at Entry Ellund and storage, it will seem more of a critical incident if Entry Ellund is interrupted than if storage is interrupted - Both in Denmark and in Sweden, it seems possible to interrupt only a small number of customers Energinet.dk actions?

6 Energinet.dk's actions To minimise the consequences of the supply situation 2011, 2012 and 2013, Energinet.dk: 1. has made an agreement with the transmission-system owners in northern Germany about delivery of gas at maximum available pressure at Ellund (if possible, more than 68 barg). The increased operational costs for compressors in Germany are paid by Energinet.dk 2. will use all available operational tools (swap storage facilities, buffers, System Operator Storage) before interrupting capacity at Dragør, Ellund and the storage facilities 3. will try to move forward the commissioning of one compressor at Egtved from 1 October 2013 to 1 April has agreed with the storage-facility owners on how to handle any partial interruption of injection in case of pressure challenges in transmission Storage-injection capacity levels are operationally defined, and injection is interrupted according to RfG (Rules for Gas Transport) like capacity at other entry/exit points

7 Interruptible capacity levels Entry Ellund, Exit Dragør and Storage (Entry) No limit No limit in 1,000 m 3 /h Dragør Ellund Storage 0 Level 2 50 No limit No limit Level Firm

8 Operational strategy No limit No limit % interr. level 2 x% interr. level 1 in m Dragør Ellund Storage (assumed) Level 2 50 Level Firm Lille Torup Denmark Stenlille Sweden Tyra Nybro If pressure challenge in Eastern Denmark: 1. All operational tools used (buffer, swap, SOL) Germany 100% interr. level 2 Dragør 100% interr. level 2 x% interr. level 1 2. Capacity level 2 reduced: - Entry Ellund to 150,000 m 3 /h Ellund x% interr. Level 1 - Dragør to 310,000 m 3 /h - Storage to 350,000 m 3 /h If pressure challenge remains in East Denmark after renominations: 1. All operational tools used (buffer, Swap, SOL) 2. Level 1 capacities reduced by x%

9 Ellund flow October May 2011 Level 1 Entry Ellund 150,000 m 3 /h Import Denmark Import to Export 1 April Export Germany

10 Next steps Next foreseeable pressure challenges in autumn 2011 If no problems occur before 1 September 2011, the same operational procedures will be followed May 2012-April 2013 First compressor at Egtved planned to be operational from 1 April 2013

11 Demand forecast Shippers' Forum JBJ, 8 June 2011

12 Danish Energy Agency demand forecast 2011 Danish Energy Agency (DEA) has published the yearly 2011 demand forecast describing the development in energy consumption and greenhouse gas emissions , assuming no further political actions, often called frozen policy scenario Effects of already adopted legislation has been incorporated. 'Energy Strategy 2050' recently published by the Government, which describes how Denmark can achieve independence from coal, oil and gas by 2050 and significantly reduce its greenhouse gas emissions, has not been incorporated Late 2010, Energinet.dk published a similar forecast, which has been included in the 'Gas in Denmark 2010' report. This forecast was significantly higher than the DEA 2010 forecast (in approximately BCM). Essentially, the evaluation of the gas consumption in decentralised and centralised heat and power plants differed The new DEA forecast 2011 is very similar to the Energinet.dk 2010 forecast

13 Future development in gas consumption Energinet.dk has calculated the consumption corrected for temperature in 2010 to 3.8 BCM. This is an increase in the 'normal year'-consumption of 4% in 2010 compared to However, the increase mainly reflects higher consumption at central heat and power plants. The natural gas consumption has decreased by 16% during the last 5 years, corresponding to a yearly decline of approx. 3% The DEA 2011 forecast foresees a decrease in natural gas consumption from 2010 to 2011 of 8%. The DEA foresees a 34% decrease from 2010 to 2030 without further political action - Is this correct? Energinet.dk will make a new forecast late 2011

