serbia: gasification study prepared by eca, financed by the wb branka tubin ministry of mining and...
TRANSCRIPT
Serbia: Gasification Study prepared by ECA, financed by the WB Branka TubinMinistry of mining and energy
Outline Two key issues: Increased gasification
extent prices competitiveness storage supply cases: import and transit
Invest in a new import option support increased gasification? incremental volumes incremental investment cost effect on security and reliability preferred investment case
Increased gasification
Key issues
Increased gasification is likely to reduce Serbia’s already low system load factor, increasing peak demand beyond the daily capacity limit via Hungary
Seasonal storage could reduce the winter peak to relieve the import constraint
A new import point in southern Serbia would greatly strengthen the system and increase reliability and security of supply
A southern import point would facilitate increased gasification in southern and central Serbia, and provide increased reliability,
However, the non-enforcement to date of the take-or-pay clause of the transit contract and the flat annual prices from Gazprom, reduce the economic incentive to develop storage
Gasification
MontenegroSouthern Serbia
Northern Serbiafully gasified
Western and Central Serbia partly gasified
Southern Serbia gasification barely begun
Montenegronot gasified
Western & East Serbia
Northern Serbia
Belgrade
Prices International benchmarks indicate that relative gas prices between customer types in Serbia need to be adjusted to reflect costs
Comparison with import prices shows that absolute price levels need to be increased, particularly for small customers with high seasonal ‘swing’
New Energy agency (regulatory authority) is to be established soon, price methodologies developed and tariff systems approved
3.7
0.7
3.1
2.1
1.7
0.8
0.50.4
1.5
1.21
1.33
1.1
0.6 0.5
0
1
2
3
4
1 10 100
1 00
0
10 0
00
100
000
1 00
0 00
0
10 0
00 0
00
Approximate peak day demand, kWh log scale
Rel
ativ
e P
rice
France
SpainIreland
Germany
AustriaBelgium
Portugal
United Kingdom
SwedenCzech Republic
Slovakia
PolandHungarySerbia
Croatia
Germany
Finland
Hungary
SlovakiaSpain Czech RepublicRomaniaCroatia
Denmark
Serbia
Denmark
PolandFrance
Relative prices international price comparisons
Residential Commercial
Industrial
Relative gas prices for residential and industrial customers in Serbia need significant adjustments$300
$200
$95 $80 $75
$165$125
Annual demand profile
high seasonal swing
-5
0
5
10
15
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dai
ly v
olu
mes
(m
illio
n sc
m)
Transit contract daily maximumExpected maximum daily demand
Seasonal demand swing in Serbia is very high
-5
0
5
10
15
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dai
ly v
olu
mes
(m
illio
n sc
m)
Current supply and demand
with domestic production
Transit contract daily maximum Expected maximum daily demand
… but with domestic production approximately flat …
… the swing is met with imports.
Domestic production buys some capacity …
-5
0
5
10
15
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dai
ly v
olu
mes
(m
illio
n sc
m)
Swinging domestic production
Transit contract daily maximum
Expected maximum daily demand
… could buy some more capacity …
… but domestic daily output is limited and production is in decline.
Review of the current import situation
The existing Hungarian import contract does not provide sufficient capacity to meet peak winter demand
This situation will worsen with increasing demand and declining domestic production
However, most of the import capacity is unused for most of the year
Nevertheless, the contract requires that NIS pay for 80% of unused daily capacity under a ‘take-or-pay’ clause
Instead of meeting this requirement now, NIS has negotiated to increase its capacity liabilities in future years
The situation is becoming quite serious.
