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Budapest, 31 st May 2012

Russian gas – European possibilities . Didier Lebout, Head of Strategy, Gazprom Marketing and Trading France. Budapest, 31 st May 2012. Gas in Europe: an eco-friendly solution for decades ahead.

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Budapest, 31 st May 2012

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  1. Russian gas – European possibilities Didier Lebout, Head of Strategy, Gazprom Marketing and Trading France Budapest, 31st May 2012

  2. Gas in Europe: an eco-friendly solution for decades ahead Natural gas: the best solution for environmentally safe and economically efficient generation in the decades ahead. Much lower costs to achieve European emission reduction goals towards 2050, according to a study commissioned by the European Gas Advocacy Forum: Through RES: up to $ 1.5 trillion (out of which $820 billion to be paid from the budget of the European states) Through “gas scenario”: 500 billion dollars less by 2030, and 850 billion less by 2050 than the full RES scenario. Other advantages: Gas is available, its reserves are predictable Supply routes are growing. Gas power production is also flexible: it can provide a “base load”, cover peak loads, or act as a back-up for downfalls in RES power production. Budapest, 31st May 2012

  3. European imports Budapest, 31st May 2012

  4. Gas market development: becoming more global • The gas market in the early 21st century should be discussed in an increasingly global scale. •  One key principle: It is the principle of long-term contracts with oil products index and the “take-or-pay” conditions that our parent company and the entire Gazprom Group in foreign markets base their activity upon. Budapest, 31st May 2012

  5. Oil-peg versus spot • Spot-markets are volatile - no guarantee of supply Early days economic crisis: prices in the spot markets of continental Europe • (over-contracted volumes dumped in the spot market, forcing the price down there) After the European customers had a chance to adjust their contracts, the excessive volumes on spot disappeared and spot prices went up • Volatile spot markets– an adequate pricing reference? • Spot markets in continental Europe: not yet mature, liquid and deep enough to provide a reliable price signal • Gazprom Group: not against spot peg, but its share is limited by own economic limits of spot markets. • Oil-pegged pricing: predictable and protected against the abuse of any market player Budapest, 31st May 2012

  6. Long-term contracts: a fundamental role • Conclusion: a hybrid pricing model in Europe’s gas market • Long-term contracts and oil-indexation: leading role, secured supplies • Spot-market: balancing role, arbitrage for companies at the margin  Closely interconnected, healthy balance between its two components Long-term contracts: mutual obligations – mutual guarantees Budapest, 31st May 2012

  7. Policy: equal treatment is essential In Europe, equal treatment and equal opportunities for all projects and all technologies are essential to enable genuine competition. Long-term plans – the nuclear phase-out and renewable energy What will be able to replace the generating capacity being phased out? What solution would be best if we decide to reduce nuclear power generation? A number of imperfections in the current regulatory framework: ‘merit order’ for access to electricity grid intended to stimulate renewable sources but… nips in the bud all incentives for investing in other areas of generation Budapest, 31st May 2012

  8. GM&T Ltd : a quick presentation Budapest, 31st May 2012

  9. Gazprom Marketing and Trading France The French example • Our landmarks: • Company created in mid-2006 • First sale to the end user: end of 2006 • 2007-2008: direct sales to very large end users-monosite • 2009-2010 : expanding to medium –size end customer market and multi-site large clients • 2009-2010: First smart meter installed • 2011: development of the sales to small and medium clients • The total of about 1 bcm delivered in 2010 • French sales organization is integrated inside GM&T Energy team (Manchester) active in England, Ireland, Belgium, Netherlands, Germany. • In France, GM&T also has other activities • Gazprom representative functions in France and admin support functions; • To manage the EU REACH program for GAZPROM & SIBU (Registration of chemicals products exported to EU) • To develop through BST synergies between all BU’s of GM&T and all others entities of the Gazprom group. Budapest, 31st May 2012

  10. Dynamic of Gas market liberalization in France - 1 • August 2000: liberalization of the market for sites consuming more than 237 GWh/y (± 20% of the market is open – roughly 600 sites) • August 2003: liberalization of the market for sites consuming more than 83  GWh/y (± 37% of the market is open – roughly 1200 sites added to the liberalized market) • July 2004 : liberalization for the professional clients (± 70% of the market is open – roughly 640 000 sites added to the liberalized market) • July 2007: liberalization of the domestic market (11 millions sites) = total liberalization of the market Budapest, 31st May 2012

  11. Dynamic of Gas market liberalization in France - 2 Budapest, 31st May 2012

  12. French gas market structure overview and GM&T position in 2011 INDUSTRIES FRANCE (1,200 sites) Market share: approx. 6% 18 Bcm / year (2,700 sites) ( 71,000 sites) B2S ( 71,000 sites) PROFESSIONALS 15 Bcm / year B2i + B1 (707,000 sites) (707,000 sites) (10,193,000 sites) RESIDENTIALS 13 Bcm / year Budapest, 31st May 2012

  13. Thank you for your attention! 11 Budapest, 31st May 2012

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