Gas Regional Initiative Region SouthSouth East

1

Gas Regional Initiative - Region South-South
East 3rd Implementation Group Meeting Towards a
Regional Entry-Exit System in the SSE Gas Market.
A Preliminary Study Sergio Ascari, Consultant,
AEEG Maribor, 9 October 2007
2
Objectives of current preliminary study

• Overview of current tariff systems
• Stylised simulation of a regional tariff system
• Disclaimer approximate though plausible data
• Comparison between transport costs with current
  (national) tariffs and with regional tariffs
• No change in total TSO revenue same as with
  current national tariffs
• Benefits and costs for countries, SSE
• Inter-TSO Compensation (ITC) issues

3
SSE current tariff system
4
Scope of the study countries, routes

• Preliminary version includes A, CZ, I, SK, SLO
• Routes already considered in GRI for SSE-5
• 1. UKR-SK-CZ-GER (Vel'ké Kapuany - Waidhaus or
  Hora S. Kateriny)
• 2. UKR-SK-A-SI-I (Vel'ké Kapuany Baumgarten
  Murfeld - empeter/Gorizia)
• 3. UKR-SK-A-I (Vel'ké Kapuany - Baumgarten -
  Tarvisio)
• 4. UKR-SK-A-GER (Vel'ké Kapuany Baumgarten -
  Oberkappel)
• 5. ALGERIA-I-(SI)-A-SK (- CZ, -H)
  (Mazara-Tarvisio (GoriziaSI) Minerbio -
  Baumgarten CZ/SK)

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Scope of the study other routes

• Other Routes included in this version
• CH-I-A/SI (Griespass-Minerbio-A/SI/CZ/SK)
• Italian LNG terminal connection
  (Panigaglia-Minerbio-A/SI/CZ/SK)
• Routes to be added when data are provided
• UKRH-Austria (Beregdaroc-Mosonmagyarovar-Baumgar
  ten)
• BELARUS-PL-GER-CZ (Kondratki Mallnow HSK)
• UKR-RO-BG-GR (IsacceaNegru Voda-Kula-Revithoussa
  )
• UKRH-Serbia (Beregdaroc-Szeged)

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Scope of the study TSOs, entry/exit points

• TSOs
• RWE-TN, SPP-P, BOG, TAG, OMV(SOL), Geoplin-P,
  SRG
• Entry points
• Import points (Vel'ké Kapuany, H.S. Kateriny,
  Overkappel, Griespass, Panigaglia, Mazara/Gela)
• Main domestic production and storage areas (S.
  Moravia, SW Slovakia, Lower Austria, Adriatic
  Sea, Po Valley, Basilicata)
• Exit points
• Export points (H.S. Kateriny, Waidhaus,
  Overkappel, Rogatec, Griespass)
• Virtual national consumption areas (Slovakia,
  Czech Rep., NE/NW/S Austria, Slovenia,
  N/SCentral Italy)

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Scope of the study a stylised regional system
HORA S. KATERINY
DE
WAIDHAUS
CZ
55
UKR
DE
43
89
0
53
36
Lanzhot
SK
291
OBERKAPPEL
BAUMGARTEN/ EAST AUSTRIA
26
33
RAINBACH/ WEST AUSTRIA
DE
17
4
22
6
27
53
0.2
CH
SPP - P
SOUTHERN AUSTRIA
GRIESPASS
7
RWE - TN
NORTHERN ITALY
Tarvisio
Weitendorf
313
186
BOG
Gorizia
Cersak
TAG
5
11
PANIGAGLIA
Bologna
3.5
Geoplin
ADRIATIC FIELDS
HR
174
33
SOUTHERN CENTRAL ITALY
SLO
OMV
SOUTHERN ITALY
SRG
8
92
ALG
ENTRY POINT (Booked capacity Mcm/d)
MAZARA DEL VALLO/GELA
y
x
EXIT POINT (Booked capacity Mcm/d)
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Is the study representative?

