Report on Energinet.dk s handling of the emergency supply situation from Thursday, 8 November 2007 at 20:00 to Friday, 9 November at 24:00 26 November 2007 PAH/FWI 1. Background On Thursday, 8 November 2007 at 12:40, Energinet.dk s control centre for gas was informed by DONG Energy s control centre at Nybro that Mærsk Oil and Gas planned to shut down its platforms in the North Sea on 8 November 2007 at 20:00 for 24 hours until the forecast gale was likely to have subsided. Mærsk Oil and Gas stated that their expected start-up of production would take place on Friday, 9 November 2007 at about 12:00, from which time the expected start-up period would be 8-12 hours. The shutting down of Mærsk s platforms would result in Denmark being without gas supplies from the North Sea for approximately 24 hours. As production from the North Sea is the only external source of supply to the Danish market, the situation would entail that supplies to Danish consumers and exports to Germany and Sweden from Denmark would only be possible from the Danish gas storage facilities. The situation led to Energinet.dk declaring an emergency supply situation in the afternoon of Thursday, 8 November 2007 in accordance with clause 20 of the Rules for Gas Transport. To begin with, the emergency supply situation was declared for collaborative partners and adjacent systems, ie the TSOs in Germany and Sweden and the Danish storage companies. An emergency supply situation was subsequently declared for shippers and storage customers. The emergency supply situation is unprecedented in the history of the Danish gas transmission grid. Document no. 176874/07 1/6
1.1 Actual course of events The factual course of events is as follows: - 8 Nov. at 12:40 DONG Energy s control centre at Nybro informs Energinet.dk that the platforms in the North Sea are planned to be shut down for 24 hours from 8 Nov. 2007 at 20:00. - 8 Nov. between 16-17 Energinet.dk declares an emergency supply situation for collaborative partners and adjacent systems with effect from 20:00. - 8 Nov. between 16-17 Energinet.dk declares an emergency supply situation for shippers and storage customers with effect from 20:00. - 9 Nov. at 01:30 DONG Energy s control centre at Nybro announces that Mærsk Oil and Gas will shut down production immediately because the critical wave height near the platforms has been exceeded. - 9 Nov. at 20:45 Production at Mærsk Oil and Gas is resumed and back to normal after another 24 hours. - 9 Nov. at 24:00 Energinet.dk declares that the emergency supply situation has ended. 2. Remedial measures Under the Danish Natural Gas Supply Act, Energinet.dk is responsible for supplying gas to all Danish consumers in the event of emergency supply situations such as - a 3-day scenario with total interruption of supplies from the North Sea on the coldest winter s day (average temperature -14 C for three days) - a 60-day scenario with damaged submarine pipelines during average winter conditions. Energinet.dk's emergency supply preparedness is based on the activation of a number of measures, which are analysed and optimised on a current basis. The primary measures include: - Use of the Danish storage facilities: - Under the Danish Natural Gas Supply Act, Energinet.dk has an option on the capacity in the storage facilities. Consequently, Energinet.dk has gas ready for emergency supply situations in the storage facilities. The quantity is 130 million m 3. - Via payment, Energinet.dk has ensured that the commercial players have gas in the storage facilities that can be made available to Energinet.dk in an emergency supply situation corresponding to maximum 375 million m 3. The quantities are called filling requirements. - Capacity in the South Arne pipeline: - In the event of damage to the main submarine pipeline from the Tyra platform to Jutland / Nybro, the gas can be redirected via another submarine pipeline (the South Arne pipeline). The quantity is some 7 million m 3 per day. Document no. 176874/07 2/6
- Emergency-interruptible consumers: - Energinet.dk has entered into separate agreements with about 30 of the largest gas consumers who are to reduce their gas consumption in emergency supply situations. The consumers often have an alternative fuel (for example oil) which they can use instead of gas. The quantity is some 7½ million m 3 per day. In an emergency supply situation it is Energinet.dk's task to continuously assess the supply situation and to ensure gas supplies to the Danish consumers applying the measures listed. The course of events on 8-9 November 2007 can be divided into two parts: 1. Physical/system-related measures, including establishment of concrete guidelines for how the storage facilities and DONG Energy s control centre are to act during an emergency supply situation. 2. Market measures according to clause 20 of the Rules for Gas Transport, including how the commercial players (shippers and storage customers) are to act in an emergency supply situation. 2.1 Physical and system-related measures Energinet.dk s control centre for gas prepares an estimation of the expected gas consumption in Denmark and expected imports and exports for the coming 24- hour period. The control centre estimates what types of activities are to be initiated to ensure gas supplies to the greatest possible number of Danish consumers. November is a relatively warm month, and the emergency supply preparedness procedures have been dimensioned for a cold winter s day (down to -14 o C). The control centre was therefore in a position to allow a certain quantity of natural gas to be exported to Germany and/or Sweden in addition to ensuring natural gas supplies to the Danish consumers. Energinet.dk's control centre immediately began filling the gas systems (Energinet.dk's transmission system and DONG Energy s submarine pipelines) with extra gas from the storage facilities to be able to meet the challenges of the coming days in the best possible way. The main facts on which Energinet.dk's control centre based its analyses were estimated gas consumption in Denmark of approximately 12 million m 3, whereas Energinet.dk can supply some 17 million m 3 from the two gas storage facilities. The difference of 5 million m 3 makes up the quantity of gas that may be exported to Germany and/or Sweden. On that background, Energinet.dk announced to the commercial players that they could have 30% of their withdrawal capacity from the storage facilities (5 divided by 17) at their disposal for exports. Energinet.dk also chose to activate the emergency-interruptible consumers - primarily because a potential increased offtake from the largest consumption sites during the emergency supply period could lead to a lack of gas for the Document no. 176874/07 3/6
