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Unbundling & Liberalisation

Unbundling & Liberalisation. Creating new challenges and opportunities The ‘Belgian case’. Rudy Van Beurden. GAS TRANSPORT Existing company with a new name: Fluxys. GAS SALES & SUPPLY New company with an existing name: Distrigas. FLUXYS: PROACTIVE UNBUNDLING 11-2001. Former Distrigas.

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Unbundling & Liberalisation

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  1. Unbundling & Liberalisation Creating new challenges and opportunities The ‘Belgian case’ Rudy Van Beurden

  2. GAS TRANSPORT Existing company with a new name:Fluxys GAS SALES & SUPPLY New company with an existing name:Distrigas FLUXYS: PROACTIVE UNBUNDLING 11-2001 Former Distrigas Why proactive unbundling : • Draft proposal 2nd EU directive included legal unbundling • Market perception: legal unbundling most effective to ensure level playing field • Strategic move: organise rather than undergo changes

  3. SHAREHOLDERS SUEZ 100% SUEZ-TRACTEBEL PUBLIGAS • Board and Executive Committee:two federal government representatives in an advisory capacity • Right to oppose to decisions about and transfers of strategic assets if considered prejudicial to federal energy policy 57.25% 31.25% FLUXYS 11.50% (+ 5.21% shares owned by Suez-Tractebel) 1 share FIRST MARKET OFEURONEXT BRUSSELS BELGIAN STATE GOLDEN SHARE

  4. Unbundling: the challenges • Strategical: establish new objectives • Contractual: need for formal agreements between an increasing number of players • Commercial: setting up new relationships and obtain information from the market • Changing/unstable regulatory environment • Operational: Gas flow management & grid balancing • Investment planning: obtaining market information and commitments in due time

  5. FLUXYS’ CHALLENGES IN THE LIBERALISED GAS MARKET interconnection connection End-consumers Fluxys Adjacent operator • Put into practice framework to install level playing field for suppliers: Code of conduct • Arrive at regulated tariffs providing sufficient return to justify investment • Cope with highly complex interfaces in a multi-shipper environment Open access to system Supplier Supplier Supplier Free choice of supplier

  6. ConnectionAgreement Exploring the Current Legal Environment Transportation agreements: new relationships Gas supply licence Shipper/ Trader Transport ServicesAgreement + (with connection procedure) AllocationAgreement (at Supply Point) End-consumer Transporter Transport licence Eligible

  7. Regulatory environment • The ‘Belgian case’ • 1 federal regulator • 3 regional regulators • Different levels of market opening in each region • Public distribution zones sometimes covering more than 1 region • Continuous changes asked by different authorities  challenge of coping with system changes • Low profitability on transport and storage activities  reduces entrepreneurship • Annual  multi-year tariffs as from 2007

  8. A strong acceleration 100% 100 92% 90 83% 07.07 80 07.04 70 65% 58% 60 07.03 01.03 47% 50 08.00 07.01 40 30 20 1998 EU Gas 10 Directive 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Belgium: proactive acceleration of market opening 100% opening in Flemish region

  9. Gas Flow Management & Grid Balancing • Exponential growth of data to be interchanged in a multi-shipper environment • Hourly flow nominations by shippers enabling Fluxys to set grid configuration • Hourly matching information with adjacent operators to facilitate cross-border transactions • Hourly flow allocations + metering data services by Fluxys enabling shippers to stay within balance and thus avoid balancing charges • Residual balancing by Fluxys far more complicated: • Gas price is main flow driver for shippers • Shippers can arbitrage between balancing charges in different systems • System integrity factors (stable inflow and gas quality) considered pure TSO concern

  10. Investment planning: a complex issue in an unbundled and regulated environment • Shippers uncertain as to their market share in the future  fear for ‘open positions’: • larger part of supply portfolios is short-term • hence: more shorter term transportation contracts • Fluxys uncertain about regulatory environment and profitability  financing more complex • Belgian gas demand 2000-2014 to rise by 46% ➔huge investments needed • Shippers’ behaviour increasingly unpredictable + unpredictable regulatory environment ➔lack of adequate investment signals➔increasing risk of stranded investments

  11. BUT ALSO…..

  12. New opportunities • Zeebrugge Hub: created proactively in 1999 • Hub services  Huberator • Cleared spotmarket  APX Gas Zeebrugge B.V. • Shipper & ICT services  GMSL • Becomes a catalyst for further infrastructure investments • LNG terminal expansion by Fluxys LNG • BBL pipeline  BBL Company B.V. • Futher investments in transit capacity (open season launched)

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