European 33 Gas Market Profiles 2006

www.datamonitor.
com
Datamonitor USA
245 Fifth Avenue
4th Floor
New York, NY 10016
USA

t: +1 212 686 7400
f: +1 212 686 2626
e: usinfo@datamonitor.com
Datamonitor Europe
Charles House
108-110 Finchley Road
London NW3 5JJ
United Kingdom

t: +44 20 7675 7000
f: +44 20 7675 7500
e: eurinfo@datamonitor.com
Datamonitor Germany
Kastor & Pollux
Platz der Einheit 1
60327 Frankfurt
Deutschland

t: +49 69 9750 3119
f: +49 69 9750 3320
e: deinfo@datamonitor.com
Datamonitor Asia Pacific
Darling Park
Tower 2, Level 21
201 Sussex Street
Sydney NSW 2000
Australia
t: +61 2 9006 1526
f: +61 2 9006 1559
e: apinfo@datamonitor.com
Datamonitor Japan
Wakamatsu Bldg 7F
3-3-6 Nihonbashi-Honcho
Chuo-ku
Tokyo 103-0023
Japan
t: +813 6202 7681
f: +813 5778 7537
e: jpinfo@datamonitor.com

European 33 Gas Market
Profiles: Q1 2006 Update
Current Trends and Future Prospects
The report comprises comprehensive analysis of the gas markets in the 25 EU member
states and 8 related markets. Each country profile looks at market structures, regulatory
environments, supply/demand balances, storage, imports and, where appropriate, wholesale
markets.
Reference Code: DMEN0414
Publication Date: 02/06

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by
any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission
of the publisher, Datamonitor plc.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.
Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based
on information gathered in good faith from both primary and secondary sources, whose accuracy we are
not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions
taken based on any information that may subsequently prove to be incorrect.

European 33 Gas Market Profiles: Q1 2006 Update DMEN0414
Datamonitor (Published 02/2006) Page 2
This report is a licensed product and is not to be photocopied

ABOUT DATAMONITOR
Datamonitor plc is a premium business information company specializing in industry
analysis.
We help our clients, 5000 of the worlds leading companies, to address complex
strategic issues.
Through our proprietary databases and wealth of expertise, we provide clients with
unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive,
Consumer Markets, Energy, Financial Services, Healthcare, Technology.
Datamonitor maintains its headquarters in London and has regional offices in New
York, Frankfurt, Sydney and Japan.

Regional Overview

CHAPTER 1 REGIONAL OVERVIEW
Regulatory climate
Liberalization and market reform have long been key themes in the European energy
sector with the creation of a single European energy market high on the agenda of
the European Union for many years.
The first steps towards this process took place in the early 1990s with the passing of
Directive 90/377/EC, which aimed to make gas and power prices more transparent.
This was followed by Directives 91/296/EEC and 90/547/EEC which were aimed at
making trading energy between different European Union members more efficient.
Liberalization began in earnest in late 1996 when the EU passed the electricity
directive (Directive 96/92/EC) setting out common rules for power production,
transmission and distribution throughout the EU. The directive also legislated for
gradual market opening with a target of 33% of all power markets meant to be
opened to competition by February 2003.
The electricity directive was followed in June 1998 by the passing of the first gas
directive (Directive 98/30/EC), which came into legal force on 10th August 1998 and
was meant to have been adopted into the national legislation of all member states
within 2 years. The directive established common rules for the operation of gas
markets as well as outlining a market opening schedule. Under the terms of the
directive, consumers of more than 25 mcm per year and all gas fired power stations
were immediately able to choose their supplier, whilst phase 2 set a 28% market
opening target by mid 2003 and 33% by mid 2008.
At the time the first directive was criticized, mainly by gas consumers, who described
it as toothless and lacking in substance for having what they saw as a slow and
undemanding market opening schedule.
In June 2003 the EU passed revised legislation accelerating the opening of both the
gas and power markets by passing Directive 2003/54/EC for the electricity markets
and Directive 2003/55/EC for gas. The new directives laid out a timetable to fully
open both markets in two phases phase 1 came into force on 1st July 2004 and
opened the non-residential market, whilst phase 2 will come into effect on July 1st
2007 and will bring in 100% market opening.
Regional Overview

