The Gas Market - Overview

Transcription

1 The Gas Market - Overview Dr. Burckhard Bergmann, CEO of Ruhrgas AG and Member of the E.ON Board of Management March 11, 2004

2 1. Gas Market 2. Ruhrgas Business Model 3. Strategy 2

3 New Market-Unit (MU)-Structure Corporate Center E.ON AG MU Central Europe MU Pan European Gas MU UK MU Nordic MU US-Midwest (E.ON Energie) (Ruhrgas) (Powergen) (E.ON Nordic) (LG&E) 3

4 Differences between Natural Gas and Power Seasonal Business Small Margins Larger Energy Quantity kwh ENERGY CONSUMPTION Natural Gas Power Storage Transmission Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: Ruhrgas estimate, UTCE 4

5 Share of Natural Gas in Primary Energy Consumption in % % 23% 13% Western Europe USA Japan Sources: OECD/ International Energy Agency / Ruhrgas estimates 5

6 Natural Gas Consumption in Europe billion m³ m³ = 11.5 kwh Western Europe Central and Eastern Europe Total Source: Ruhrgas calculation based on various energy forecasts. 6

7 Natural Gas is an International Business Norw. Barents Sea 3,000 km Norwegian Sea 2,000 km Norw. North Sea 1,400 km United Kingdom 1,200 km Netherlands 550 km Denmark 1,300 km Italy 750 km 1, ,567 4, , ,500 6,345 4,100 23,002 14,400 36,100 (Urengoy, Jamburg, Bovanenko a.o.) 1,841 6,006 1,875 2,010 gas reserves in billion m³ Russ Barents Sea 4,000 km West Siberia > 4,700 km Russia Europe part 3,600 km Kazakhstan 4,100 km Uzbekistan 5,400 km Turkmenistan 5,400 km 3,511 LNG: Algeria 3,400 km 3,800 km Libya 4,200 km 5,600 km Nigeria 6,600 km 8,500 km Km = pipeline transport to Frankfurt a. M., LNG to Wilhelmshaven Saudi Arabia 5,400 km 12,400 km Qatar 5,600 km 12,200 km U.A.E. 6,000 km 12,100 km Iran 6,000 km 12,200 km Source for natural gas reserves: Oil and Gas Journal, Norwegian Petroleum Directorate, others 7

8 International Natural Gas Trade billion m³ pipeline deliveries LNG deliveries Exporting Countries 25% Russia 16% Canada 9% Algeria 9% Norway 7% Turkmenistan 6% Netherlands 5% Indonesia 3% Malaysia 3% Qatar 2% United Kingdom 15% other countries 2002 approx. 650 billion m³ Importing Countries USA 17% Germany 12% Japan 12% Italy 8% Ukraine 8% France 6% South Korea 4% Spain 3% Turkey 2% Belarus 2% other countries 26% 1 m³ = 11.5 kwh includes deliveries within countries of the former Soviet Union after 1992 Sources: Various Sources (e.g. Eurogas, OECD) and Ruhrgas Calculations 8

9 Natural Gas Supplies to Germany billion m³ (7%) 25.2 (26%) Denmark / U. K. Norway (32%) Russia (17%) Netherlands (18%) Domestic m³ = 11.5 kwh estimated data for 2003 incl. eastern Germany since 1991 Source: Arbeitsgemeinschaft Energiebilanzen 9

10 1. Gas Market 2. Ruhrgas Business Model 3. Strategy 10

11 Business Segments of Ruhrgas Upstream Ruhrgas E&P Participation in Gas Production Downstream RGE / Thüga Shareholdings in Gas Companies and Municipal Utilities in Germany and Abroad Ruhrgas AG Gas Supply Gas Sales Gas Storage Pipeline Network Technical Development, Advice and Services Transmission Ruhrgas Transport AG & Co. KG Marketing of Transmission Capacities / Operation of Pipeline Network Project Companies For Gas Storage Ruhrgas Industries Global Shareholdings in the Business Segments Utility Metering Systems and Industrial Furnaces 11

12 Business Model of Ruhrgas Producers Diversified purchase and pooling of large volumes Transmission and storage Transformation of bulk supplies into individual flexible sales Competitive prices Increase market value of gas by marketing and technical services for sales partners Security of supply by long-term contracts Customers Best partner for producers and customers 12

