What make a market attractive?
The case of the European Union gas market
Madrid 22 – 23 November 2007
Yves Lebas – Managing Director
Cepsa Gas Comercializadora
European Union Gas Market: main features
700 bcm
2020
Sustainable
demand
growth
2010
2000
X2
1990
Europeans Gas Directives
10
9
$/mmbtu
8
7
6
Adequate
valorisation
Cif Japan
Cif Europe
Henry Hub
5
4
3
2
Bp statistical review
1
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
Towards an
integrated and
competitive
market
330 bcm
Cepsa Gas Comercializadora
A growing dependency to the external supplies
Expected by 2020
70%
60%
2006
90´ies
45%
80´ies
70´ies
35%
15%
Globally, Europe needs more investments to face growing imports
infrastructures
Cepsa Gas Comercializadora
Different market situations
Different market situations could imply different approaches to face the
challenge
80% of total gas imports concentrated in 4 countries
Germany
Italy
France
Spain
Belgium
Hungary
United Kingdom
Austria
Poland
Czech Republic
Slovakia
Romania
Ireland
Finland
Portugal
Lithuania
Greece
Bulgaria
Sweden
Denmark
Netherlands
-40
Nearly or 100% depended
from one supplier
Importers
Exporters
-20
0
20
40
Bcm
60
80
Cepsa Gas Comercializadora
Different players and ….. different objectives
A great challenge: how to conciliate different points of view?
Suppliers
- Guaranty of outlets
- Valorisation
Governments
- Security
- Efficiency
- Environment
European Commission
- Single market
- Competitiveness
New entrants
- Access to the gas
- Access to the market
- Market share offensive
Incumbents
- Market share protection
- Margin
- Diversification
Cepsa Gas Comercializadora
An imperative: develop gas import infrastructures
From 2004 to 2015 a dramatic increase of gas imports all around the world
Europe: more than 200 Bcm of new gas imports infrastructures (120 for LNG)
Asia:
around 120 Bcm of new gas imports infrastructures (100 for LNG)
America: 120 Bcm of new LNG imports infrastructures
Source : Total
Cepsa Gas Comercializadora
Centrally situated, a real advantage for Europe
Europe is a potential and accessible destination for worldwide major NG and LNG
producers
Supply capacities (2010 – 2020)
Central Asia
15 - 40
T & Tobago
5 - 10
Algeria
85 – 115
Western Africa
15 - 25
Source : IEA/OME
Libya
15 - 35
Egypt
15 - 25
Cepsa Gas Comercializadora
The actual situation of European gas market
• Natural gas flows are in a reorganisation process
• More globalisation through LNG
• Buyers looks to increase supply diversification
• Sellers are seeking diversification and putting projects in
competition
• With regard to the capitalistic and rigidity of the logistic,
natural gas industry will still be a long term business
and for the future …
Cepsa Gas Comercializadora
With regard to the gas demand growth expected, the
competition from traditional and new consuming gas
areas,
The European Union gas market even if it is
well situated, with regard to the world gas reserves
repartition, need to stay attractive
in order to mobilise new resources
Any regulation need to be equilibrated, send the right
signal to the market and provide long term visibility
Cepsa Gas Comercializadora
The offer and demand competition
On the demand side: competing for supply
• competing for quantities
• growing gas demand from traditional areas (US & Asia)
• emergence of new gas markets (China, India, …)
• competing for the better price
On the offer side: competing for markets
• looking for the better rate of return
• looking for stability
Common interest:
➣ security on flux
➣ sustainability on revenues
➣ trust and continuity in regulation and legal rules
Common obligation:
➣ invest in logistics
Cepsa Gas Comercializadora
The unbundling debate
How to conciliate different dilemmas?
“ I need firm commitment before to invest in infrastructures ”
“ I can close the deal only if the capacity is available ”
“ long term contracts are inherent to a highly capitalistic activity”
“ competition is the basis for correct information and better prices”
…
Who’s first?
Is the unbundling the only way to solve these dilemmas?
 be more pragmatic than theoretical
Cepsa Gas Comercializadora