Possible solutions
negotiate with customers to shift demand from winter to summer
negotiate with customers to interrupt gas use on peak days
introduce seasonal prices
establish seasonal gas storage within Serbia to flatten the import profile
secure additional import capacity
Seasonal prices for gas
reflect the higher value of winter gas (and/or the cost of storage)
automatically recover revenues in line with the costs of delivering gas
allow the cost of import capacity and transmission capacity to be better reflected in prices
encourage those customers who can to reduce winter gas consumption and/or increase summer gas consumption
automatically produce lower average prices for customers with flat annual profiles and higher average prices for customers with high swing profiles
Annual demand profile
high seasonal swing
-5
0
5
10
15
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dai
ly v
olu
mes
(m
illio
n sc
m)
Transit CONTRACT daily maximum
The ANNUAL AVERAGE daily quantity is significantly below the
daily transit capacity
A flat import profile would be of economic value to Hungary and should strengthen Serbia’s position in contract renegotiations.
Expected MAXIMUM daily demand
-5
0
5
10
15
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dai
ly v
olu
mes
(m
illio
n sc
m)
Seasonal storage to release transit capacity
Meeting the daily peaks from storage
Reduces the transit
capacity required
Gas from storage
Gas into storage
On current Serbian demand levels, seasonal storage could release about 4.5 million scm per day of Hungarian transit capacity.
Cost of storage
Estimated cost of stored gas is reasonable: US$ 33/ mcm
Northern Serbia
c
b
Montenegrod
Gasification cases
Network extensionswithin Serbia
a south to Dimitrovgrad 28” 43
b west to Backa Palanka (in 2b and 3b)
c west to Badovinci (in 3c)
d south-west to Montenegro12” 79
e west to Visegrad 10” 12
f branch to Kosovo 12” 8
g south to Vranje 12” 22
h east to Negotin 12” 34
j strengthen backbone24” 30
k west ring via Valjevo12&14”18
mcentral ring via Trstenik12” 12
n branch to Majdanpek (no data)
p branch to Bor 10” 3
q branch to Ivanjica 10” 8
Pipeline cost estimatessize US$m
Southern Serbiagf
a
he
p
n
k
qm
j
Western & Eastern Serbia
Belgrade
Import and transit cases tie in with gasification cases
New import connections would: strengthen Serbia’s weak linear-radial
gas transmission system increase import (and transit) capacity increase security of gas supply
and may: allow for diversity of supply sources
Transiting gas through Serbia would: increase quantities and help the
financial viability of new pipelines
and may: generate additional revenues for NIS
New import and transit
investment cases
1a
2b
2c
2g
2a
Import cases
1.Major transit routes across Serbia
a south-to-north 48”5 712
b east-to-west 48”3 785
Pipeline cost estimatessize US$m
2d LNG
2f
2e
1b2h
2j
south-to-north
1a2e
Bulgaria
east-to-west
1b2h
Romania
Major transit cases to be carefully considered
Both major transit cases should be considered carefully because:
the east-to-west option was declared to be expensive
the south-to-north option was declared to be redundant by the Nabucco pipeline
Nabucco pipeline Sources: map OMVprojections NIS
Serbia is advised to pursue import options that would leverage regional developments
55
29
11
1714
Expected 2010 demand of 5 countries : 125 bcm
30 bcm/y
20 bcm/yTotal expected 2010 demand of other potential Nabucco shipper countries:
bcm/yGermany 114Italy? 93Czech Republic 14Slovakia 9Switzerland 6
Compare Serbia3 ~5
But, the way we see Serbia in the region is that new gas pipeline direction across the territory of Serbia would be much easier to construct due to flat terrain in comparison to Karpats mountain region
The route to west Europe would be shorter
Since central Serbia is only partly gasified there is a number of consumers to be connected
Serbia is in a position to have connections with Croatia, Bosnia and Herzegovina, Montenegro, Kosovo and Metohija and Macedonia
Albania
Import cases
1.Major transit routes across Serbia
a south-to-north 48” 5 712b east-to-west 48” 3 785
2. Import routes to serve Serbian demand
a via Hungary (existing)b via Croatia 20” 36c via Croatia - BiH 20” 73d via Montenegro 20” 195e via Bulgaria 20” 60f via Albania 20” 202g via Macedonia 20” 67h via Romania 20” 76j via Romania 24” 32
