The rising value of underground European gas
storage – „Tool” to survive crisis situation
GIE Annual Conference, Groningen,
May 7, 2009
Zoltan Jaszberenyi
Managing Director – EON Földgaz Storage Hungary
European Storage Demand Outlook - Business Climate
Page 2
Import Dependency will increase
FIN
Variations expected:
S
EST
LV
LT
74-80%
DK
60%
IRL GB
49%
2002
Source: IEA, World Energy Outlook 2004
2010
2030
NLD
PL
BL
CZ
SK
A
H
F
SLO
I
P E
GR
M
S 5611
CY
Growing dependence
Increasing investments and larger distances to gas supply sources
Barent Sea/Russia
Shifting from nearby located
gas supply sources to supply
areas in large distances
connected with political
instability
Barent Sea/Norway
181
3.500
West Siberia
(Urengoy,
Jamburg,
Bovanenko etc.)
36.100
Sea/Norway
994
North Sea/Norway
1.991
Great Britain
630
Denmark
84
Russia,
European part
4.100
Germany
The Netherlands 326
1.567
Italy 227
1.841
Kazakhstan
1.875
2.010
Algeria
Libya
1.314
4.522
Increasing Storage capacity
as instrument for flexibility
in gas supplies required
Turkmenistan
Iran
23.002
SaudiArabia
6.345
UAE
6.006
14.400
Qatar
Nigeria
3.511
1 m³ = 11,5 kWh
Source for gas reserves: Oil and
Gas Journal, Norwegian Petroleum
Directorate, professional publications
Billion cubic meters
Development of storage demand
Storage demand today and tomorrow
balanced
120 %
Import dependency
Belgium 0.7
100 %
Spain 2.3
Italy 13.3
France 11.2
Czech Rep. 2.1
Austria 2.8
80 %
SK 1.7
Hungary 3.4
Poland 1.6
60 %
Germany 19.6
EU-avarage 70.3
40 %
20 %
UK 3.5
0%
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
Storage capacity related to annual consumption in per cent
EU-avarage 2006
Scenario 2:
• Natural gas demand: 470 Mrd. m³
Scenario 1:
Gas import grows by 16%
• Import dependency: 58 %
• Natural gas demand: 600 billion cm
• Natural gas demand: 700 billion cm
Gas import grows by 22%
• Storage demand: 15 percent of annual • Import dependency: 74 %
• Import dependency: 80 %
consumption
• Storage demand: ~18.5 percent of
• Storags demand: ~20 percent of annua
annual consumption or 110 billion cm
consumption or 140 billionPage
cm5
Are we prepared?
Gas storages – a contribution to the security of supply
Working gas in billion cm
OECD Europe
0,3 - ?
0,4
2
1
2
(+3)**
NL
4
5
1
UK
0,1
1
B
2,3
D
3
20
3
0,6-2
4
A
4
I
1,6
PL
CZ
3
0,4
F
12
105-111
0,5
90
15-21
75
15
15
2020
2
2010
1-4
26-31 *
further projects
in preparation
LV
DK 4,7
2007
0,4
134
0,4
3
SK
4
HU
3
RO
3,2
13
2
Capacities 2007
*
**
Construction
between 2008 and
2010 (under
construction)
Construction
between 2010 and
2020 (planned)
Needs until 2025
(forecast)
(EU OECD)
GSE publication 01/2009: up to 60 bcm to be available by 2015 which is nearly a doubling
of the capacities currently available (State: planned)
NL: except ~3 bcm for production purposes
2025
S
Page 6
Are we prepared?
Gas storages – a contribution to the security of supply and
to the development of liquid markets
Working gas in billion cm
European SSO and
E.ON Gas Storage are
planning and
constructing storage
capacities
- on time
- cost efficiently
- according to the
demand
Page 7
SSOs are responding to market needs
GSE has a powerful and transparent instrument to evaluate storage
supply perspectives.
Database of EU storage investments was launched in July 2007:
 Publicly available information
 Projects divided into 3 categories: planned, committed and under
construction
 From an initial 30 bcm WG capacity increase to 2015 (July 2007) to
around 65 bcm (February 2009)
 Grand total of around 110 projects
“Independents”/new players are increasing their role: 25% of projects
and 30% of planned new capacity (~ 19 bcm)
http://www.gie.eu/gse/storageprojects/
Page 8
Future storage demand can covered well by storage
projects based on commercial market growth scenario
Reported storage projects cover well the range of demand scenario
This constitutes a further increase of around 6 bcm as compared to the
figures gathered by GSE in June 2008.
