GIE Conference – 3 November Unbundling & Liberalisation Creating new challenges and opportunities The ‘Belgian case’ Rudy Van Beurden

GIE Conference – 3 November FLUXYS: PROACTIVE UNBUNDLING GAS TRANSPORT Existing company with a new name: Fluxys Former Distrigas GAS SALES & SUPPLY New company with an existing name: Distrigas Why proactive unbundling : Draft proposal 2nd EU directive included legal unbundling Market perception: legal unbundling most effective to ensure level playing field Strategic move: organise rather than undergo changes

GIE Conference – 3 November FLUXYSFLUXYS SUEZ-TRACTEBEL 57.25% 31.25% 11.50% (+ 5.21% shares owned by Suez-Tractebel) 1 share SUEZ 100% SHAREHOLDERS PUBLIGAS FIRST MARKET OF EURONEXT BRUSSELS BELGIAN STATE GOLDEN SHARE Board and Executive Committee: two federal government representatives in an advisory capacity Right to oppose to decisions about and transfers of strategic assets if considered prejudicial to federal energy policy

GIE Conference – 3 November Unbundling: the challenges Strategical: establish new objectivesStrategical: establish new objectives Contractual: need for formal agreements between an increasing number of playersContractual: need for formal agreements between an increasing number of players Commercial: setting up new relationships and obtain information from the marketCommercial: setting up new relationships and obtain information from the market Changing/unstable regulatory environmentChanging/unstable regulatory environment Operational: Gas flow management & grid balancingOperational: Gas flow management & grid balancing Investment planning: obtaining market information and commitments in due timeInvestment planning: obtaining market information and commitments in due time

GIE Conference – 3 November End-consumers Fluxys Supplier connection Open access to system FLUXYS’ CHALLENGES IN THE LIBERALISED GAS MARKET Free choice of supplier Put into practice framework to install level playing field for suppliers: Code of conduct Arrive at regulated tariffs providing sufficient return to justify investment Cope with highly complex interfaces in a multi-shipper environment Adjacent operator interconnection

GIE Conference – 3 November GAS MARKET ORGANISATION IN BELGIUM Fluxys grid 3700 km 17 shippers with supplier’s licence Large industrial end-users Power stations Grids of 21 Distribution System Operators km 14 shippers with supplier’s licence 18 entry points Small and medium-sized industrial end-users Residential end-users Fluxys Neigbouring grids: transit

GIE Conference – 3 November Connection Agreement Transporter Shipper/ Trader End-consumer + (with connection procedure) Allocation Agreement (at Supply Point) Transport licence Gas supply licence Eligible Transport Services Agreement Transportation agreements: new relationships Exploring the Current Legal Environment

GIE Conference – 3 November Regulatory environment The ‘Belgian case’The ‘Belgian case’ –1 federal regulator –3 regional regulators –Different levels of market opening in each region –Public distribution zones sometimes covering more than 1 region Continuous changes asked by different authorities  challenge of coping with system changesContinuous changes asked by different authorities  challenge of coping with system changes Low profitability on transport and storage activities  reduces entrepreneurshipLow profitability on transport and storage activities  reduces entrepreneurship Annual  multi-year tariffs as from 2007Annual  multi-year tariffs as from 2007

GIE Conference – 3 November Belgium: proactive acceleration of market opening 1998 EU Gas Directive A strong acceleration % % % % % 47% % opening in Flemish region

GIE Conference – 3 November Gas Flow Management & Grid Balancing Exponential growth of data to be interchanged in a multi-shipper environmentExponential growth of data to be interchanged in a multi-shipper environment –Hourly flow nominations by shippers enabling Fluxys to set grid configuration –Hourly matching information with adjacent operators to facilitate cross-border transactions –Hourly flow allocations + metering data services by Fluxys enabling shippers to stay within balance and thus avoid balancing charges Residual balancing by Fluxys far more complicated:Residual balancing by Fluxys far more complicated: –Gas price is main flow driver for shippers –Shippers can arbitrage between balancing charges in different systems –System integrity factors (stable inflow and gas quality) considered pure TSO concern

GIE Conference – 3 November Investment planning: a complex issue in an unbundled and regulated environment Shippers uncertain as to their market share in the future  fear for ‘open positions’:Shippers uncertain as to their market share in the future  fear for ‘open positions’: –larger part of supply portfolios is short-term –hence: more shorter term transportation contracts Fluxys uncertain about regulatory environment and profitability  financing more complexFluxys uncertain about regulatory environment and profitability  financing more complex Belgian gas demand to rise by 46% ➔ huge investments needed Shippers’ behaviour increasingly unpredictable + unpredictable regulatory environment ➔ lack of adequate investment signals ➔ increasing risk of stranded investments

GIE Conference – 3 November BUT ALSO…..

GIE Conference – 3 November New opportunities Zeebrugge Hub: created proactively in 1999Zeebrugge Hub: created proactively in 1999 –Hub services  Huberator Huberator –Cleared spotmarket  APX Gas Zeebrugge B.V. Shipper & ICT services  GMSLShipper & ICT services  GMSLGMSL  Becomes a catalyst for further infrastructure investments –LNG terminal expansion by Fluxys LNG Fluxys LNGFluxys LNG –BBL pipeline  BBL Company B.V. BBL Company B.V.BBL Company B.V. –Futher investments in transit capacity (open season launched) open seasonopen season

GIE Conference – 3 November TJ/day 2003 LIQUIDITY ON THE ZEEBRUGGE HUB 2004 GWh/day + 3 % + 6 % + x %

GIE Conference – 3 November SHIPPER SERVICES AND ICT Shipper services: possibility to outsource operations for managing gas transmission logisticsShipper services: possibility to outsource operations for managing gas transmission logistics Software: exchange nomination data, manage trading portfolios, manage transport nominationsSoftware: exchange nomination data, manage trading portfolios, manage transport nominations Easy & low cost access to liquidity and new markets

GIE Conference – 3 November ZEEBRUGGE LNG TERMINAL CAPACITY ENHANCEMENT LNG Reception Storage Send Out After 2007: +/- 9 BCM / year Investment: € 165 million Enhancement works on schedule

GIE Conference – 3 November PARTICIPATION IN BBL Interconnector Bacton-Balgzand Line Length: 235 km Total investment: € 500 mln BBL Characteristics Capacity:11 BCM expandable to 15 BCM Partners:GTS 60% Fluxys20% Ruhrgas 20%

GIE Conference – 3 November II. FUTURE GAS FLOWS: ADDITIONAL CAPACITIES TO FILL UK SUPPLY GAP II. FUTURE GAS FLOWS: ADDITIONAL CAPACITIES TO FILL UK SUPPLY GAP BBL Zeebrugge LNG-terminal Additional transit capacity east-west Russia Information Memorandum launched June 2005 Interconnector Evolution: 8, 16, 23.5bcm/y

GIE Conference – 3 November ENHANCEMENT VTN EAST-WEST RUSLANDNOORWEGEN DUITSLANDRUSLAND VERENIGD KONINKRIJK Fluxys Zelzate Eynatten Zeebrugge Information Memorandum launched in June 2005 Results are being analysed Commercial discussions being started Appropriate regulatory framework is key for succes