2003204PW - GTE Paris 22.10.03 - 1

FLUXYS EXPERIENCE FLUXYS EXPERIENCE TOWARDS LIBERALIZATIONTOWARDS LIBERALIZATION

P. Wailliez - COO FluxysP. Wailliez - COO Fluxys

2003204PW - GTE Paris 22.10.03 - 2

Liberalization: Fluxys experience

00

1010

2020

3030

4040

5050

6060

7070

8080

9090

100100

2000

2000

2001

2001

2002

2002

2003

2003

2004

2004

2005

2005

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

%%

MARKET OPENING IN BELGIUM: MARKET OPENING IN BELGIUM: a unique example in Europea unique example in Europe

2002 FL Gas Decree

07/2

003

2001 B Gas Law

2006

1999 B Gas Law

2010

1998 EU GAS Directive

A strong acceleration

Less than 6 months between decision& implementation

2003204PW - GTE Paris 22.10.03 - 3

Liberalization: Fluxys experience

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

• RegulationRegulation

• ActorsActors

• Market and NetworkMarket and Network

• CostsCosts

2003204PW - GTE Paris 22.10.03 - 4

Liberalization: Fluxys experience

BEFOREBEFORE

• Clear Objectives Clear Objectives

• Infrastructures enablingInfrastructures enablingGas Market DevelopmentGas Market Development

• Continuity of SupplyContinuity of Supply

• SafetySafety

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

RegulationRegulation

2003204PW - GTE Paris 22.10.03 - 5

Liberalization: Fluxys experience

NOWNOW

• Same clear objectives butSame clear objectives but

• Regulators at FederalRegulators at Federal& Regional level in Belgium& Regional level in Belgium

– Risk of regulatory pancakingRisk of regulatory pancaking

• Important impact on:Important impact on:

– Value creationValue creation

– ComplexityComplexity(potential dis-optimization)(potential dis-optimization)

TOWARDS MORE COMPLEXITY / UNCERTAINTY TOWARDS MORE COMPLEXITY / UNCERTAINTY

RegulationRegulation

2003204PW - GTE Paris 22.10.03 - 6

Liberalization: Fluxys experience

THEREFORETHEREFORE

• Take initiativeTake initiative

– UnbundlingUnbundling

– Publishing Tariffs Publishing Tariffs

– Coordinate modalitiesCoordinate modalitiesof opening with Distributors.of opening with Distributors.

TOWARDS MORE COMPLEXITY / UNCERTAINTY TOWARDS MORE COMPLEXITY / UNCERTAINTY

RegulationRegulation

2003204PW - GTE Paris 22.10.03 - 7

Liberalization: Fluxys experience

BEFOREBEFORE

• IntegrationIntegration

• Non-detrimental Decisions for TransportNon-detrimental Decisions for Transport(molecule decisions taking into account network (molecule decisions taking into account network integrity)integrity)

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY ActorsActors

2003204PW - GTE Paris 22.10.03 - 8

Liberalization: Fluxys experience

NOWNOW

• Transport not underTransport not underthe umbrella of incumbentthe umbrella of incumbent(incumbent decisions not granted)(incumbent decisions not granted)

– RevenuesRevenues(tariff hypothesis <> reality)(tariff hypothesis <> reality)

– Continuity of SupplyContinuity of Supply(network integrity <> portfolio optimization)(network integrity <> portfolio optimization)

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

ActorsActors

2003204PW - GTE Paris 22.10.03 - 9

Liberalization: Fluxys experience

THEREFORETHEREFORE

• Anticipate shippers Behavior & NeedsAnticipate shippers Behavior & Needs

• Careful design of Access Rules.Careful design of Access Rules.

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

ActorsActors

2003204PW - GTE Paris 22.10.03 - 10

Liberalization: Fluxys experience

BEFOREBEFORE

• Long-term contractsLong-term contracts& Easy forecasts& Easy forecasts

• Infrastructure Developed around ContractsInfrastructure Developed around Contracts

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and NetworkMarket and Network

2003204PW - GTE Paris 22.10.03 - 11

Liberalization: Fluxys experience

NOWNOW

• Shorter TermsShorter Terms& Uncertainties& Uncertainties

• Infrastructure ProjectsInfrastructure Projectsnot tied to Moleculenot tied to Molecule

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and NetworkMarket and Network

2003204PW - GTE Paris 22.10.03 - 12

Liberalization: Fluxys experience

THEREFORETHEREFORE

DevelopDevelop

• Performant Forecasting ToolsPerformant Forecasting Tools

• Probabilistic above Deterministic Approach.Probabilistic above Deterministic Approach.

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

Market and NetworkMarket and Network

2003204PW - GTE Paris 22.10.03 - 13

Liberalization: Fluxys experience

BEFOREBEFORE

• Transport costs includedTransport costs includedin Commercial Marginsin Commercial Margins

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

CostsCosts

2003204PW - GTE Paris 22.10.03 - 14

Liberalization: Fluxys experience

NOWNOW

• Revenues models not always favouring an Revenues models not always favouring an Entrepreneurial BehaviourEntrepreneurial Behaviour

• Deregulation <> OptimisationDeregulation <> Optimisation

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

CostsCosts

2003204PW - GTE Paris 22.10.03 - 15

Liberalization: Fluxys experience

THEREFORETHEREFORE

Further developFurther develop

• Cost ConsciousnessCost Consciousness

• Customer-mind and InnovationsCustomer-mind and Innovations

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTY

CostsCosts

2003204PW - GTE Paris 22.10.03 - 16

Liberalization: Fluxys experience

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTYRegulationRegulation

Be Proactive & Innovative!

