1. Flame conference, Amsterdam, 13th March 2007
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Liberalisation and Security of Supply
Steve Surrall, Director Business Development, Europe Downstream
Flame conference, Amsterdam, 13th March 2007
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2. This presentation includes forward-looking statements.
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Legal notice
This presentation includes forward-looking statements.
Such statements are only predictions and actual events
or results may differ materially. For a discussion of
important factors which could cause actual results to
differ from the forward-looking statements, please refer to
BG Group plc’s Annual Report and Accounts 2005.
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3. Changes in the UK gas market
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Introduction
Changes in the UK gas market
Implications for the European gas market
European consumers able to seize opportunity?
Liberalisation and security of supply
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4. Changing composition of UK gas supply 2003-07
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Changing composition of UK gas supply 50
100
150
200
250
300
350
400
2004
2005
2006
2007
million cubic metres / day
UK production
Norway
IUK imports
BBL
LNG terminals
Stock withdrawals
Source: National Grid
New import flows replace declining UKCS production
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5. Investments decided in lower price environment
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Investments decided in lower price environment
100
100 90 90 80 80 70 70 60 60
Langeled, BBL
UK NBP month ahead (p/therm) 50
Dated Brent ($/bbl) 50 40 40 30 30 20 20
Grain LNG 10 10
South Hook,
IUK
Dragon
2000
2001
2002
2003
2004
2005
2006
2007
Source: Argus
UK NBP (p/therm) LH scale
Dated Brent ($/bbl)
Capital deployed to supply growing import demand
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6. Oil price indexation: is it sustainable?
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Oil price indexation: is it sustainable?
European Buyers’ Term Contract Indexation by Region 0%
20%
40%
60%
80%
100% UK
W.Europe
E. Europe
per cent %
Other
Other energy prices
Electricity
Crude oil
Heavy FO
Gasoil
Gas price
Source: Energy Sector Enquiry
High oil prices may encourage revision of oil-indexed pricing
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7. Implications for investment
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Implications for investment
Competition and uncertain prices a challenge to investment?
UK and US examples prove this is not the case
BG Armada rig, North Sea
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8. Transportation – investment in infrastructure
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Transportation – investment in infrastructure
Access to infrastructure remains problematic
Alternatives to unbundling must be demonstrated
BG pipe infrastructure
Unused capacity rarely released to market
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9. Access to storage is key
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Storage
Access to storage is key
Role of the regulator
incentivise new facilities
ensure fair access for new entrants
make storage available on non-discriminatory basis
Rough storage facility
TPA exemption can incentivise investment
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10. Implications for new entrants and NOCs
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Implications for new entrants and NOCs
New entrants/NOCs seeking downstream role
European Commission recognises attributes of new entrants/NOCs
EU member states should welcome NOCs
Egyptian LNG
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11. Open markets do not prevent the incentive to invest
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Conclusion
European Commission assert liberalisation and security of supply can co-exist
Open markets do not prevent the incentive to invest
Future UK gas supply position may have knock-on effects on aiding liberalisation
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12. 06/04/ :14
Thank you
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