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Challenges in Gas Transmission: The V4+ Perspective Andreas Rau Member of the Board of Directors

Explore the challenges and opportunities in gas transmission in Central Europe from the perspective of V4+ countries. Analyze the current market position, new projects, and TSO cooperation. Understand the impact of pipeline capacities and the development of transmission capacities in Slovakia.

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Challenges in Gas Transmission: The V4+ Perspective Andreas Rau Member of the Board of Directors

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  1. Challenges in Gas Transmission:The V4+ PerspectiveAndreas RauMember of the Board of Directors European Economic Congress, Katowice, 17 May 2011

  2. Facts and Figures 2010 HoldingTrade & Sales • Employees 893 • Turnover > € 800 million • Transmission volume 71 bcm • Key Business Data • transmission contracts for 90bcm/a • 2,270 km of pipelines • four compressor stations (aggregated power >1,000 MW;Veľké Kapušany biggest compressor station in the EU) Transmission 100% Distribution 100% StorageE&P 56% Storage 35%

  3. Market Position About 75% of today’s gas flow from Russia toWestern Europe is passing through Slovakia St. Petersburg Existing Eustream 90 bcm/a EuRoPol Gaz 33 bcm/a New Nord Stream 2 x 27.5 bcm/a South Stream 30-60 bcm/a Nabucco 31 bcm/a Moscow Minsk Berlin Warsaw Prague Kiev Bratislava Vienna Budapest New projects can easily double existing pipeline capacities! New challenges due to increasing pipe-to-pipe competition!

  4. contracted capacities max. technical capacities (acc. to decommissioning plan) Development of Transmission Capacities in Slovakia Capacity 2009=100% expected impact of Nord Stream How reasonable are new routes if they lead to stranded investment elsewhere? 4

  5. Our Vision: A Central European “Gas Turntable” Poland • interconnection PL/SK? • access to LNG (Świnoujście)? Ukraine • gas storages and E&P? • technical cooperation SK/UA? • reverse flow at SK/UA border(capacity cca. 85 mcm/d) Czech Republic • reverse flow (capacityof 25 mcm/d via Lanzhot) Austria • development of Baumgarten Hub • reverse flow (capacity of cca. 40 mcm/d via BOG) Hungary • SK/HU Interconnector (“bridgehead” for Nabucco) • access to LNG (Krk)?

  6. Short-term / Short-haul Gas Transmission • increasing no. of hub related transactions in SK (e.g. arbitrage NCG/CEGH) • sufficient transmission capacities available in Slovakia in the long run (no investment need) • new products (e.g. title transfer, VTP prepared) • positive impact expected fromSK/HUinterconnector

  7. TSO Cooperation : GATRAC Cross border VP2VP products – Overview • Direct connection between respective VPs • Bundled products with one single contract (similar “train tickets”) • Bookable with each participating TSO on FCFS-principle • First product: • Firm daily capacity • Bookable one to more days ahead* • No renomination VP * More days ahead will be used to allow bookings over the weekend and holidays and to align capacity booking periods with trading times on the EEX Gas Spot Market 7

  8. The North-South Gas Corridor • discussion triggered i.a. by 2009 gas crisis • strong political support by V4+ initiative (six countries directly involved) • 2,300 km of pipelines (+upgrade of existing lines) • 900,000 t of steel • investment approx 3,800 MEUR • financing under EU programmes: 220 MEUR • access to two LNG terminals (Świnoujście, Krk) Realistic concept for enhancing market liquidity and security of supplies or wishful thinking?

  9. The Hugarian/Slovak Interconnector I SK/HU • 115 km of pipeline length • 5 bcm/a of (design) capacity • bidirectional flow • investment app. 120 MEUR • financing under EERP (30 MEUR) • start of operations initially planned for 2013

  10. The Hungarian/Slovak Interconnector III 6/2009 MoU signed by FGSZ and Eustream 7/2009 EEPR application 12/2009 end of non-binding open season 6/2010 end of binding open season I 10/2010 EEPR grant decision by EC 12/2010 end of binding open season II (start of operations postponed to 2014) 4/2011 FGSZ withdraws from project, OVIT new partner on Hungarian side

  11. Conclusions • further diversification of transmission routes and supply sources (e.g. Nord Stream, Nabucco, South Stream ) – mainly enhancing east-west capacities • huge efforts of TSOs to increase transmission capacities and implement newinterconnections (forward and reverse flow) • special focus on establishing a north-south corridor in Central Europe • significant financial support of EU and political support by V4+ • TSOs introducing new products (e.g. GATRAC) • some uncertainties as to development of commodity markets • some routes already having spare capacities today Start with realistic projects (e.g. HU/SK) and then follow a step-by-step approach (always verifying market demand, needs in terms of security of supply and cost/benefit ratio)

  12. For further information: www.eustream.sk

  13. Strategic Challenges EU gas demand stagnating? stricter environmental regulations pipe-to-pipe competition consolidation among European TSOs? new unbundling requirements short-term bookings and increased speed of shipper transactions

  14. Back-up: Main Gas Corridors in Central Europe 8 9 7 11 6 1 2 5 3 4 • - CZ/SK reverse flow Lanžhot • - AT/SK reverse flow WAG • - AT/SK reverse flow TAG • - SK/HU interconnector • - Internal reverse flow SK • - Gazelle • - EuRoPol Gaz / Jamal • - Nord Stream • - LNG PL • - LNG CRO • - OPAL • - HU/CRO interconnector • - Nabucco / South Stream 13 12 10

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