DRAFT DG TREN Staff Working Paper on LNG Madrid Forum XV Follow-up: LNG workshop: Introduction by European Commission DRAFT DG TREN Staff Working Paper on LNG Heinrich Hick DG TREN C 2 12-13 March 2009, Bilbao Heinrich Hick DG TREN C 2 XV Madrid Forum 6 November 2008 EUROPEAN COMMISSION EUROPEAN COMMISSION

Current EC policy context for LNG LNG featuring in both internal & external energy policy dimensions: Political: - European Council of 19/20 March 09: Follow-up 2nd SER: SoS, crisis mechanisms, infrastructure, etc. - Preparation of Communication “A secure and competitive EU Gas Policy” - integrated view on EU gas policy - no separate “LNG Action Plan” as referred to in SER2 Legal: - Second Reading on 3rd IEM Package - gas specfic Trilogue only next week - target: agreement within this legislature - Revision of Security of Gas Supply Directive Operational: - MF XV homework, GGPLNG

3rd IEM Package perspective (1) Package provides more solid basis [depending on final second reading outcome !] for taking workshop issues further: TPA (Art 15) [new Regulation, some differences between EP and CP !] CAM/CMP (Art 17) [new Regulation, some differences between EP and CP !] offer same services under equivalent contractual terms & conditions offer services compatible with use of interconnected gas transportation system  ref. to cooperation with TSOs make « relevant information » public on use and availablility of services  meet TUs « reasoable commercial needs » ambitious and balanced provisions: efficient and maximum use of capacity & facilitate investment in new infrastructure LSO to offer unused capacity on primary market

3rd IEM Package perspective (2) Transparency (Art 19) [new Regulation, some differences between EP and CP !] Trading of capacity rights (Art 22) [new Regulation, some differences between EP and CP !] disclosure of information re. services offered, conditions applied and technical information information on contracted and available capacities (regular, rolling basis, user-friendly, …) disclosure requirements also for exempted terminals some provisions on confidetiality [PM: role of NRAs ?] all SOs shall ensure harmonized « contracts and procedures on primary market to facilitate secondary trade »

LNG Policy rationale for regulatory framework Many terminals in EU have capacity (almost) fully booked in long- term contracts. Parties seeking long-term capacity booking depend on participation in terminal enhancement / construction project. BUT … capacity committed in long-term contracts is not used all the time (overcapacity in regasification) and access to short-term capacity (primary and secondary) is becoming more important - substitute scarce long-term capacity - capture potential of short-term trading opportunities What does EU market need ? Fair level playing field & investment friendly conditions: arbitrage possibilities across EU terminals (if price differentials allow) no regulatory distortion ? prevention of capacity hoarding ! Transparency for services offered and tariffs charged ! Certain alignment of services offered by LSO ?

Set-up and ambition of workshop Discuss Action Points: dynamic view (perspective of 3rd Package, business cycle, question well-known established views ..)  selection of priorities IV thematic blocks of Action Points: “lead stakeholder” per block, stakeholder presentations, discussion, conclusions on consolidated position of group Consolidate stakeholders’ views on Action Points to report back to next MF consider input into wider EU energy policy process under way (COM Communication on gas ?)

Running order (1) BLOCK I BLOCK II  Eurogas to kick-start 1) Preliminary findings from monitoring GGPLNG 2) Further analysis of tariffs and revenue regulation applied to LNG terminals  ERGEG to kick-start BLOCK II 1) Application of CAM principles to past capacity bookings 2) Need for harmonisation of anti-hoarding notification periods and anti- hoarding rules regarding the effect on capacity rights 3) [if the analysis above concludes that harmonisation is needed] recommendation on what such notification period and anti- hoarding rules should be  Eurogas to kick-start

Running order (2) BLOCK III BLOCK IV  GLE to kick-start 1) Identification of all technically possible and commercially relevant “unbundled services” 2) Benefits of detailed requirements for tradability of terminal access services, and possibilities and benefits of standard contracts offered for the same LSO services 3) Need for rules on prospective transparency 4) Need for detailed rules on transparency with regards to services offered  EFET to kick-start BLOCK IV Steps to improve cooperation between LSOs and interconnected TSOs Assess costs & benefits of minimum gas quality requirements at the entrance of terminals in the development of standards issued to CEN  GLE to kick-start