In addition to the market opening timetable, this second gas directive contained
additional market reforms. These were:
Legal unbundling of transport and trading the directive requires all member
states to separate their gas transportation and trading functions into separate
companies.
Regulated TPA access must be granted to all gas grids with grid owners publishing
rates which have been approved by the national regulator.
Creation of a Regulator all markets without a gas regulatory body were required to
create one.
Public service obligations various obligations were placed on gas companies
requiring them to protect the interests of consumers and to ensure the right to switch
their gas supplier.
These obligations also apply to the 10 accession countries that joined the European
Union on 1st May 2004.
The willingness, and success, with which the EU 25 members have adopted the
terms of the directive varies widely. Some markets have not only met, but also
exceeded, the timetable set out by the EU whilst others have still not complied with
the deadlines. In mid October 2004 the European Commission issued formal letters
to 18 members censuring them for not having met all of the requirements set out by
the directive. Subsequently in July 2005 the EU announced its intention to take legal
action against Estonia, Ireland, Greece, Spain and Luxembourg for not having fully
transcribed the directives into national law.
Market development
Europes gas markets are at widely varying stages of development. Some markets,
such as Germany and the UK, have sophisticated market structures reflecting their
long histories as gas consumers. Conversely, some markets such as Spain and
Portugal, are comparatively new consumers of gas and have immature infrastructures
and markets. Significant differences also exist in terms of gas self sufficiency, the role
gas plays in each country and in future demand growth rates.
Despite these differences, all markets in Europe are united by the fact that gas
demand over the short to medium term is certain to increase as economic growth,
Regional Overview

greater supply availability, environmental concerns and legislation and a concerted
movement towards gas fired power generation all combine to drive demand.
As this demand grows, and as indigenous supply becomes increasingly depleted,
Europe will become more dependent on other sources of supply. North African and
Russian gas will increasingly penetrate the European market, whilst gas from further
afield, in the form of LNG, will also significantly gain market share.
Figure 1: Gas Penetration vs Absolute Demand

Austria
Belgium
Czech
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Lithuania
Netherlands
Poland
Portugal
Slovakia
Spain
Sweden
United Kingdom
0
20
40
60
80
100
120
0% 10% 20% 30% 40% 50% 60%
Role of Gas In Primary Energy Mix
2
0
0
4

D
e
m
a
n
d

(
b
c
m
)

Source: Datamonitor D A T A M O N I T O R

TABLE OF CONTENTS
CHAPTER 1 REGIONAL OVERVIEW 3
Regulatory climate 3
Market development 4
CHAPTER 2 ALGERIA 28
Market summary 28
Supply and demand balance 29
Supply overview 30
Demand overview 31
Regulatory structure 33
Infrastructure 33
Pipelines 33
LNG 34
CHAPTER 3 AUSTRIA 36
Market summary 36
Supply overview 38
Demand overview 39
Wholesale environment 41
Overview 41
Infrastructure 42

Pipelines 42
Storage 43
CHAPTER 4 BELGIUM 45
Market summary 45
Supply overview 47
Demand overview 48
Infrastructure 51
Pipelines 51
LNG 52
Capacity deals signed 52
Storage 53
CHAPTER 5 BULGARIA 54
Market summary 54
Supply overview 56
Demand overview 56
Infrastructure 58
CHAPTER 6 CROATIA 60
Market summary 60

Supply overview 62
Demand overview 62
Infrastructure 64
CHAPTER 7 CYPRUS 66
Market summary 66
CHAPTER 8 CZECH REPUBLIC 67
Market summary 67
Supply overview 69
Demand overview 70
Infrastructure 73
CHAPTER 9 DENMARK 74
Market summary 74
Supply overview 76
Demand overview 77
Infrastructure 81
Pipelines 81

Storage 81
CHAPTER 10 ESTONIA 82
Market summary 82
Supply overview 84
Demand overview 84
Infrastructure 85
CHAPTER 11 FINLAND 87
Market summary 87
Supply overview 89
Demand overview 89
Infrastructure 91
Pipelines 91
CHAPTER 12 FRANCE 93
Market summary 93
Supply overview 95
Demand overview 96
Key factors limiting the development of competition in France 99

Infrastructure 101
LNG 101
Pipeline infrastructure 101
CHAPTER 13 GERMANY 105
Market summary 105
Demand overview 108
Infrastructure 112
CHAPTER 14 GREECE 115
Market summary 115
Supply overview 117
Demand overview 118
Infrastructure 120
LNG 120
CHAPTER 15 HUNGARY 121
Market summary 121
Supply overview 123

Demand overview 124
Infrastructure 127
Pipelines 127
Storage 127
CHAPTER 16 IRELAND 128
Market summary 128
Supply overview 130
Demand overview 132
Infrastructure 134
CHAPTER 17 ITALY 136
Market summary 136
Supply overview 138
Demand overview 139
Infrastructure 143
Pipelines 143
LNG infrastructure 144
Storage sites 146

