1. 2nd GTE Conference Copenhagen, September 2004 Author:Milan Sedlacek SPP (Slovak Gas Industry) Slovak Republic GAS TRANSIT THROUGH A NEW EU MEMBER STATE The view of TSO

2. Content 1. Transit systems of the new EU states 2. Transit system of SPP 3. New projects 4. New legal regime - challenges - transport vs. transit 5. Challenge of adjacent non-EU transit country 6. Conclusion

3. Transit systems for the russian gas export -Traditional corridor Ukraine, Slovakia, Czech republic, Austria -New Yamal corridor through Belarus and Poland -Romania and Bulgaria for direction Balkan and Turkey

4. Transit Capacity of SPP SPP provides transit services for Gazexport, Wintershall, VNG, Transgas, INA and Geoplin. 2004 year: - capacity of the transit system is nearly 94 bcm/y

5. Transit service challenges

6. Trans-European Networks – Priority Axes For Natural Gas

7. Ongoing implementation of EU legal regime New transit system access rules and conditions to be implemented under the umbrella of the new energy law. ENTRY-EXIT SYSTEM OF TARIFICATION

8. CEER says: Transit required to convey gas over long distances and across borders Our definition: Transit country is a country, where the volumes of gas crossing the country do significantly exceed the gas consumption of the country. For which countries is the gas transit issue important?

9. CEER - Transit and Third Party Access document, Madrid 2002 Question whether transit differs to transportation – i.e. is there really a need to think about these differently? 1. Most GTE members consider that, as far as the service and the conditions are identical, similar tariff rules and principles should apply to transits and transportations for delivery within the domestic market. 2. Nevertheless, some GTE members consider that transit implies specific types of services and risk sharing. It could justify the application of specific conditions, provided that the application of the principle of non discrimination is ensured. Why do we find transit to be the different service?

10. 1.A final customer will often only be able to use one system, whereas there are competing transit-systems 2.T he service rendered in a transit contract may be different from a domestic transportation contract : for instance, lower balancing tolerances and higher load factor for transits ; 3.transportation within a country may have specific economical, social or political objectives, such as public service obligations, market development, which can be achieved through different tariff methodologies, whereas transit contracts are based on commercial conditions agreed between parties ; SPP finds good rasons for different treatment of transit

11. 4.due to the large volumes implied in usual transit contracts, there are special risks associated with transits, against which existing users have to be protected (risks associated to large investments implied by large volumes) ; these risks have to be shared between the transmission company and the transit requester (there are partly covered by long duration contracts which is another difference with contracts for the domestic market) ; the tariff for transit is a result of this specific sharing of risks between the transmission company and a shipper (or a group of shippers) 5. non-EU country shipper and his requirements vs. EU requirements

12. - OBA: “Operational Balancing Agreement” where Balancing agreement results from a bilateral agreement between the connected operators, TSOs allocate all the quantities “as confirmed the day before”. - SBA: “Shipper Balancing Agreement” which has the same effect as OBA for all the shippers except one who is predominant at that IP and would then be able to take the steering differences. Problem of non-EU country adjacent partner: Operational Procedures at Interconnection Points

13. Current regime for transit of russian gas – vs OBA a. OBA says: Nominations by the shippers Yes, done by shippers. b. OBA says: Validation of nominations by the Upstream dispatching Yes, but done at 7:30 of D day, which starts at 8:00. Really at the last moment, is not it? No lesser rule, upstream side in charge of shippers nominations. c. Confirmation of nominations by SPP Yes, but with no impact on upstream side d. Renominations during the D day Never, even when necessary. Transport as you can, do your best. Usually rectified at D+1. How to change it? Solution as easy as a destination clause issue!!!

14. Conclusions - Gas transit is a security of supply issue - Competitive routes do exist - Treatment of transit vs. transport - Great challenges under way - Results are too uncertain -Neighbourhood of non-EU countries – OPEN ISSUE IMPOSSIBLE TO BE SOLVED WITHOUT BRUSSELS