13 Ruhrgas Compared to its European Competitors Based on Total Sales Ruhrgas is Number 3 in the European Market for Natural Gas Based on Domestic Sales Ruhrgas is Number 2 Domestic Market Share of Ruhrgas reflects efficient Gas-to- Gas-Competition in Germany Sales in 2002 (billion kwh) % Export / Sales Abroad Domestic National market share Sources: Annual reports, Ruhrgas calculations Gas Natural 90% Centrica 40% Gaz de France 99% Gasunie 78% Distrigas 99% Ruhrgas 57% Eni 75% 13

14 Sources of Natural Gas for Ruhrgas in 2003 From Norway From UK & DK 7% 28% From the Netherlands 18% From Russia 17% 30% Domestic Ruhrgas Ranking (producing countries view, based on volume)

15 Ruhrgas in the German Natural Gas Market Imports 909 billion kwh Domestic production 205 billion kwh 57% of imports 52% of domestic production 56% Of exports Export 57% of gas consumption Regional/local distributors 2003 estimated Natural gas consumption 992 billion kwh 15

16 Ruhrgas Sales by Sectors 52 % 18 Regional Customers Distributors Ruhrgas Sales Region in Germany Kiel approx 1,100 approx 1, % approx 80 Customers Local Utilities Emden Hamburg Bremen Osnabrück Hannover Münster Bielefeld Berlin Frankfurt /Oder 10 % Approx 180 Industrial Customers Customers Essen Köln Aachen Leipzig Dresden Frankfurt/M. Contracts Points of supply Break Down of Natural Gas Sales 12 % 11 Sales Countries abroad Mainz Würzburg Medelsheim Karlsruhe Stuttgart Waidhaus Nürnberg München Number of Customers / Countries 16

17 Non-competitive Factors Determining the Earnings of Ruhrgas Temperature Oil price General economic development Energy taxation Mean annual temperature [ C ] Peak temperature [ C ] Oil price (Brent) [ US-$/bbl ]

18 Internal Factors Determining the Earnings of Ruhrgas Manage the Balanced Competition in the European gas market Potential to develop new sales markets Business development of Ruhrgas Energie Beteiligungs-Aktiengesellschaft and Ruhrgas Industries GmbH Ability to respond timely to market challenges: Competition from other domestic and foreign gas suppliers Competition with other energy sources Transport system regulation Pipeline-to-pipeline competition Third party transportation 18

19 1. Gas Market 2. Ruhrgas Business Model 3. Strategy 19

20 Overall Gas Strategy Midstream Strategy Use convergence of gas and power Stabilise domestic sales by expansion and deepening of sales partnerships and competitive price policy Develop supplies to E.ON market units (UK and Nordic) and to E.ON companies in Central and Eastern Europe Extend foreign operations to other countries (e.g. France, Italy, Netherlands) Foster E.ON-Group as an attractive partner for marketing gas in Europe Tap gas-to-power potential Upstream Strategy Selective engagement in UK and Norway Evaluate upstream activities in Russia Acquisition Strategy Midstream acquisition in Central and Eastern Europe to form a logistic network in the long run Participate in infrastructure projects gas supply optimisation within Group 20

21 Sales Regions of E.ON Energie and Ruhrgas E.ON Energie E.ON Energie & Ruhrgas Ruhrgas 21

22 Supply Ties in the E.ON Group electricity gas über E.ON Sales & Trading 58 % 42 % 2 % 98 % sendout supplies from Group from third parties 71 % 12 % 29 % RECs 88 % non-group companies and minority shareholdings 22

23 Ruhrgas Integration Potentials Pan-European gas Improve leverage vs. gas producers Extend European arbitrage opportunities Infrastructure optimization UK Enhanced supply options for Powergen Coordinated trading activities Optimization of future storage needs Italy Integration of power/gas activities Potential backward integration of downstream activities Pan-European gas Nordic Enhanced supply options for Sydkraft Joint approach in infrastructure development Central Europe Joint market management with RECs Integration of gas trading activities Transfer of Thuega from E.ON Energie to Ruhrgas Pooling of downstream activities in Eastern Europe Pooling of technical expertise in power/gas 23

24 Power gas convergence Synergies by distributing and retailing gas and electricity together Gas for power generation Arbitrage between power and gas Improvement for security of supply for power and gas 24

25 Summary Rising demand for gas in Europe Importance of long-term import contracts will continue As midstream aggregator for the European market Ruhrgas is the best partner for producers and customers Extend international operations Realise integration potentials 25