• Most flows, capacity included in the study (see
  Table)
• Consumption regrouped into simplified areas
• About 21 of capacity for transit through SSE-5
• 2006 data used throughout

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REETS costs and revenues

• Assumed that revenue costs
• Calculation of (approximate) revenue requirements
  for each TSO based on
• current tariffs or methods, approved by NRAs
• applicable for standard long term contracts
  (15.6 Mcm/d 5 Bcm/y, load factor 88)
• for considered routes only, secondary grid
  excluded
• for Geoplin-P primary grid cost estimated as 68
  of total

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REETS simulation required revenues
SPP-Preprava 904.980.100 RWE-Transgas
Net 534.594.287 BOG (WAG)
52.142.679 TAG 172.766.806 OMV (SOL)
6.812.659 GEOPLIN-Plinovodi
24.814.518 SnamReteGas
1.032.861.236 Total 2.728.972.286
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REETS simulation building sections

• Each routes split into sections
• For each TSO, 2 or 3 sections on each route
• If no more information available TSOs with
  virtual exits split into sections of the same
  size and exit point located between such sections
  (RWE-TN, SRG for South-Central Italy, Geoplin-P)
• If more precise information available sections
  may be different (Austrian TSOs, SPP-P)
• cost of each section currently paid tariffs of
  standard LT contract for that section
• cost of sections when used backhaul 10 of
  normal cost, 30also simulated

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SSE-5 system building sections
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REETS simulation further work

• Simulation of increased cost (20) to pay for
  enhancement of selected congested pipelines
  included in this version
• Cost data are being collected and will be used
  for benchmarking, further simulations

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REETS simulation tariff structure

• Single balancing zone
• Entry-exit, 100 capacity tariffs
• Gas fuels and losses not considered - to be
  provided in kind by shippers
• Entry-exit split as generated by the simulation
  (not constrained)
• Multiple balancing zones with interlinks may be
  considered in next version

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REETS simulation basic results (/m3/d/y)
Entries Exits

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REETS simulation results with backhaul 0.3
(/m3/d/y) and comparison with basic results

17
REETS simulation impact of increased cost
(investment allowance) in BOG or TAG

18
Cost of transport for selected paths after basic
simulation results of REETS, /m3/d/y

19
REETS simulation change of transport cost
entailed by regional tariffs vis-à-vis current
tariffs, /m3/d/y
20
REETS simulation change of cost transport
entailed by regional tariffs vis-à-vis current
tariffs ( of wholesale price, for profile 1
contracts)

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REETS simulation comments

• Recall that total revenues and hence weighted
  average transport cost in SSE-5 does not change
  in this simulation
• With respect to current tariffs, REETS entail
• - increase of transport costs for close sources
• - decrease of transport costs for far sources
• Cost increase due to investment is spread among
  all routes
• Weight used for sections used backhaul has
  limited impact

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REETS simulation ITC mechanism/1

• Unlike in electricity, physical flows triggered
  by scheduled transportation patterns are largely
  predictable
• No need to devise inter-TSO compensation
  mechanism based on ex-post flows
• Tariffs may be entirely capacity based,
  required revenue is defined ex-ante
• If commodity-based component is agreed, related
  revenues are simply attributed to each TSO

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REETS simulation ITC mechanism/2

• Regulated allowed revenue (AR) determined and
  approved by NRAs for each TSO
• Tariffs may be collected by individual TSOs
  (e.g. according to exit area) and/or by a
  regional grid manager (RGM)
• Tariff revenue is then re-allocated to match
  individual AR
• Cost of tariffs and fuel gas to be separately
  provided by shippers at metered or regulated
  rates

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REETS preliminary conclusions/1

• Based on assumption of no TSO revenue change
• A regional tariff solution can be easily
  estimated for a stylised system and is stable
• Transport cost changes vis-à-vis current tariffs
  would be remarkable but usually between 10-15
  of wholesale price, 4-8 of retail price
• Reduced transport cost from more remote sources
  likely to offset increases for close sources

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REETS preliminary conclusions/2

• Risk of sharp changes adversely affecting
  wholesale prices in some countries suggests that
  REETS should be phased in gradually
• Hence transitional system consisting of smaller
  balancing areas with interlinks may be
  appropriate
• Since transport costs from close sources
  increase, from far sources fall, competition
  opportunities between suppliers and exporting
  sources increase
• ITC required but based on TSO's required
  revenues, implementation easier than for
  electricity