3-4 November 2005GIE Annual Conference 2005, Athens1 The increasing importance of storage Klaus-Dieter Barbknecht GSE President GIE Annual Conference 2005, Athens 3-4 November 2005

3-4 November 2005GIE Annual Conference 2005, Athens2 Storage New Economy

3-4 November 2005GIE Annual Conference 2005, Athens3 Agenda 1.Storage volumes: present & future 2.Why storage? 3.Changing role of storage 4.Preconditions to develop storage 5.Conclusions Epilogue: Outcome Madrid X

3-4 November 2005GIE Annual Conference 2005, Athens4 2. Why storage? Balancing seasonal variations in consumption Securing gas supply in case of interferences in production, transport or supply Covering demand peaks Enhancing cost effectiveness of gas transport Traditional roles of storages as important guarantor of security of supply

3-4 November 2005GIE Annual Conference 2005, Athens5 Storage volumes Overall working gas volume in Western Europe: 57 bcm Storage volumes in Europe need to expand by 3 bcm per year until 2025!

3-4 November 2005GIE Annual Conference 2005, Athens6 Storage volumes: future Source: Global Insight, Some examples of current storage projects in Europe: Storage volumes in Europe need to expand by 3 bcm per year until 2025!

3-4 November 2005GIE Annual Conference 2005, Athens7 Shrinking EU gas production Source: Global Insight, 2004.

3-4 November 2005GIE Annual Conference 2005, Athens8 Growing gas demand in EU-25 Source: European Commission, 2004.

3-4 November 2005GIE Annual Conference 2005, Athens9 Longer transportation routes Barents Sea Yamal 850 km 4800 km 1300 km North Sea Norwegian Sea > 5000 km Turkmenistan > 4000 km Iran

3-4 November 2005GIE Annual Conference 2005, Athens10 Future role for storage  Seasonal modulation and security of supply (technical availability) seconded by products to support the new market  Storage is and will be part of the flexibility market  Security of Supply remains the most important target

3-4 November 2005GIE Annual Conference 2005, Athens11 Overview of flexibility instruments

3-4 November 2005GIE Annual Conference 2005, Athens12 4. Preconditions to develop storage  Clear allocation of responsibilities of different market players  Clear, stable and incentivising investment climate for infrastructure development  Long term commitments between operators and suppliers  (Self)-regulation should foster entrepreneurship: stability, predictability, simplicity

3-4 November 2005GIE Annual Conference 2005, Athens13 Increasing demand for storage in order to: -Balance declining production swing (e.g. need for strategic storage in UK) -Meet growing demand of natural gas (e.g. in East and Southern Europe) -Make use of market flexibilities (e.g. price arbitrage) -Overcome delivery bottlenecks through long distance transports (e.g. producers entry to European market like Gazprom)  Need for allowing storage activities to be in line with market expectations  Need for regulative stability and positive investment signals Conclusions

3-4 November 2005GIE Annual Conference 2005, Athens14 Epilogue: Outcome Madrid X  Progress of Storage System Operators recognized  Overall compliance in the field of transparency and secondary market edentified as “construction sites”: -Publication of Operational Datas vs. Confidentiality Requirements -Bulletin boards not yet established with all SSOs -Limited secondary trade of unbundled services – solutions in sight  GSE Workshop on this issues : Nov. 16. Brussels