14 Danish Energy Agency forecast 2011 History Forecast

15 Comparison DEA 2010/2011 and Energinet.dk 2010

16 DEA forecast

17 Accumulated Exit DK volume Expected BCM Million m Actual 31 April Forecast Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

18 Accumulated Volume Sweden Expected BCM Actual 31 April Forecast Million m

19 Status on Ellund-Egtved Søren Juel Hansen

20 Ellund-Egtved project status Looping Pipe production is progressing as planned Tender for construction is in prequalification phase Valve arrangements and compressors in Egtved Some of the new critical valves have now been established Compressor construction is progressing as planned - Decision making Focus on maintaining current design - Current design match the Swedish-Danish market and SOS needs - Current design maximise flow from Germany - no matter what is constructed when in Germany - Current design keeps the construction time schedule on track - Current design minimise possible economic losses and secure EU grant

21 What happens if the initial capacity in Germany is limited? Energinet.dk is constructing for 700,000 m3/h Accordingly, Energinet.dk expects to allocate 450,000 m3/h to the OS2009-shippers However, capacity contracts can be delayed/reduced correspondingly by shippers if their capacity requests have been reduced in Germany - e.g. in Gasunie Deutschland s Integrated Open Season ( IOS ) DERA has been informed informally of Energinet.dk s intention to allocate 450,000 m3/h for the OS2009 bidders - Energinet.dk hope for acceptance of allocation and focus on: - maximising interruptible capacity in the point from day 1 - maximising incentives on all involved parties to secure a subsequent fast track investment decision in Germany

22 Open Season 2009, Appendix 7: Capacity Agreement (Final version, summer 2009) 7.1 Conditions Precedent of the Participant What happens In the event that: if the initial capacity in Germany is limited? (i) the Participant shall receive capacity from an Adjacent System and such capacity is not available and under the precondition that Energinet.dk is constructing for 700,000 m3/h (a) the Participant has made all reasonable efforts to obtain such capacity in the Adjacent System and can document this with copies of formally correct bids and/or requests for such capacities from the Adjacent System operators; Accordingly, Energinet.dk expects to allocate 450,000 m3/h to the OS2009-shippers (b) the Participant has no further opportunities to obtain such capacity in the Adjacent System; and However, capacity contracts can be delayed by shippers if (c) the capacity in the Adjacent System is required in order for the Participant to utilise the their capacity OS 2009 Capacity; requests or have been reduced in Germany (ii), - e.g. in Gasunie Deutschland s Integrated Open Season ( IOS ) the Participant may choose to postpone the date on which OS 2009 Capacity shall be DERA delivered has to been the Participant informed informally of Energinet.dk s decision to allocate 450,000 m3/h for the OS2009 bidders Furthermore, in the event that the Participant does not receive the necessary capacity from an Adjacent Transmission System, cf. Clause (i), the Participant may request that its OS 2009 Capacity is reduced correspondingly. Energinet.dk Gastransmission will at its sole - maximising interruptible capacity in the point discretion decide whether a reduction equal to or less than the unavailable capacity in the Adjacent - maximising Transmission incentives System can be to met secure as Energinet.dk a subsequent Gastransmission fast track is not obliged to accept investment such request from decision the Participant. in Germany Energinet.dk Gastransmission will use commercial reasonable endeavours to grant such reduction if in any way this is possible within reasonable limits. - Energinet.dk hope for acceptance of allocation and focus on:

23 Status on the North Sea

24 Investetment/Capacity reservation Energinet.dk Operator DK Producer DK Capital Supplier DK-NL Producer NO Norwegian connection Low Risk High Gassco has in May finished a feasibility study which showed that a connection to the Dutch/Danish systems will be costly and will not provide significant new export capacity for the Norwegian producers. Gassco plans no further activities, but other players are well come to propose a mature business case if such can be identified Quote from West Baltic Task Force, First progress report May 2011 Gassco s feasibility study focused on: - Tyra and F3 - Increasing the Norwegian export capacity physically Mærsk, Energinet.dk and other players are looking for a more cost efficient Norwegian-Danish connection based on market gains - Business case fundamentals are: - Business case shall finance an additional separate tariff for the new connection - Business case shall include gas sellers with capacity reservations in Europipe I - Business case shall include gas purchase agreement commitments - Energinet.dk considers to make a reservation to ensure market and SOS interests - Please feel free to contact Mærsk or Energinet.dk for more information

