How Gaz de France – Transport can contribute to further competition in France

1. How Gaz de France – Transport can contribute to further competition in France www.transport.gazdefrance.com Gaz de France Réseau de Transport Jacques Laurelut

2. French Gas Transmission System – Main Characteristics • The French transmission system is divided into 8 zones, taking into account: • the existing boundaries between TSOs • the existence of two gas qualities (L-gas and H-gas) • the major physical capacity constraints (from North to South, from West to East) • Each zone is an Entry / Exit system: • separate entry and exit capacity booking for each zone (including capacity coming from or going to the neighbouring zones) • each zone is a notional balancing point • The capacity between zones (in each direction) is limited by the physical constraint Gaz de France Réseau de Transport Jacques Laurelut

3. N NL NH O E S Gaz de France Transmission System Taisnières H Dunkerque Taisnières B Obergailbach Montoir Balancing zone Exit zone Interconnection Point with other Transmission systems CFM Ouest Oltingue CFM Sud Gas Exchange Point CFM Transmission-Storage Interface Point Lussagnet Fos GSO Cruzy Gaz de France Réseau de Transport Jacques Laurelut

4. Services proposed • Annual capacity • Monthly capacity • Secondary market on a monthly basis • Title transfer facilities Gaz de France Réseau de Transport Jacques Laurelut

5. Gaz de France Title Transfer Points Points d’Échange de Gaz – PEGs / Gas Exchange Points • Five title transfer points, one in each balancing zone • In operation since November 1st 2003 • « Over The Counter » exchanges of daily quantities • Firm title transfer : allocated quantities = scheduled quantities Gaz de France Réseau de Transport Jacques Laurelut

6. The PEG Early Stages Gaz de France Réseau de Transport Jacques Laurelut

7. How can GDF Transport contribute to further competition in France ? • Widening of the range of services • Helping to increase the number of transactions and the quantities exchanged at the PEGs Gaz de France Réseau de Transport Jacques Laurelut

8. Widening range of services proposed in 2005 As from January 1, 2005 GDF Transport will propose: • Possibility to book capacity on a daily basis • Possibility to exchange capacity on a daily basis with a single nomination of the seller • Interruptible capacity which price is consistent with availability • Capacity allocation procedure in case of congestion Gaz de France Réseau de Transport Jacques Laurelut

9. Increasing of the number of transaction and quantities exchanged at the PEGs (1/4) 2004 3 Transmission System Operators (TSOs) Gaz de France Network : 24 000 km Compagnie Française du Méthane Network : 7 000 km Gaz du Sud-Ouest Network : 4 500 km Gaz de France Réseau de Transport Jacques Laurelut

10. Increasing of the number of transactions and quantities exchanged at the PEGs (2/4) 2 Transmission System Operators Gaz de France Pipelines: 24,000 km Compagnie Française du Méthane Pipelines: 7,000 km Gaz du Sud-Ouest Pipelines: 4,500 km 2005 planning : 100% Gaz de France 2005 planning : 100% Total Gaz de France Réseau de Transport Jacques Laurelut

11. Increasing of the number of transactions and quantities exchanged at the PEGs (3/4) GDF Transport will reduce the number of the balancing/tariff zones of his Entry/Exit model from currently 7 to 4 in 2005 • The 2 balancing zones of the CFM’s pipe line system are merged with the 2 adjacent zones of the GDF’s transmission system • In the North of France, merge of the L gas zone and the H gas zone and proposal of a conversion H – L service Gaz de France Réseau de Transport Jacques Laurelut

12. Increasing of the number of transactions and quantities exchanged at the PEGs (4/4) The GDF E/E model should have only two balancing zones in 2009 • Merge of the three balancing zones: north, east and west • The global E/E system will have two zones: north and south Gaz de France Réseau de Transport Jacques Laurelut

13. Making this possible (1/4) • In an E/E system, the balancing zones are designed, notably, in order to identify potential congestions • To solve the question of congestion, there are at least two possibilities • Reinforcing the pipe line system capacity • avoiding congestion through incentive scheme for shippers Gaz de France Réseau de Transport Jacques Laurelut

14. Making this possible (2/4) • We should compare the cost of reinforcing the system with the incentive requested by the shippers • But: • Difficulties identifying all the constraints • Market conditions prevailing in France currently • costs for de-bottlenecking were identified on a zone by zone basis Gaz de France Réseau de Transport Jacques Laurelut

15. Making this possible (3/4) • In the French Regulator’s opinion de-bottelenecking investment should be better rewarded • following discussion with the regulator; it was decided: • except for some cases, to reinforce the pipeline system between the North – East and North – West zones, • To not reinforce the pipeline system between the new north zone and the south one • We are convinced that the additional costs for the shippers should be lower than their savings on the gas price Gaz de France Réseau de Transport Jacques Laurelut

16. Making this possible (4/4) • This approach is not completely satisfactory since the investment are made by the TSO while the advantages should benefit to the shippers. • Lack of feed back on the decision • Lack of market based process to make the decision Gaz de France Réseau de Transport Jacques Laurelut

17. Thank you for your attention Gaz de France Réseau de Transport Jacques Laurelut