CHAPTER 18 LATVIA 147
Market summary 147
Supply overview 149
Demand overview 149
Infrastructure 151
Pipelines 151
Storage 151
CHAPTER 19 LITHUANIA 152
Market summary 152
Supply overview 154
Demand overview 154
Infrastructure 156
Pipelines 156
CHAPTER 20 LUXEMBOURG 157
Market summary 157
Supply overview 159
Demand overview 159

Infrastructure 161
Pipelines 161
CHAPTER 21 MALTA 162
Market summary 162
CHAPTER 22 THE NETHERLANDS 163
Market summary 163
Supply overview 165
Demand overview 167
Infrastructure 170
Pipelines 170
Storage 170
LNG 171
CHAPTER 23 NORWAY 172
Market summary 172
Supply overview 174
Demand overview 175
Infrastructure 177

CHAPTER 24 POLAND 180
Market summary 180
Supply overview 182
Demand overview 183
Infrastructure 185
Pipelines 185
CHAPTER 25 PORTUGAL 187
Market summary 187
Supply overview 189
Demand overview 190
Infrastructure 192
LNG 192
Storage 192
CHAPTER 26 ROMANIA 194
Market summary 194
Supply overview 196
Demand overview 197

Infrastructure 199
CHAPTER 27 RUSSIA 200
Market summary 200
Supply overview 202
Demand overview 203
Industry restructuring 205
Competitive intensity 206
Market framework factors 207
Supplier push factors 207
Customer pull factors 208
Infrastructure 208
Upstream 208
Unified Gas Supply System 209
Export infrastructure 210
CHAPTER 28 SLOVAKIA 212
Market summary 212
Supply overview 214
Demand overview 215

Infrastructure 218
Pipelines 218
Storage 218
CHAPTER 29 SLOVENIA 220
Market summary 220
Supply overview 222
Demand overview 222
Infrastructure 224
Pipelines 224
CHAPTER 30 SPAIN 225
Market summary 225
Supply overview 227
Demand overview 228
Infrastructure 232
LNG 232
Pipelines 233
Pipeline developments 233
Storage 234
CHAPTER 31 SWEDEN 236

Market summary 236
Supply overview 238
Demand overview 239
Infrastructure 241
Pipelines 241
CHAPTER 32 SWITZERLAND 243
Market summary 243
Supply overview 245
Demand overview 245
Infrastructure 247
CHAPTER 33 TURKEY 249
Market summary 249
Supply overview 251
Demand overview 252
Infrastructure 254
CHAPTER 34 UNITED KINGDOM 256
Market summary 256

Supply overview 258
Demand overview 259
Infrastructure 263
Transmission and distribution 263
Offshore infrastructure 263
LNG 265
Storage 266
CHAPTER 35 APPENDIX 268
Data sources 268
Data Adjustments 268
Definitions 269
Future readings 270
SPP writing team 270
How to contact experts in your industry 271

LIST OF TABLES
Table 1: Algeria, Supply and Demand Balance 29
Table 2: Austria, Supply and Demand Balance 37
Table 3: Austria, Storage Sites 43
Table 4: Belgium, Supply and Demand Balance 46
Table 5: Belgium, Interconnector Ownership 51
Table 6: Belgium, Storage Sites 53
Table 7: Bulgaria, Supply and Demand Balance 55
Table 8: Croatia, Supply and Demand Balance 61
Table 9: Czech Republic, Supply and Demand Balance 68
Table 10: Czech Republic, Storage Sites 73
Table 11: Denmark, Supply and Demand Balance 75
Table 12: Denmark, Storage Sites 81
Table 13: Estonia, Supply and Demand Balance 83
Table 14: Finland, Supply and Demand Balance 88
Table 15: France, Supply and Demand Balance 94
Table 16: France, LNG Infrastructure 101
Table 17: France, LNG Infrastructure 103
Table 18: Germany, Supply and Demand Balance 106
Table 19: Germany, Storage Sites 114
Table 20: Greece, Supply and Demand Balance 116
Table 21: Hungary, Supply and Demand Balance 122
Table 22: Hungary, Storage Sites 127