25 Groningen, IOS GUD Shippers meeting ENDK 8 June 2011

26 1. Capacities to be realized in the framework of IOS GUD, conditional to the final decision by Gasunie Estimates NEL 31% 17% 12% 6% 35% Exit Ellund IOS Remaining: Intelligent measures PA s not extended by customers Currently reduced Capacity allocation according to agreed rules (Precedent Agreements) All capacities are conditional to the final decision by Gasunie

27 2. Scope of measures: Exit Ellund (ExEll) NEL ExEll Lite ExEll Others Loop Fockbek-Ellund MCS Ellund CS Quarnstedt MCS Heidenau NEL CS +MCS Achim CS Compressor station MCS Metering & control station

28 3. First expansion step NEL EXELL Lite MCS Heidenau NEL CS +MCS Achim ExEll Lite is still conditional to the final investment decision by Gasunie scheduled end of June 2011 CS Compressor station MCS Metering & control station

29 4. Capacities to be realized at Ellund in the first expansion step 225,000 to 310,000 m 3 /h MCS Heidenau NEL 500,000 m 3 /h CS +MCS Achim CS Compressor station MCS Metering & control station

30 5. Second expansion step Investment decision later in time, technical preparations continuing NEL ExEll Lite ExEll Others Loop Fockbek-Ellund MCS Ellund CS Quarnstedt MCS Heidenau NEL CS +MCS Achim CS Compressor station MCS Metering & control station

31 Lunch

32 Agenda - 08 June Development of a maritime LNG filling station structure for North Europe (Mogens Schrøder Bech, Danish Maritime Authority) International update Coffee Break Emergency supply New rules for balancing Internal revision of tariff structures and methods End of program

33 Shippers forum - Energinet.dk 5 June 2011 A maritime LNG filling station infrastructure for North Europe Mogens Schrøder Bech Danish Maritime Authority

34 Outline The green challenge - and LNG as a part of the solution The Motorways of the Sea project on LNG The pilot project in headlines The infrastructure project the main part Sum up

35 The green challenge short and long term! ECA provisions on fuel oil from 1 January 2015 in North European waters From 1.0 to 0.1% sulphur Operational costs for shipping Competitiveness for shipping Competitiveness for regions Shipping must be developed as the green alternative Green demands will increase in the future A basic condition

36 LNG as a solution New competitive fuels Technology neutrality LNG is an obvious alternative Transport, storage and distribution of natural gas Focus on the LNG supply chain A facilitating LNG infrastructure is needed Hard on marine filling stations Soft on regulations, industry standards, etc. How can we create this infrastructure?

37 Do we have a Gordian LNG knot? Manufacturers can supply LNG engines, tank systems, etc. In order to invest, shipowners need access to a system of LNG bunkering facilities The LNG providers will invest only if there is a market No momentum until the infrastructure problem is solved A broad infrastructure perspective is needed The problem is biggest for international shipping Oil-based fuels, on the other hand A supportive and competitive infrastructure No major cash flow problems for the infrastructure

38 An infrastructure of filling stations and deployment in ships the overall project A TEN-T Motorways of the Sea project LNG as fuel for international shipping Total costs 26 mill. euro A pilot project Fjord Line Danmark A/S 9.0 mill. euro from TEN-T An LNG infrastructure project 0.6 mill. euro from TEN-T A combined top down and bottom up approach

39 The pilot project Supporting and developing a transport corridor From the South Western part of Norway to the Northern part of Jutland and further to the Continent Ports Hirtshals base port Bergen, Stavanger, Kristianssand The project Conversion of two new cruise ferries under construction for LNG A full scale pilot project Deployment in international shipping An extensive measuring programme A maritime LNG infrastructure is needed!!

