EXPORTING CASPIAN GAS TO SEE AND THE EU THE ITGI PROJECT. Marco Margheri Edison SpA Head of EU Affairs Ljubljana, Sept.. 11, 2009

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1 EXPORTING CASPIAN GAS TO SEE AND THE EU THE ITGI PROJECT Marco Margheri Edison SpA Head of EU Affairs Ljubljana, Sept.. 11, 2009

2 AGENDA WHO WE ARE (BRIEFLY ) THE CONTEXT: EU GAS SCENARIOS THE ITGI PROJECT: CURRENT DEVELOPMENTS CONCLUSIONS: ITGI AS A KEY LEVER TO OPEN THE SC

3 THE OLDEST ENERGY COMPANY IN EUROPE (PROBABLY...) Born in 1881,, Edison is one of Europe s oldest energy companies.. In 2008,, it reported revenues of mln,, and is currently carrying out one of the largest investment plans in Europe, worth 7,2 bln. within Edison had to diversify its business, when the national monopoly on electricity was established in Italy in Thanks to the first wave of EU Directives in 1996, it could re-focus its business on energy once again,, this becoming the largest new entrant on the Italian market. With 50,2 billions kwh produced in 2008,, and a market share of 16,4% it is now Italy s s second largest electricity generator. Thanks to MW of new highly efficient and low emission plants (CCGT thermo plants, as well as hydro and wind power plants), the Company has now a total installed capacity of more than MW. In the hydrocarbons business, Edison has an integrated presence in natural gas chain, from production to importation, distribution and selling, with a market share Edison s s available supply/total Italian market at 16.2%. In 2009 the new LNG terminal in Rovigo will contribute to the diversification of the country s s supply sources with its regasification capacity of 8 bcm of natural gas a year,, equal to 10% of Italy s s demand for natural gas. In 2012 there will be the start up of Galsi and ITGI pipelines, which will connect Italy to Algeria and Caspian Sea, two areas rich in hydrocarbons.

4 EU GAS MARKET SCENARIO: DEMAND / PRODUCTION GAP Gas demand Power generation Residential Industry Own use and losses Demand will increase from 563 Bcm in 2007 to Bcm in 2020 (cagr 07-20: 1.1%-1.7%) Different scenarios mainly depend on the evolution of power consumption: renewables development nuclear phase-out economic upturn Growth mainly driven by power generation. Gas production * Europe includes EU27 + Norway, Switzerland and Turkey 9300 kcal/cm Others Norway Sources: IEA World Energy Outlook; BP Statistical Review, ENI, IHS, CERA, OIES, Edison estimates NL UK Domestic production will decrease from 296 Bcm in 2007 to 250 Bcm in Reduction mainly driven by UK decreasing production Main EU30 producer in 2020: Norway Increasing demand coupled with decreasing production leads to a growing dependence on imports 4

5 EU IMPORT SCENARIO: INCREASING DEPENDENCE Gas demand covering (Bcm) Gas import need (Bcm) CAGR 1.1%-1.7% Import ~47% Import ~62%-64% Import 07 (bcm) Russia 153 Algeria 56 Nigeria 17 Others ? Others Nigeria Algeria Russia Domestic production Import 2007 gas import additional import need 2020 gas import Traditional EU suppliers will not fully cover demand requirements. Opening the Southern Gas Corridor for at least 70 bcm/y by 2020 is mandatory. 5

6 EU IMPORT: A CASPIAN OUTLOOK Azerbaijan is the only Country in the area that is ready as of today to finalize supply agreement with EU for approx. 7 bcm/y, starting in All other Countries, although rich in term of reserves, are not ready (due to political, infrastructure, investments constrains) to take any short term binding commitment with EU. Gas export availability for EU: From South Pars 2015 > >2020 6

7 ITGI: A PROJECT OVERVIEW The Turkey-Greece-Italy Project ITGI Project will allow the flow of approx. 10 Bcm/y of Caspian and Middle East gas to Italy and Europe via Turkey and Greece. ITGI Project IGI Poseidon IGI Onshore IGB IGI ITG Turkish Grid The ITGI Project comprises: limited upgrades of the Turkish Grid and the ITG (in operation since November 2007); the realization of the IGI Project, consisting of: i) a 600 km onshore pipeline within the Greek territory under development by Desfa (Greek Transmission System Operator); and ii) a 200 km offshore pipeline across the Ionian Sea - namely, the Poseidon Pipeline - under development by IGI Poseidon SA (a company incorporated by Edison and Depa). Following the EERP Regulation, studies has started to link Bulgaria to the ITGI Project via the IGB Project. 7

8 ITGI: IGI Poseidon IGI POSEIDON S.A. S.A. IGI Poseidon S.A. is the project company that will develop, build and operate the offshore section of the IGI Project, namely the Poseidon Pipeline. The Poseidon Pipeline links the compression station in the Greek Ionian Coast to the measuring station in Otranto. IGI Poseidon S.A. is incorporated in Athens under Greek Laws. ITALY Brindisi Lecce Otranto Poseidon Pipeline Length: 207 Km Max Depth: Km Diameter: 32 Investment: 500 M ALBANIA Kerkyra GREECE Igoumenitsa POSEIDON PIPELINE CAPACITY TPA Exempted Capacity: 8 Bcm/y of which: Edison 6,4 and Depa 1,6 Initial Open Season Capacity: 1 Bcm/y Potential Capacity Upgrade: up to 3 Bcm/y 8