- Actors- Actors - Market and Network - Market and Network - Costs- Costs

One Example: Hub in Zeebrugge

(and this happened before Liberalization)

2003204PW - GTE Paris 22.10.03 - 17

Liberalization: Fluxys experience

SPAINSPAIN SWITZERLANDSWITZERLANDITALYITALY

SWITZERLANDSWITZERLANDITALYITALY

EASTERNEASTERNCOUNTRIESCOUNTRIES

Zebra

NETHERLANDSNETHERLANDS

GTS

SotegSoteg

LUXEMBURGLUXEMBURG

Ruhrgas

GERMANYGERMANY

Wingas

UNITEDUNITEDKINGDOMKINGDOM

Transco

Gaz de France

FRANCEFRANCE

OVERSEASOVERSEASLNG sourcesLNG sources

NORWEGIANNORWEGIANGAS FIELDSGAS FIELDS

HUB

Fluxys launched in 98-99the Zeebrugge Hub

2003204PW - GTE Paris 22.10.03 - 18

Liberalization: Fluxys experience

0

1000

2000

3000

4000

5000

6000

99 00 01 02 03

Physical Volumes Net Traded Volumes Trend

20002000 2001200119991999 20022002TJ/day

20032003

ZEEBRUGGE HUB: ZEEBRUGGE HUB: LIQUIDITY LIQUIDITY

Gross Traded Volumes (*) up to 15 106 m³(n) / h

(*) estimated(*) estimated

= 3 9Net Churning

OUTIN

5 Customers

55 Customers

[6 x Transport Capacity between UK & Continental Europe]

[3 x Belgian Peak Consumption]

Market Evolution (// UK)

2003204PW - GTE Paris 22.10.03 - 19

Liberalization: Fluxys experience

HUB CONTRIBUTION TO AN EFFICIENT GAS HUB CONTRIBUTION TO AN EFFICIENT GAS MARKETMARKET

• Opportunities for optimizing Gas Supply Opportunities for optimizing Gas Supply Portfolio through Arbitrage Portfolio through Arbitrage

– Location Location (Zeebrugge (Zeebrugge Bacton) Bacton)

– Spot / Long Term Spot / Long Term

– Spark Spark (Gas (Gas Electricity) Electricity)

– LNG / Pipeline GasLNG / Pipeline Gas

Spread TradingSpread Trading

2003204PW - GTE Paris 22.10.03 - 20

Liberalization: Fluxys experience

0

1

2

3

4

5

6

7

8

9

01/9

703

/9705

/9707

/9709

/9711

/9701

/9803

/9805

/9807

/9809

/9811

/9801

/9903

/9905

/9907

/9909

/9911

/9901

/0003

/0005

/0007

/0009

/0011

/0001

/0103

/0105

/0107

/0109

/0111

/0101

/0203

/0205

/0207

/0209

/0211

/0201

/0303

/0305

/0307

/0309

/03

Continental Beach Bacton Day-ahead - Midpoint Zeebrugge Hub Day-ahead - Midpoint

EUR/GJ

No

v ‘

 98

Sta

rt I

nte

rco

nn

ec

tor

No

v ‘

 98

Sta

rt I

nte

rco

nn

ec

tor

ZEEBRUGGE HUB: ARBITRAGE OPPORTUNITIESZEEBRUGGE HUB: ARBITRAGE OPPORTUNITIES

Source: The Heren Report (ESGM) & Distrigas

2003204PW - GTE Paris 22.10.03 - 21

Liberalization: Fluxys experience

-25000

-20000

-15000

-10000

-5000

0

5000

10000

15000

20000

25000

30000

01-01

03-01

05-01

07-01

09-01

11-01

01-02

03-02

05-02

07-02

09-02

11-02

01-03

From UK To UK

TJ/monthTJ/month

ININ

OUTOUT

ZEEBRUGGE HUB: THE ZEEBRUGGE HUB: THE UK BEHAVIOURUK BEHAVIOUR

Net SellerNet Seller SummerSurplus

WinterShortage

2003204PW - GTE Paris 22.10.03 - 22

Liberalization: Fluxys experience

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

01-01

03-01

05-01

07-01

09-01

11-01

01-02

03-02

05-02

07-02

09-02

11-02

01-03

From To

ININ

OUTOUT

ZEEBRUGGE HUB: ZEEBRUGGE HUB: ANOTHER BEHAVIOURANOTHER BEHAVIOUR

TJ/monthTJ/month

Net BuyerNet Buyer

Sellingin the Winter

Buyingin the Summer

2003204PW - GTE Paris 22.10.03 - 23

Liberalization: Fluxys experience

One Example: Hub in Zeebrugge

(and this happened before Liberalization)

TOWARDS MORE COMPLEXITY / UNCERTAINTYTOWARDS MORE COMPLEXITY / UNCERTAINTYRegulationRegulation

Be Proactive & Innovative!

- Actors- Actors - Market and Network - Market and Network - Costs- Costs

One Example: Hub in Zeebrugge

(and this happened before Liberalization)

(would have this happened after Liberalization ?)

2003204PW - GTE Paris 22.10.03 - 24

Liberalization: Fluxys experience

A new Challenge :

Criteria:

HUB IN EUROPE : WHAT’S NEXT?HUB IN EUROPE : WHAT’S NEXT?

• Interconnected Grid• Access to Sources• Flexible & Willing Operator• Market Driven Generation

??

Harmonization of Business Practices for [multi-] Hubs Trading (EU Standard)& avoid Temptation of sub-Regional Behaviours

CommunicationCommunicationFlowsFlows

Liberalization: Fluxys experience

2003204PW - GTE Paris 22.10.03 - 25

Liberalization: Fluxys experience

2003204PW - GTE Paris 22.10.03 - 25