Table 23: Ireland, Supply and Demand Balance 129
Table 24: Italy, Supply and Demand Balance 137
Table 25: Italy, LNG Infrastructure 145
Table 26: Italy, Storage Sites 146
Table 27: Latvia, Supply and Demand Balance 148
Table 28: Lithuania, Supply and Demand Balance 153
Table 29: Luxembourg, Supply and Demand Balance 158
Table 30: Netherlands, Supply and Demand Balance 164
Table 31: Netherlands, Storage Sites 170
Table 32: Norway, Supply and Demand Balance 173
Table 33: Gassled Shareholders 178
Table 34: Poland, Supply and Demand Balance 181
Table 35: Portugal, Supply and Demand Balance 188
Table 36: Romania, Supply and Demand Balance 195
Table 37: Russia, Supply and Demand Balance 201
Table 38: Russia, Age of high-pressure pipelines, 2004 209
Table 39: Slovakia, Supply and Demand Balance 213
Table 40: Slovakia, Storage Sites 218
Table 41: Slovenia, Supply and Demand Balance 221
Table 42: Spain, Supply and Demand Balance 226
Table 43: Spain, LNG Infrastructure 232
Table 44: Spain, Storage Sites 235
Table 45: Sweden, Supply and Demand Balance 237
Table 46: Switzerland, Supply and Demand Balance 244

Table 47: Turkey, Supply and Demand Balance 250
Table 48: UK, Supply and Demand Balance 257
Table 49: UK, LNG Infrastructure 266
Table 50: UK, Storage Sites 267

LIST OF FIGURES
Figure 1: Gas Penetration vs Absolute Demand 5
Figure 2: Algeria, Gas Production 30
Figure 3: Algeria, Pipeline Gas Export Destinations 31
Figure 4: Algeria, Sectoral Demand 32
Figure 5: Algeria, Historical Demand 32
Figure 6: Algeria, Gas Infrastructure 35
Figure 7: Austria, Gas Production 38
Figure 8: Austria, Imports By Source 39
Figure 9: Austria, Sectoral Demand 40
Figure 10: Austria, Historical Sectoral Demand 40
Figure 11: Austria, Gas Grid 44
Figure 12: Belgium, Supply Source 47
Figure 13: Belgium, Sectoral Demand 48
Figure 14: Belgium, Historical Sectoral Demand 49
Figure 15: Bulgaria, Historical Demand 57
Figure 16: Bulgaria, Sectoral Demand 57
Figure 17: Bulgaria, Gas Grid 59
Figure 18: Croatia, Gas Production 62
Figure 19: Croatia, Sectoral Demand 63
Figure 20: Croatia, Historical Demand 63
Figure 21: Croatia, Gas Grid 65
Figure 22: Czech Republic, Import Sources 69

Figure 23: Czech Republic, Gas Production 70
Figure 24: Czech Republic, Sectoral Demand 71
Figure 25: Czech Republic, Historical Sectoral Consumption 71
Figure 26: Czech Republic, Czech Republic Distribution Grid 73
Figure 27: Denmark, Supply Sources 76
Figure 28: Denmark, Gas Production 77
Figure 29: Denmark, Sectoral Demand 78
Figure 30: Denmark, Historical Sectoral Demand 78
Figure 31: Estonia, Sectoral Demand 84
Figure 32: Estonia, Gas Distribution Grid 86
Figure 33: Finland, Sectoral Demand 90
Figure 34: Finland, Historical Sectoral Demand 90
Figure 35: Finland, Gas Grid 92
Figure 36: France, Gas Production 95
Figure 37: France, Import Sources 96
Figure 38: France, Sectoral Demand 97
Figure 39: France, Historical Sectoral Demand 97
Figure 40: France, Transmission Grid 104
Figure 41: Germany, Gas Production 107
Figure 42: Germany, Imports By Source 108
Figure 43: Germany, Sectoral Demand 109
Figure 44: Germany, Historical Sectoral Consumption 109
Figure 45: Greece, Indigenous Production 117
Figure 46: Greece, Sectoral Demand 118

Figure 47: Greece, Historical Sectoral Demand 119
Figure 48: Hungary, Gas Production 123
Figure 49: Hungary, Imports By Source 124
Figure 50: Hungary, Sectoral Demand 125
Figure 51: Hungary, Historical Sectoral Demand 125
Figure 52: Ireland, Gas Production 131
Figure 53: Ireland, Imports By Source 131
Figure 54: Ireland, Sectoral Demand 132
Figure 55: Ireland, Historical Sectoral Demand 133
Figure 56: Ireland, Transmission Grid 135
Figure 57: Italy, Gas Production 138
Figure 58: Italy, Imports By Source 139
Figure 59: Italy, Sectoral Demand 140
Figure 60: Italy, Historical Sectoral Demand 140
Figure 61: Italy, Gas Infrastructure 146
Figure 62: Latvia, Sectoral Demand 150
Figure 63: Lithuania, Sectoral Demand 155
Figure 64: Luxembourg, Sectoral Demand 159
Figure 65: Luxembourg, Historical Sectoral Demand 160
Figure 66: Luxembourg, Gas Grid 161
Figure 67: Netherlands, Gas Production 166
Figure 68: Netherlands, Imports By Source 166
Figure 69: Netherlands, Sectoral Demand 167
Figure 70: Netherlands, Historical Sectoral Demand 168