9 ITGI: The European A STRATEGIC relevance EU PRIORITY of the ITGI project The EU recognised the strategic relevance of the ITGI Project with: the inclusion of ITGI-Poseidon among the Southern Gas Corridor Projects in the European Recovery Plan with (100 M ); further 45 M are projected for the IGB interconnection; the tender is ongoing; the grant of a 25 years TPA Exemption ex Art.22 of Directive 55/2003 to Poseidon pipeline; the inclusion of the ITGI project among the Projects of European Interest, having the highest priority within EU. 9

10 ITGI: ITGI REGIONAL Relevance BENEFITS for the Balkan IN THE Peninsula BALKANS BULGARIA Consumption (2008): 3.3 Bcm Production (2008): Not significant Import (2008): 3.1 Bcm, only from Russia through Romania Underground gas storage: Mcm Transport infrastructure: four interconnection points with Romania, Turkey, Greece and FYROM lack of reverse flow from Turkey and Greece towards Bulgaria The country is highly dependent on Russian import and extremely vulnerable in case of disruption of its major import infrastructure Source: GTE+ 10

11 ITGI: ITGI REGIONAL Relevance BENEFITS for the Balkan IN THE Peninsula BALKANS ITGI could represent an important source of gas supply for Bulgaria (as highlighted in the last winter crisis) through the proposed interconnection, included in the European Economic Recovery Plan, from Komotini, starting point of the IGI Project, and Stara Zagora. Komotini Stara Zagora It could also represent a further incentive for the realization of some reverse flow projects on the existing pipeline routes towards Bulgaria: at Malcochlar (between Turkey and Bulgaria, 1) and at Strimonohori (between Greece and Bulgaria, 2) Source: GTE+ 11

12 ITGI: ITGI REGIONAL Relevance BENEFITS for the Balkan IN THE Peninsula BALKANS GREECE Consumption (2008): 4.2 Bcm Production (2008): 0 Bcm Import (2008): 4.1 Bcm, mainly from Russia (2.8 bcm) ITGI provides to enhance security of gas supply to Greece also through the full TPA access on Virtual reverse flow of the Poseidon Pipeline and, therefore, the possibility to implement solidarity mechanisms (i.e. balancing the networks through Italian Storages and Revithoussa LNG) in the event of gas supply shortages in some routes. Transport infrastructure: two interconnection points with Bulgaria and Turkey Revithoussa Island LNG terminal (maximum capacity 13 mcm/d) allow virtual reverse flow Reduce physical fowrward flow to ITGI is also one of the most realistic opportunities of gas supply for the concept of the Energy Community Gas Ring, contributing to the development of the SEE region. 12

13 ITGI: Development DEVELOPMENT Status STATUS Out of Southern Gas Corridor projects, the ITGI Project is the one having reached the most advanced stage of development, having already: IGI Poseidon Obtained TPA Exemption (6/07) & Started Open Season Procedure (6/08) Filed the construction authorisation requests to Italy and Greece (11/06 and 6/07) Completed the Basic Engineering and Reconnaissance Marine Survey activities (1/08) Started Detail Engineering phase (6/08) Greece and Turkey Secured transit capacity in Greece (first come first served allocation principles) Secured transit capacity on the ITG & agreed a sustainable transit regime in Turkey (Turkey-Greece-Italy IGA, 7/07) The Final Investment Decision for the realization of the ITGI Project could be taken within 2009, provided that gas supply agreements with Azerbaijan and gas transit agreements with Turkey are timely finalized. The development Status of the ITGI Project secures start of operation in the same timeframe of Shah Deniz 2 13

14 CONCLUSIONS Shah Deniz phase 2 and ITGI Project The ITGI Project is the most advanced opportunity to link Azerbaijan to Europe, as: Most of the infrastructures are already in place; It is the only project ready to take the final investment decision, having already finalized TPA exemption, authorization and technical activities The ITGI Project time schedule secures the possibility of starting the commercial operation of Shah Deniz 2 the soonest. The ITGI Project is the only Southern Corridor priority project that can fly based only on the available volumes from SD2 beyond Turkey (7bcm/y) and without requiring further financial assistance or complementary gas sources. Due to its limited investments and coherent size, the ITGI project is likely to offer the best netback values to Shah Deniz Consortium. The ITGI Project represents the first step in the realization of the Southern Gas Corridor, as it will enhance further development of Caspian gas resources facilitating the realization of other transit project through Turkey. 14

15 THE MOST DANGEROUS SCENARIO... From Saumel Beckett s Waiting for Godot Act 2, Finale ESTRAGON: Yes, let s go! VLADIMIR: Well? Shall we go? THANK YOU GRAZIE marco.margheri@edison.it THEY DO NOT MOVE...

Greece s Role as the Emerging Energy Hub of South- Eastern Europe: DESFA s Role and Perspectives

Greece s Role as the Emerging Energy Hub of South- Eastern Europe: DESFA s Role and Perspectives By: Konstantinos E. Maroulis General Manager Director of Gas Transmission, Administration & Finance Hellenic