Pipeline cost estimatessize US$m
1a2e
Bulgaria
Macedonia
2fMontenegro
Croatia
Bosnia andHerzegovina
Hungary
Romania2j
1b2h
Romania
2d LNG 2g
2b
2c
2a
Import casesSorted by capital cost Source/dependencies US$ million via Romania (north) Gazprom 32
via Croatia North African LNG 36Croatian terminal
via Macedonia Caspian/ Iran 67Turkey-Greece pipeline
via Croatia and BiH North African LNG 73 Croatian terminal
via Romania (central) Russia or Caspian/ Iran 76Nabucco pipeline
via Bulgaria Russia or Caspian/ Iran 60
Nabucco pipeline
via Montenegro North African LNG 195Montenegro terminal
via Albania Caspian/ Iran 202Turkey-Greece pipeline
Transit cases
3. Minor transit routes to neighboring countries
a to Croatia 20”18
b “ 20” 36
c to Bosnia and Herzegovina 20” 39
d “ n/a
e “ 10” 12
f to Albania and Montenegro
20” 140
g to Macedonia 20”56
Pipeline cost estimatessize US$m
AlbaniaMacedonia
Croatia3a
Bosnia andHerzegovina
3f 3g
3c
3d
3e
3b
Potential transit volumes
potential transit volumes in 2015, bcm
Croatia 0.5 Bosnia and Herzegovina 1.5 [Montenegro] 1.0 Albania 0.5 Macedonia 1.0 SubTOTAL 4.5
Serbia 3.5 TOTAL 8.0
Regional demand annual volumes
-5
0
5
10
15
20
25
2010 2015 2020 2025 2030 2035 2040
An
nu
al v
olu
me
(bc
m)
Croatia (10%)
Albania
Montenegro
Macedonia
Bosnia & Herzegovina
Serbia incremental imports
Assumed imports via Hungary
Imports via new pipeline
Delivered cost of gas
Based on the estimated capital costs and projected volumes of demand in Serbia and neighboring countries for regional gas transit, the transport cost of new import routes would be less than half the current Hungarian price
However, these estimates do not allow for transit fees (rent), so the total transit price may be higher
Industry structure
Currently a state-owned company for imports transmission distribution
+ 30 small distribution companies in Vojvodina
Transmission a single state-owned company is envisaged who is responsible for imports?
Distribution privatize or retain in state ownership two companies or many
Regulation give incentives to merge? (as per Bulgaria) exclusive franchises or gas supply
competition provide financial incentives to distribution
companies to gasify where economic?
Conclusions and recommendation
s
Recommendations
Increase gas prices to economic levels and reduce connection costs to economic levels to make the gas industry financially viable and facilitate increased gasification
Develop storage to: relieve the seasonal import capacity
constraint (providing sufficient capacity from the existing Hungarian transit contract for Serbia’s demand until 2010~2015)
provide a reliability reserve for the system Commence discussions with the
relevant authorities about supplying gas via Serbia to Montenegro, Croatia, Bosnia and Herzegovina, Albania and Macedonia
Enter discussions with the Nabucco consortium to take gas via a new pipeline
Regional transit opportunities could significantly increase volumes through a new import pipeline to Serbia
Therefore the Government of the Republic of Serbia made a conclusion on necessity to connect gas pipeline systems of Serbia and Bulgaria
In order to proceed with the activities leading to realization of this goal our Government proposed MoU to be signed with the Bulgarian side
Regional
initiative
Our Ministry proposed Energy strategy paper, it was adopted by the Serbian Government, now pending Parliament procedure
Although commercial- industry development strategy did not exist when this energy strategy paper was prepared, our ministry did decide to work on energy strategy paper. Therefore we believe that even higher gas consumption can be possible in case of dynamic commercial development
Energy Law stipulates the necessity to develop programs for energy strategy realization
Activities
already underwa
y
Therefore we decided to start working on guidelines for Serbia gasification action plan
National action plan is to be proposed by our Ministry and adopted by the Government
Both our guidelines paper and strategy paper are for the territory of central and northern Serbia due to inability to have accurate information from constituent Serbian part- Kosovo and Metohija and we are ready to be liable for natural gas supply of this part of Serbia as well