Figure 71: Norway, Gas Production 174
Figure 72: Norway, Gas Export Destinations 175
Figure 73: Norway, Sectoral Demand 176
Figure 74: Norway, Historical Sectoral Demand 176
Figure 75: Norway, Gas Export Infrastructure 179
Figure 76: Poland, Gas Production 182
Figure 77: Poland, Imports By Source 183
Figure 78: Poland, Sectoral Demand 184
Figure 79: Poland, Historical Sectoral Demand 184
Figure 80: Poland, Gas Transmission System 186
Figure 81: Portugal, Imports By Source 189
Figure 82: Portugal, Sectoral Demand 190
Figure 83: Portugal, Historical Sectoral Demand 191
Figure 84: Romania, Gas Production 196
Figure 85: Romania, Import Sources 197
Figure 86: Romania, Sectoral Demand 198
Figure 87: Romania, Historical Demand 198
Figure 88: Russia, Gas Production 202
Figure 89: Russia, Gas production by producer type 203
Figure 90: Russia, Sectoral Demand 204
Figure 91: Russia - The state is planning to increase its stake in Gazprom to 51%
and to expand the open market 206
Figure 92: Russia, gas market competitive intensity 2005-08 207
Figure 93: Russia, Gas reserves 209
Figure 94: Russia, Main existing and planned export pipelines 211

Figure 95: Slovakia, Gas Production 214
Figure 96: Slovakia, Imports By Source 215
Figure 97: Slovakia, Sectoral Demand 216
Figure 98: Slovakia, Historical Sectoral Demand 216
Figure 99: Slovakia, Gas Grid 219
Figure 100: Slovenia, Imports By Source 222
Figure 101: Slovenia, Sectoral Demand 223
Figure 102: Slovenia, Gas Grid 224
Figure 103: Spain, Gas Production 227
Figure 104: Spain, Imports By Source 228
Figure 105: Spain, Sectoral Demand 229
Figure 106: Spain, Historical Sectoral Demand 229
Figure 107: Spain, Gas Grid 234
Figure 108: Sweden, Sectoral Demand 239
Figure 109: Sweden, Historical Sectoral Demand 240
Figure 110: Sweden, Gas Grid 242
Figure 111: Switzerland, Import Sources 245
Figure 112: Switzerland, Sectoral Demand 246
Figure 113: Switzerland, Historical Sectoral Demand 246
Figure 114: Switzerland, Gas Grid 248
Figure 115: Turkey, Gas Production 251
Figure 116: Turkey, Imports by Source 252
Figure 117: Turkey, Sectoral Demand 253
Figure 118: Turkey, Historical Sectoral Demand 253

Figure 119: Turkey, Gas Grid 255
Figure 120: UK, Gas Production 258
Figure 121: UK, Imports By Source 259
Figure 122: UK, Sectoral Demand 260
Figure 123: UK, Historical Sectoral Demand 260

CHAPTER 2 ALGERIA
Market summary
Algeria is a significant exporter of gas and accounts for around 18% of the gas imports
into the EU 25, making it Europes second largest supplier after Russia.
This role is set to continue in the longer term given the country's significant reserves
and the fact that large areas of the country are yet to be explored.
Gas is extensively used in Algeria, with the power generation sector being the main
end user. Demand levels have remained relatively unchanged in recent years, though
over the next five years demand has been forecast to grow significantly as a result of
economic growth.
Recently new legislation has been passed which has significantly liberalised the sector
and ended Sonatrachs monopoly.
Algeria is a significant LNG exporter and in 1964 became the worlds first LNG
producer. Two major export lines allow Algerian gas to be exported to Europe with a
third line, known as Medgas, due for completion in 2009.