40 The LNG infrastructure project - Central enablers for the use of LNG as basis Safety Local municipalities and public awareness Technical possibilities for fuelling ship engines with LNG Fuelling of other means of transport than ships from maritime LNG filling stations LNG filling station dimensions Economy as seen by a ship, a port and an LNG provider The LNG market The potential for LNG

41 Central enablers 1/5 Safety A ship, a port and an LNG provider point of view Regulations Industry standards Local municipalities and public awareness Land use and safety measures From a specialized industry with large terminals to a more decentralized maritime industry

42 Central enablers 2/5 Technical possibilities for fuelling ship engines with LNG New engines Retrofitting Fuelling of other means of transport than ships and industry, etc. from maritime LNG filling stations Economies of scale

43 Central enablers 3/5 LNG filling station dimensions The supply of LNG to the filling stations Including the integration with the natural gas network Different layouts From mobile land as well as sea based to fixed stations Scaling possibilities Legal, financial and operational models Neutral access to the service Bunkering of different ship types Volume, time and safety, etc. A map of strategic ports for LNG filling stations

44 Central enablers 4/5 Economy as seen by a ship, a port and an LNG provider Economies of scale Second-hand prices, new builds and retrofits Pay-back periods Internal return on investment The relation between contracted volume and price The LNG market Possible price developments of LNG compared to 0.1% sulphur fuel Markets spot, short-term, medium-term and long-term and expected developments

45 Central enablers 5/5 The potential for LNG in Northern Europe Starting points Existing lines in the Baltic, the North Sea and the English Channel Tramp shipping problematic Ship characterization age and size, etc. Other modes of transport relevant for LNG filling stations in ports A two-track measurement of the potential For partner countries and ports a detailed approach, and in particular for liner shipping For other countries a general estimate Development of a framework for an operational methodology Addressing the potential for the single port and/or port cluster

46 Partners States: Belgium, Denmark, Finland, Sweden and Norway Regional: Council of Nordic Ministers Ports: Port of Hirtshals (DK), Port of Zeebrugge (BE) and Szczecin and Swinoujscie Seaports Authority (PL) LNG terminals and gas distribution companies: Fluxys (BE), Gasum (FI), Gasunie (NL), Energinet.dk (DK), Energigas Sverige (SE), Gasnor (NO) and GazpromLNG The Maritime Cluster: Germanischer Lloyd (DE), Bureau Veritas, MAN Diesel and Turbo (DK), Lauritzen Kosan A/S (DK)

47 The time schedule An EU application submitted on 31 August 2010 In kind contributions an important element Adopted in December 2010 Consultancy work starts up on 9 May 2011 End 31 March 2012 the infrastructure part End 31 March 2013 the pilot project

48 Organization chart for the project

49 Sum up the infrastructure project Identify and analyse critical enablers LNG infrastructure recommendations The LNG supply chain Hard on marine filling stations Soft on regulations, industry standards, etc. Validated through the industrial partners Relevant for central stakeholders Shipowners, ports, LNG providers, industry organizations, countries, EU, IMO, etc. The business case as target the LNG supply chain

50 What will happen after the project has finished? The short answer Depends on the recommendations! Likely developments Missing regulations and standards will be worked out Motorways of the Sea Calls from the EU will be positive on facilitating LNG investments Investments in the private (and public) sector/ the business case as a target

51 Thank you for your attendance Further information on North European LNG Infrastructure Project

52 International agenda Shippers' Forum 8 June 2011 Johnny Thomas Holst, Energinet.dk

53 Gas on the European agenda Current activities in the EU Progress on defining the EU gas-market rules

54 Principal concerns driving current activities The liberalisation of the energy market is going too slow - ACER and ENTSOG are encouraged to keep up the pace - Annual evaluation with special focus on consumers' position The pan-european energy infrastructure is not being developed fast enough - New market rules must drive the development with costs recovered through tariffs reflecting market demand - The Commission will consider the need for financial support The gas supply needs too be more diversified - Use of shale-gas sources in the EU will be considered - Better infrastructural and political links to neighbouring suppliers are encouraged

