EU Diversity of Supply Management? (could this be a 2020 aspiration?)

1. The Energy CommunityChrissa Argyriou – European Commission – DG Transport and EnergyElectricity and Gase-mail: chrysoula.argyriou@cec.eu.int

2. The Energy Community Treaty was signed on October 25 Key issues included in the Treaty: acquis on electricity and gas, renewable, environment, competition

3. EU Diversity of Supply Management? (could this be a 2020 aspiration?) Norway/Netherlands Russia Norway lines 93 bcma plus 50 Bcma Netherlands supply 27.5% 27.5% EuroPol 20 bcma LNG Ukraine 5 lines Total 140 bcma 10-20% 10% CAC 80 bcma - 5 lines EU LNG to 100-150 bcma Russia West 1&2 15 bcma Blue Stream 16 bcma Nth. African 10-15% 4th Supply Corridor from 80 to 100 bcma requires about 4 - 20 bcma lines (incl. LNG), 10-15% Caspian/Middle East 2 lines total 31 bcma expansion +10 bcma LNG requirement Existing infrastructure 4th Corridor requirement

4. Table below summarised infrastructure required as Europe gas market growth from 520 bcma in 2003 to 830 bcma in 2025 Given supply diversity indicated

5. Gas Realities in South East Europe • Market in region too small • SECI Gas Study: develop market as ancillary market to supplying EU market • World Bank ECN Study: Delivered gas prices in SEE competitive • So, TPA reservation for provision of EU market and contestable local market using TPA on exiting and new local infrastructure

6. Mechanism for Operation of Network Energy Markets • Outputs for 2005 Protocol on Gas Transmission and InvestmentsGuidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community

7. Protocol on Gas Transmission and Investments • Protocol to Athens Memorandum 2003 • Title III Measure when Treaty comes into force • Principles: • Harmonisation between Regulators and TSOs of Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community • Limited possibility for revision and not subject to regulatory policy change • Concerted Application of Art 22 exemptions • Favour new sources of supply

8. Regulated Asset Base • Minimum harmonised principles • Risk-Return Relationship • Risk on investors not on local market

9. Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community • Stability and single regulatory process • Discrimination between existing and new? • Respect of the position of small shippers and new entrants • Unbundled regime • Use it or lose it • TPA on existing bulk transition lines – relationship with dominant flows • Level playing fields for new investments

10. Activation of Gas Regulatory Group • Agreed at last Ministerial • Meet at early stage under aegis of Commission • First Draft of Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community Chairman: Michael Caramanis, RAE

11. Next steps (1) • Updated Gas Transition Strategy • WB launch of Gas economics study and APL gas fund, based on country action plans and transit potential • Gas Forum in 2006

12. Next steps (2) • Adoption of the gas transition strategy paper by PHLG in 2006 • Consensus on Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community at Forum and then PHLG