Supply and demand balance
Table 1: Algeria, Supply and Demand Balance
BCM 2003 2004 CAGR
SUPPLY
Production 82.80 82.00 -1.0%
Pipeline Imports

Total Pipeline Imports 0.000 0.000 -

LNG Imports
0.000 0.000 -
Total LNG Imports 0.000 0.000 -

Total Imports 0.000 0.000 -

Gross Supply 82.800 82.000 -1.0%

Pipeline Exports
Italy 21.45 23.60 10.0%
Portugal 2.50 2.25 -10.0%
Slovenia 0.44 0.44 0.0%
Spain 6.40 7.53 17.7%
Morocco 0.60 - -
Tunisia 1.69 1.30 -23.1%
Total Pipeline Exports 33.08 35.12 6.2%

LNG Exports
USA 1.51 3.41 125.8%
Belgium 3.15 2.85 -9.5%
France 9.20 6.72 -27.0%
Greece 0.55 0.55 0.0%
Italy 2.02 2.10 4.0%
Spain 7.48 6.58 -12.0%
Turkey 3.86 3.24 -16.1%
South Korea 0.23 0.30 30.4%
Total LNG Exports 28.00 25.75 -8.0%

Statistical Diffs 0.32 -0.07 -
Stock Change 0.00 0.00 -

Net Supply 21.40 21.20 -0.9%
DEMAND
Residential 4.92 4.88 -0.9%
Non Residential 2.57 2.54 -0.9%
Power Generation 13.91 13.78 -0.9%
Total Demand 21.40 21.20 -0.9%
Source: IEA / Datamonitor D A T A M O N I T O R

Supply overview
With proven reserves of 4,550 bcm, an R/P ratio of 55 years and considerable future
reserve additions potential, Algeria is certain to maintain its role as one of the worlds
leading gas producers. Over the past decade production has been growing steadily at
around 3.4% per annum. Currently around three quarters of production is exported,
both as pipeline gas and LNG. The main markets for Algerian gas exports are in
southern Europe, though LNG is exported further north with small volumes also going
to Asia. Sonatrach hopes to increase exports to around 100 bcm per year by 2015.
At 25.75 bcm per year, LNG exports are significant and make Algeria the worlds third
largest LNG producer after Indonesia and Malaysia. Algeria accounts for around 18%
of the gas imports to the EU 25, making it Europes second largest supplier after
Russia.

Figure 2: Algeria, Gas Production

Indi genous Gas Producti on
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
1970 1974 1978 1982 1986 1990 1994 1998 2002
B
C
M



Figure 3: Algeria, Pipeline Gas Export Destinations

Exported gas vi a pi pl ei ne
Spain
21%
Tunisia
4%
Italy
68%
Portugal
6%
Slovenia
1%


Demand overview
Algerias significant natural resource endowments mean that gas has long played a
role in the Algerian energy mix. At 63% natural gas is currently the most important fuel
in the primary energy mix and represents one of the highest gas penetrations in the
world.
Current annual demand levels of 23 bcm have remained surprisingly constant in recent
years having remained largely unchanged since the late 1980s. However, estimates
made by Sonatrach indicate a rapid increase in demand between now and 2010, by
which time it expects annual demand to have reached 30 bcm.
Power generation is by far the largest end use sector accounting for nearly two thirds
of consumption.


Figure 4: Algeria, Sectoral Demand

Sectoral Consumpti on
Power
Generation
65%
Non
Residential
12%
Residential
23%


Figure 5: Algeria, Historical Demand

Gas Demand
0
5
10
15
20
25
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
B
C
M


Regulatory structure
The Algerian government exerts considerable influence on the gas sector through its
control of two fully state owned companies - Sonatrach which dominates the production
and wholesale distribution of gas and Sonelgaz which controls distribution.
In 1996 legislative changes allowed foreign companies to set up commercial joint stock
companies with Sonatrach, giving the government the right to acquire majority stakes
in hydrocarbon ventures. Subsequently Sonatrachs acquisition rights were reduced to
a maximum of 30%. The Algerian government has been successful in attracting
foreign investors, including Statoil, BP and around 30 others, into the upstream arena
under partnership agreements. Efforts were made in 2005 to attract foreign investors
into the retail market through liberalising domestic gas prices, though this proved
unpopular with consumers and future developments in this area remain unclear.
In March 2005 a new hydrocarbons law was approved, effectively ending the monopoly
of Sonatrach and further promoting foreign investment in the sector. Until recently the
majority of regulation was undertaken by the government through the Ministry of
Energy and Mining, though under the May 2005 law two new bodies were created.
The first of these new bodies is ALNAFT (Agence pour la valorisation des ressources
en hydrocarbures) which was created to run the tendering process for E&P licensing
rounds and administer the states upstream activities. The other, the HRA (autorite
pour la regulation des hydrocarbures) was created to oversee the regulatory aspects of
the upstream and downstream sectors and to administer TPA to pipeline and storage
facilities.
Infrastructure
Pipelines
Given that one field, Hassi RMel, which accounts for about 25% of the countrys gas
production, is the largest gas source in the country, it lies at the heart of the gas
infrastructure network.
Algeria has two main gas exporting lines:-
Transmed at 670 miles long, Transmed is the country's longest exporting pipeline. It
runs from Hassi RMel via Tunisia and Sicily into mainland Italy. It currently exports
around 23 bcm per annum, though has capacity to export up to 27 bcm per year.