55 Gearing up for the Danish EU presidency Starting 1 January informal Council of Ministers sittings 90 working group meetings and conferences 15,000 participants 1 July January January July July January 2013

56 Key elements on the agenda Financial perspectives Potential funds for energy infrastructure EU Energy Road Map Expected call for new initiatives at Informal Energy Ministers' meeting in Denmark 18 April 2012 (renewable energy) Window of opportunity: A chance to promote issues like renewable gasses, gas in transport and better connections to Germany and Norway

57 The making of new EU network codes New EU rules will replace national rules by 2014

58 Network code for capacity allocation management (CAM) Consultation period: 21 June 8 August

59 Key discussion points for CAM The extent of bundling: Still possible to trade at border points? Length of contracts: quarterly/yearly products Type of auction: Cleared-price (long and short term)/pay-asbid auction methodology

60 Target model for all network codes Capacity allocation methodologies (CAM) Framework guide Network code (ENTSOG) Comitology Congestion management principles (CMP) Framework guide Comitology Balancing Consultation closes 12 June Framework guide Network code (ENTSOG) Comitology Harmonisation of tariff structures? Framework guide Network code (ENTSOG) Comitology Interoperability rules Framework guide Network code (ENTSOG) Comitology Rules for trading Framework guide Network code (ENTSOG) Com Third-party access Framework guide Network code (ENTSOG) Security and reliability Framework guide Network code (ENTSOG)

61 Participating in the process Specific responses related to the individual parts of the text Clarify the reasons for all positions Coordinate with relevant organisations

62 Thank you for your attention!

63 Coffee break

64 Agenda - 08 June Emergency supply New rules for balancing Internal revision of tariff structures and methods End of program

65 EU-Regulation No 994 Security of supply Shippers Forum 8. June 2011

66 Project progress All three major project activities for 2011 progress according to plan Main focus currently on defining a protected customer - A solution is necessary to ensure progress on the Market design and the Risk assessment work activities We are gradually closing in on a solution

67 Protected customers Searching for an appropriate definition The definitions identified should Comply with the EU-regulation SME District heating - Grey zones exist what do other countries do? Entail reasonable administrative Compliant burdens to the sector - End customers pay eventually Means should be proportionate to the objective Administrable - The objective is to recover sufficient gas to protect the protected market Proportionate

68 Protected customers Small and medium sized enterprises (art. 2.1.a) Solutions analysed, and rejected on poor administrability or lack of proportionality - # of employees - Financial accounts data - DMS/nDMS - Maximum hourly offtake capacity We recommend that a criterion be based on the individual customer s annual gas consumption Still analysing effects of different cut-off values Customers Volumes (mill Nm3/y) Non-protected Customers Cutoff value (mill Nm3/y) Protected Customers Non-protected volumes (mill. Nm3) Cutoff value (mill Nm3/y) Protected volumes (mill. Nm3) DMS-customers excluding essential social services and district heating; based on data from HMN and DONG Distribution

69 Protected customers District heating (art. 2.1.b) High complexity sector - More than gas fired installations - Serving almost 300 isolated hot water networks Criterion based on fuel shift capacity - Engines and turbines can theoretically shift fuel (reality may be more complex, however) - Production may shift to less efficient peak load boilers instead Criterion based on heat demand - Complex production patterns require individual solutions for individual networks An emergency situation on the gas may under these conditions severely stress adjacent oil and power markets Who will take the heat when ordinary people start freezing in their homes? - Need for a substantial safety margin in the solution identified Other criteria still being explored

70 New rules for balancing - moving stepwise towards a European balancing regime Shippers Forum 8 June 2011 Clement Johan Ulrichsen

71 Agenda Stepwise towards a European balancing regime Changes in balancing as of 1 October Free Balance Margin - Balancing Service Agreements - Neutral Gas Price - Incentives The package of changes

