1. 4th DRS Stakeholder seminar of DRS PA2
Challenges and opportunities to gas market integration in the Danube Region
Dr. Péter Kaderják
Director
4th DRS Stakeholder seminar of DRS PA2
December 5, 2017, Brussels

2. Natural gas: a major component of a low carbon electricity future…

3. … and for a future low carbon electricity generation fuel mix for the DR
Forecasted gross electricity fuel mix for SEE
Source: REKK – SEERMAP 2017

4. Third Package related EU legislation completed
Will the implementation of TP related legislation result in an efficient market in the DR?
Third Package related EU legislation completed
715/2009 as amended, in particular the Guidelines on Congestion Management Procedures
NC on Capacity Allocation Mechanisms (NC CAM)
NC on Balancing (NC BAL)
NC on Interoperability
NC on Harmonised Transmission Tariff Structures
Regulation 2017/1938 concerning measures to safeguard the security of gas supply
Regulation on wholesale energy market integrity and transparency (REMIT)
Any immediate relevance for the DR?

5. Preconditions for gas to play its future role
Well functioning gas market…
Building missing infrastructure (CESEC)
Efficient use of existing infrastructure (IP tariffs)
Addressing local wholesale market concentration (NS2, long term capacity bookings)
…otherwise
Price risk
Supply security risk

6. Price risk of the current status: little benefit from the LNG ‚glut’ in SEE-DR
Wholesale price impact of 100 Bcm LNG inflow to the EU market on a 2016 reference, €/MWh
Overall price decrease of 2.5 EUR/MWh but increased price divergence
Benefits in SEE part of DR are minor
Problems
Limits on physical evacuation of LNG from certain regions
Accumulated IP tariffs

7. Missing infrastructure

8. Several initiatives to address the missing infrstructure issue
PCI
CESEC
EnC/PECI
„Eastring”, TESLA
…and much more BG
-SB
TAP, LNG CR, IGB, BRUA
AL – Kosovo
SB - MK
CESEC: cost-efficiency, feasibility

9. CR-HU reverse: pressure management agreement
CESEC priority projects agreed by all members and progress by September 2016
CESEC priority projects:
Trans-Adriatic Pipeline (TAP)
Interconnector Greece-Bulgaria (IGB)
Interconnector Bulgaria-Serbia
Phased Bulgarian system reinforcement
Phased Romanian system reinforcement
LNG terminal in Croatia (with phasing potential)
LNG evacuation system towards Hungary
CESEC conditional priority projects:
Connection of off-shore Romanian gas to the Romanian grid and further enhancement of the Romanian system
Interconnection Croatia-Serbia
New Greek LNG terminal
CR-HU reverse: pressure management agreement
ROHUSKAT
redesigned
KRK: 2 Bcm/y floating by 2018
CEF: € 102m
BG-SB
stalled
CEF for the Romanian section of BRUA
Romanian gas export barriers lifted by April 2017
Bulgaria: 4 compressor stations
Bulgaria-Serbia interconnector: renewed MOU and EU support
Signature of IA of GR-BG, BG-RO, RO-UA: tpa, contractual reverse flow on the Trans-Balkan pipeline. Physical reverse flow discussed
Croatia plan 2 Bcm floating LNG by end of 2018
FID for IGB
IGB: FID;
1,57 bcm booked long term
TAP: Commissioned
> 50%
KrK: On March 28, 2017 the service agreement has been signed;
Trans-Balkan reverse flow: slow process

10. Efficient use of existing infrastructure

11. Cross-border gas transmission tariffs often discourage cross border trading…
Exit+entry tariffs in the CESEC region (€/MWh, Q1 2017)
Important tariff/market distortions detected
Coordinated tariffs to correct above-average tariffs is recommended
Tariff levels on interconnectors bringing spot gas to the region are critical
Lower tariffs across the board lead to increased spot gas supply and decent wholesale tariffs
Coloured boxes indicate above average E+E tariffs; average CB (E+E) tariff in region: 2.45 €/MWh

12. …but positive recent developments
Evolution of IP tariffs in the CESEC region and in some other European countries (shown as a benchmark) *
*percentage means the change from December 2015 to August 2017
Source: REKK calculation based on TSO and NRA data, latest information available in August 2017

13. Missing bi-directional capabilities limit competition and reduce the level of SoS
Available physical IP capacities (without backhaul), mcm/day. June 2017 (ENTSO-G)

14. Local wholesale market concentration

15. High level market concentration can conserve higher wholesale prices
Connection between wholesale prices and market structure in upstream level (2016)
Source: REKK analysis based on ACER and EU Quarterly Reports on European Gas Markets

16. Avoiding market foreclosure is key
Prisma, March 6, 2017
DE-CZ-SK reverse flow capacities booked by Gazprom. 80% between but some up to 2038
HAG, SK-HU: Hungarian regulator intervened; potential downstream market foreclosure
RU-DE: Lubmin II, Greifswald, Greifswald Entry, Vierow, DE-CZ: Deutschneudorf, Oldbernhau 2, CZ-SK: Lanzhot, Lanzhot 1, Lanzhot 2

17. Gas market outlook post-2020 for the DR
“Handing over” the lion’s share of infrastructure analysis and implementation to EnC and CESEC;
Shift in the focus of DRS PA2 activities from gas supply security to energy transition (and regional planning?)?
A modernized energy security concept?
Proposed future action / analysis:
The future of Ukraine’s gas sector reform and its integration scenarios with DR/CEE markets;
Establishing IGA criteria to promote credible cross-border sharing of gas storage assets (e.g. Hungary-Serbia, Hungary-Slovenia, Hungary-Turkey, Ukraine-Slovakia, etc).
The DR gas market in the context of the coming LNG glut

18. Should there be a shift in the focus of DR energy actions from gas SoS to support economic recovery and growth?

19. Thank you for your attention!