Pedro Duran Farell pipeline - formerly known as the GME or Maghreb-Europe line, it
exports gas to the south of Spain via Morocco. In 2004 a large capacity expansion was
undertaken, increasing throughput to close to 12 bcm per annum.
One other significant export pipeline is currently under development. The Medgas
pipeline is currently being developed by a consortium including Spanish oil company
Cepsa, Sonatrach, BP, GdF, Endesa and Iberdrola. The partners signed an
agreement in 2001 to construct an 8 bcm per annum link between Algeria and Spain to
supplement the existing connection. Financing difficulties have resulted in delays to
the start up of construction work, though following the granting of final regulatory
approval in June 2005, construction is due to start in July 2006. Initial flows are now
likely by early 2009.
Two other significant export projects have been mooted. Firstly Sonatrach signed a
deal in 2002 with Italys Enel and Germanys Wintershall to build a new pipeline, known
as Galsi, crossing the Mediterranean to Italy. Tendering plans are currently underway
with initial flows of the 10 bcm link possible by 2008.
Secondly, also in 2002, Sonatrach signed an agreement with Nigerias NNPC, forming
the Trans-Saharan Natural Gas Consortium (known as NIGEL), to build a link between
the Hassi RMel field in order to facilitate pipeline exports of Nigerian gas to Europe via
Transmed, the Pedro Duran Farell and Medgaz.
LNG
Having become the worlds first LNG producer in 1964, Algeria has a long and well
established history as a world leading LNG player. The Algerian transmission system
takes gas from the producing areas to the country's LNG terminals at Arzew, Skikda
and Algiers.
The national gas grid, both owned and operated by Sonelgaz, consists of a 4,675 kms
transmission network and a 22,111 kms long distribution network.

Figure 6: Algeria, Gas Infrastructure

Source: Sonatrach D A T A M O N I T O R

CHAPTER 3 AUSTRIA
Market summary
At 26% gas plays an important role in the Austrian primary energy mix. In common
with many other parts of Europe, gas is gaining market share by backing out coal.
Austrias main significance in the European gas sector is in its role as a transit country
for Russian gas. Currently around a fifth of Russian gas exports are routed through
Austria, giving it an added element of security of supply. Continued demand growth in
all European markets, combined with maturing indigenous production in a number of
markets, means that this transit role will continue to grow.
Austria is heavily import dependent, with indigenous production meeting less than a
quarter of demand.
Compared with other EU members, storage capacity in Austria is limited. However,
work is currently underway to double existing capacity.

Table 2: Austria, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 2.091 1.963 -6.1%
Pipeline Imports
Germany 0.979 1.078 10.1%
Norway 0.980 0.862 -12.0%
Russia 6.091 6.467 6.2%

Total Pipeline Imports 8.050 8.407 4.4%

LNG Imports
0.000 0.000 -


Total Imports 8.050 8.407 4.4%

Gross Supply 10.141 10.370 2.3%

Exports
Hungary 1.130 0.756 -33.1%
Poland 0.000 0.378 -
Slovenia 0.000 0.128 -

Statistical Diffs 0.000 0.060 -
Stock Change -0.200 -0.065 -67.5%

Net Supply 8.811 8.983 1.9%

DEMAND
Residential 1.872 1.886 0.8%
Non Residential 4.059 4.090 0.8%
Power Generation 2.981 3.004 0.8%

Total Demand 8.912 8.981 0.8%

Source: Datamonitor / IEA D A T A M O N I T O R

Supply overview
Indigenous production in Austria is limited with little or no prospect of any significant
increase in the coming years. Production is dominated by Rohol Aufsuchungs AG
(RAG) through its acreage in the Upper Austria and Salzburg areas, and OMV.
All Austrian production is non associated. Following a decline in production in the late
1970s there has been a slow increase in output, though indigenous production is still
only sufficient to meet less than a quarter of demand.
In 1968 OMV became the first Western country to sign a gas supply contract with
Russia. Russian gas, the key source of imports, is imported via 4 long term contracts
delivered at Baumgarten.
In February 2006, OMV discovered gas in the Austrias Vienna basin at its Ebenthal
Tief well. Reserve are estimated at around 1.5 bcm and are due onstream in 2007.
Production rates are likely to be between 100,000 and 150,000 cubic metres per year
giving a field life of up to 15 years.