72 The European process regarding balancing 3 rd energy package Framework Guidelines 1st draft Framework Guidelines 2nd draft Framework Guidelines - Final Balancing network code 2014 (expected) Common European balancing regime Market-based TSOs roles are minimised Cost-reflective imbalance charges

73 Process in developing the Danish balancing regime Began in Break to await the 3rd package Continued in Analysis - Active in ENTSOG Balancing Working Group - Dialogue with Shippers at the User Group & Shippers Forum in March 2011 Changes advised in March Dialogue with the DERA

74 Reduction of Free Balance Margin + 5% + 3%? - 3% - 5% 1 Oct Oct Oct

75 Change in offer of Balancing Service Agreements (BSA)? (million kwh) Oct Oct Oct

76 Change in Neutral Gas Price Reference Level of aggregation TTF dayahead Monthly average NPG dayahead NPG intraday? Daily price 1 Oct Oct Oct

77 Change in incentives 150% 135% Energinet.dk sells gas Energinet.dk buys gas? 65% 50% 1 Oct Oct Oct

78 Package of changes that enter into force on 1 October 2011 Free Balance Margin - +/- 3% of exit zone capacity Balancing Service Agreements - Monthly volume between +/- 4.5 million and +/- 9.0 million kwh/day Neutral Gas Price - Monthly average of day-ahead prices on NordPool Gas Incentives - Energinet.dk sells/buys balancing gas at 135/65% of the Neutral Gas Price

79 Stepwise towards a European balancing regime Neutral Gas Price TTF Monthly NPG Monthly NPG Daily Balance margin 15% 5% 5% 5% 3% 1% 0% BSA Free volume Fixed volume Fixed + dynamic volume 0 Balance tariffs Socialised All imbalances pay marg.price Polluter pays NPG Incentives 150% 50% 135% 65% 125% 75% 110% 90% Intraday options None GTF NPG Within Day Intraday capacity TSO purchases No daily purchase Regular TSO purchase TSO daily purchase on separate platform TSO daily purchase on NPG Information Once after gasday Every 12 hour Every 6 hour Every hour Balancing zones None Sweden Germany? Regional?

80 Possibility to comment on the changes Comments from shippers will be added to Energinet.dk s method notification to the Danish Energy Regulatory Authority Please send comments to cju@energinet.dk not later than 14 June

81 Thank you! Clement Johan Ulrichsen

82 Internal revision of tariff structures and methods Review of capacity and commodity charges Frederik P.S. Kjerulf June 2011

83 Contents Short status on tariff method revision Tariffs workshop September 2011 Review of capacity and commodity pricing

84 Time schedule per June 2011 Time schedule Tariff project 2010 Method papers Implementation of Tariff Policy Depreciation and lifetime assessment Changed capacity and volume tariff ratio Method notification Dialogue with Danish Energy Regulatory Authority Preparation of method notification Tariff project 2011 Method papers Revision of short/long-term products Market-based allocation mechanism Balancing fees Method notification Dialogue with Danish Energy Regulatory Authority Preparation of method notification Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Analyses completed Internal preparation Analyses Awaiting ENTSOG Prepared

85 Workshop September 2011 System user and stakeholder workshop focusing on: - Tariff methodology in view of evolution of market model - Input and views from stakeholders In connection with Shipper Forum on 22 September 2011 separate event

86 Workshop September 2011 Anticipated topics: - Differentiated tariffs method notification - Review of capacity:commodity ratio - Review of short term pricing - Views on changes to the market model: - Auctioning pricing and handling of over- and underrecovery: ENTSOG process and preliminary indications - Stakeholder proposal to change role of LDC in exit reservations Other topics nominated by stakeholders Invitations follow