??? - Financial / Credit Crisis
??? – Investment supportive
regulatory framework
41,380
Mill m3
34%
2,096
Total Capacities became Total planned capacities
live since June 2007
to be completed short
term ( 2012-2014)
11,183
Capacities under
construction (real
commitments)
66%
Expansion
New Facilities
investment
Page 9
Stable regulatory framework is essential to support
storage developments
Regulation should be market-driven;
Streamlined planning and permitting procedures;
It should be realized that SSO’s products are in competition with other
flexibility tools : (indigenous gas production swing, imported pipeline
gas contract flexibility, peak shaving, spot markets, imported LNG, new
transmission lines, interruptible gas);
A stable European Regulatory framework that encourages new storage
developments as well as the optimal use of existing storage facilities is
essential;
Page 10
2009 Gas Crisis from Inside – Lesson learned
Page 11
Gas Supply Crisis Situation; Hungary by gas facts
Commercial Storage facilities &
Transportation routes
Hungary has two import gas transmission points:
•Ukraine - Beregovo:
•Austria – HAG :
30 mill m3/day
7-8 mill m3/day
•Gas is the most important fuel in Hungary, representing 44% of the
country's total primary energy mix (vs 24% in Europe).
•The share of gas in the household and public sector heating exceeds
70%.
Share of Hungarian primary energy supply by fuel
Nuclear 15%
Coal 13%
Natural Gas
44%
Oil 28%
Page 12
Hungary 2009 January: gas supply crisis from inside
Hungary has phased its biggest natural gas supply crisis since ever – „0” Eastern import supply for two weeks
 29/12/2008 - 1st official signals arrive about potential reduction of supply.
 30/12/2008 – Naftogas (Ukrainian TSO) is NOT confirming deliveries
 31/12/2008 – there is 38 mill m3 import confirmed, but only 30 mill m3 arrived
What has happened
 In the next 4 days uncertain deliveries arrived without destination confirmation
 6/01/2009 – at 14:50 – Ukrainian TSO „disconnects” Hungary from supply, quickly the pressures in
Hungarian system starts to decrease (5-8 barg / hour)
 6/01/2009 The Ministry of Energy has announced the gas restriction for customers in category 1
07/01/2009 The Ministry of Energy has announced the restriction for industry but only for 2 days (large
Industrials)
 7/01/2009 – Strategic stock released by the to utilize the 200+300 mcm strategic reserves
 8/01/2009 – Western supplies were increased via HAG (extra volumes transferred from EON Ruhrgas
Germany)
 20/01/2009- Eastern supply was back on the 38mcm/day level. All restrictions were withdrawn
Page 13
Hungary 2009 January: lessons learned during the supply
crisis
Due to Storage volumes in Hungary the commercial mobile stocks were high enough to survive longer period of
import cuts
 Clear crisis management mechanism was not working properly on international level in time ( this
became more effective in mid January)
 During the crisis time all daily balancing flexibilities were deleiverd by SSO – role of the SSO in flexibility
tools
 Hungarian commercial storage facilities have played a key role in ensuring security of supply. Although the
Ministry released the strategic stocks , this was not utilized !
 Development of commercial storage in a more interconnected market must be fostered in order to reinforce
security of supply in Europe.
 There Strategic stocks should not be seen as a solution for the security of supply problem.
 The real issues in this crisis are due to a lack of diversification in supply sources and supply routes for
some countries.
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Conclusion
 Europe will need more storage capacities
 for a liquid European market
 to meet future gas demand and balance import dependency and supply
 to support challenging climate protecting measures, i.e. CCS
• SSO´s are well prepared to provide necessary storage capacities to the
market
 in due time
 on a commercial basis
• Commercial storage provide the market with several products that compete
with other market instruments for providing flexibility and security of
supply
Creating and maintaining strategic stocks is expensive (more than in the case of
oil) – the costs will ultimately have to be borne by consumers
• To ensure these long term storage investments a reliable and predictable
legal framework is essential for the future
Page 15
Zoltan Jaszberenyi
Eon Földgaz Storage Zrt
zoltan.jaszberenyi@eon-földgaz.com
Thank you for your attention !
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