uninterruptible consumers even though exports to Germany and Sweden were interrupted completely. 2.2 Market measures Energinet.dk activated its option to use withdrawal capacity in the two gas storage facilities. The part of the storage capacity that is not to be used for ensuring the supply to the Danish consumers, see the above, was made available to the commercial players for exports. As Energinet.dk had taken over the supply to the Danish consumers, the commercial players could freely use the available capacity in the storage facilities for supply to Germany and Sweden. The players could maintain their transit through Denmark and continue trading with each other via the national gas transfer facility (GTF). On 8 November 2007 at 17:11, Energinet.dk informed all its shippers and storage customers about their commercial possibilities/restraints. The main contents of the English-language e-mail included: - Shippers will not be able to order (nominate) gas into the Danish transmission system via Nybro from 20:00 on 8 November. - Shippers are to continue nominating gas to the Danish consumers so that Energinet.dk receives current indications of the offtake in Denmark. - Shippers are to supply the same quantities in and out of the Danish natural gas system from 20:00. - Energinet.dk has ordered maximum physical withdrawal from the storage facilities. - Energinet.dk expects to have the main part of the physical withdrawal capacity in the storage facilities at its disposal. Storage customers can therefore expect that their withdrawal capacity will be reduced to 30%. - Energinet.dk does not expect to use gas stored under filling requirements. - The pressure in the transmission system is expected to drop during the emergency supply period, which may lead to further reductions in the physical capacity towards Germany. - Energinet.dk interrupts supplies to emergency-interruptible consumers according to agreement on interruptibility. - Energinet.dk informs shippers and storage customers if the situation changes. 3. The general picture of the market Energinet.dk's general picture (at present) of the commercial players behaviour includes the following main elements: - The commercial players generally acted according to Energinet.dk's instructions and set of rules. - Some gas was withdrawn from the gas storage facilities for exports to Germany and/or Sweden, but the result of the players arrangements was that, generally, there were commercial but not physical exports from Germany to Denmark during the period. Document no. 176874/07 4/6
- Exports to Sweden were approximately 30% of normal supplies during the period, which is due to reduced commercial nominations. The physical supplies to Sweden were higher than the commercial nominations, and the pressure in the transmission grid at Dragør did not indicate any physical lack of gas in Sweden during the period. - Some gas was exchanged on the virtual market place (GTF), presumably pursuant to agreements under DONG s Gas Release Programme, to a number of commercial players. - Commercially, shippers made surplus gas available to Energinet.dk, which indicates that there was no lack of commercial gas for exports. Many commercial players chose to supply extra gas quantities to Energinet.dk from storage facilities or commercially from Germany to assist in the emergency situation. The final calculation of data and settlement has not yet been made. It is not expected until the beginning of December when validated data have been received. 3.1 Consequences for the Danish gas consumers The consequences for the Danish gas consumers were as follows: - Danish uninterruptible consumers received gas during the whole period (more than 320,000 consumers). - During the emergency supply period, the Danish hyper-interruptible consumers (emergency-interruptible at three hours notice) reduced their offtake as stipulated in the agreements (specifically three consumers). - The rest of the Danish interruptible consumers (emergency-interruptible at 36 hours notice) were notified, but not interrupted (about 30 consumers). 4. Further course of events Energinet.dk began to clarify practical and commercial matters immediately after the end of the emergency supply period. The course of events was as follows: 1. Clarification of quantities and data with the adjacent TSOs. 2. Clarification the commercial players supplies and offtakes. 3. Clarification of facts relating to the emergency-interruptible consumers. The individual parties will be contacted by Energinet.dk in the above order. The final clarification is expected to be concluded in mid-december 2007. Document no. 176874/07 5/6
5. Conclusion In general, it can be concluded that the emergency supply scheme introduced by Energinet.dk from 1 October 2007 worked as intended. None of the Danish uninterruptible consumers found themselves without gas supplies during the emergency supply situation, and the emergencyinterruptible consumers reacted as stipulated in the agreements. Energinet.dk was able to meet the reduced nominations by the commercial players for exports to Germany and Sweden during the whole emergency supply situation. Document no. 176874/07 6/6