87 Forecast of capacity tariffs DKK/kwh/h/year Rapid increase due to lower transit to Germany Tariffs expected to increase substantially Reduced transit result in declining sales, while cost base is expanded with new assets. Ellund Entry 25%/75% Exit Dragør 25%/75% Nybro + Ellund 25%/75% Includes anticipated lifetime extension of existing assets to year Includes expected introduction of differentiated tariffs after Oct

88 Idle transport capacity increasing Exit transport volume DK transmission mio. Nm if capacity is less a constraint, should incentives be relaxed? Maksimum annual transport capacity = 2010 (7688 mio. m 3 ) 75% capacity utilisation 50% capacity utilisation Expected transport volumes through DK transmission Majority of transmission cost is fixed 2. System users are paying for capacity whether used or idle 3. Increased sale of capacity results in lower tariffs and higher degree of utilisation.

89 Two proposed changes to methodology 1. Define capacity tariffs on basis of capital expenditures, CAPEX, and commodity tariffs on basis of operational expenditures, OPEX: Changes the cost allocation from current 75:25 to approximately 60:40 (capacity:commodity) thereby reducing capacity tariffs at the expense of higher volume tariffs 2. Increased commodity payment may be used to offset over- and under recovery within the accounting year (e.g. anticipated over recovery is deducted from volume tariffs rather than next year s overall budget. The proposals are independent. #2 is linked to future auctioning model

90 Ratio in other Member States KEMA Study, 2009/10

91 40 Span of cost allocation 0, Capacity charge, DKK/kWh g /hour/year % 25% 0,006 0,004 0,002 Commodity component, Volume tariff, DKK/kWh g 5 0 0,000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Volume tariffs' share of tariff cost base Based Based on on projected projected cost/sales cost/sales projections projections in in Includes Includes anticipated anticipated lifetime lifetime extension extension of of existing existing assets assets to to year year

92 Tariff cost base in 2014, 2010-MDKK Fuel Opex Capex Existing assets Pipeline Compressor Includes anticipated lifetime extension of existing assets to year 2042

93 Change in Nybro Entry tariffs DKK/kwh/h/year Nybro + Ellund 40%/60% Nybro + Ellund 25%/75% Includes anticipated lifetime extension of existing assets to year 2042

94 Change in Ellund Entry Tariff DKK/kwh/h/year Ellund Entry 40%/60% Ellund Entry 25%/75% Includes anticipated lifetime extension of existing assets to year 2042

95 Development in volume tariffs depending on cost allocation DKK/kwh 0,008 0,007 0,006 0,005 0,004 0,003 0,002 0,001 0, Volumen tarif 25%/75% Volumen tarif 40%/60% Includes anticipated lifetime extension of existing assets to year 2042

96 Historical changes to capacity and commodity tariffs, Kapacitetstariffer Volumentariffer 0,0025 Price dynamics over the period Kapacitetstariffer DKK/kWh/time/år ,0020 0,0015 0,0010 0,0005 Volumentariffer, DKK/kWh ø Price ratio is not constant 2 0 jan 2004 jul 2004 jan 2005 jul 2005 jan 2006 jul 2006 jan 2007 jul 2007 jan 2008 jul 2008 jan 2009 jul 2009 jan 2010 jul 2010 jan 2011 jul ,0000

97 Development in capacity reservations and tariffs High degree of elasticity Moderate demand changes from tariffs What is impact of significant price increase?

98 Degree of point differentiation is commodity tariffs are increased Method changes result in moderate differentiation (max. ±20% deviation from average tariffs) The self-imposed ±20% deviation rule is carried over from Open Season 2009 and is intended to safeguard long-term bookings against method changes. The rule is not a legal/regulatory requirement.

99 Pro et contra changing the price ratio Advantages: Increased demand (and competitiveness?) Price ratio defined by accounts, not through administrative definition Reduced barriers to entry Transfer cost-of-service to actual use of system Disadvantages: Incentives to effective utilisation is decreased Increased barriers to short-term trade (between market areas) Contradicts a tendency in EU towards full capacity pricing in entry-exit systems What is the position of shippers?

100 End of program Next Shippers Forum 22 September 2011