Figure 7: Austria, Gas Production

0
1
2
3
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000
B
C
M



Figure 8: Austria, Imports By Source

Import Suppl y Sources
Germany
13%
Norway
10%
Russia
77%

Demand overview
In line with both global and European trends, the power generation sector has been the
key source of demand growth in recent years. Average annual growth in this sector
has averaged over 6.5% since 2000, nearly twice the growth rate seen in the
Residential sector and three times that of the non-residential sector.
Various investments in gas fired power are continuing to take place including Energie
AGs new 400 MW CCGT at Timelkam in Upper Austria which is due to produce
around 2.5 TWh per year of gas fired power from late 2008.
Total gas demand has increased steadily at an average of 1.8% per year in the decade
to 2004.


Figure 9: Austria, Sectoral Demand
Power
Generation
33%
Non
Residential
46%
Residential
21%


Figure 10: Austria, Historical Sectoral Demand

0
2
4
6
8
10
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
Power Generation Residential Non-Residential


Austria translated the original 1998 EU gas directive into national law on 10 August
2000 through the passing of the Gas Management Act, known as the GWG.
The opening of the market was accelerated through the inauguration of the Energy
Liberalization Act on 1st March 2001 and the revision to the GWG in 2002.
These changes to the pace of liberalization included the formation of E-Control, a
regulatory body charged with monitoring, supporting and regulating the Austrian power
and gas sectors.
Other legislative catalysts to market opening ahead of EU deadlines resulting from the
GWG 2002 Amendment were regulated grid access for all consumers, the formation of
regulatory zones, the creation of balance groups and a clearing system to facilitate the
pricing and payment amongst the balance groups.
From October 2002, Austrias gas market became (at least in theory) fully liberalized.
As part of their competitive response to the liberalisation of the Austrian market, six
leading gas market players (BEGAS, EVN, Linz AG, O Ferngas, OMV and WIEN
ENERGIE) formed EconGas with the intention of selling gas and gas services to large
industrial gas users (those with an annual consumption in excess of 500,000 cubic
meters).
In order to prevent a possible dominance of EconGas and as a method of further
encouraging competition, E-control directed EconGas to auction 250 mcm of gas each
year until an effective and liquid hub emerges at Baumgarten. So far 3 auctions have
been held. A total of 21 market players took part in the first auction, with 8 successfully
obtaining gas. The second auction in July 2004 attracted 31 interested players with 12
companies successfully buying the 250 mcm sale volume. The third auction in July
2005 resulted in 10 of the 28 bidders acquiring all of the 270 mcm available volume.
Wholesale environment
Overview
Baumgarten, in eastern Austria, plays a key role in transiting Russian gas to the west.
Its significance as a hub lies in the fact that it is the single largest delivery point for
Russian gas shipped into western Europe. OMV set up a hub operator company, the

Central European Gas Hub GmbH (CEGH), in 2001 but it has failed to make any
significant impact. Wholesale trading has not yet developed at Baumgarten, despite its
potential as a hub, given Gazproms long standing refusal to remove destination
clauses, which disallowed its gas to be onwardly traded, from its long term contracts.
In May 2004, OMV renegotiated its long term contract with Gazprom. Continuing the
precedent set in a supply renegotiation deal agreed with Eni in late 2003 and following
continued pressure from the EU, Gazprom agreed to remove the destination clause
thus allowing the gas it supplied to be onwardly traded and consequently removing a
major obstacle to the development of a meaningful wholesale market at Baumgarten.
Currently Baumgarten remains largely a physical hub though the removal of the
destination clauses bring the development of a spot and forwards market a step closer.
From 1st October 2005 CEGH began offering a standard contract and title transfer
services for short term deals which 13 players signed up to. However it is unlikely that
liquidity will develop to any meaningful degree in the short to medium term.
Infrastructure
Pipelines
Given Austrias role as a key transit country for eastern gas going west, it is sometimes
difficult to draw a distinction between transmission and distribution infrastructure.
Transit infrastructure consists of the following key pipelines:
Trans-Austria Gasleitung (TAG) has a maximum capacity of 26 bcm and transits gas to
Italy. It runs from Baumgarten on the Austrian / Slovakian border to Tarvisio in northern
Italy and is jointly owned by OMV and Eni which also leases the majority of capacity. In
February 2006, Eni announced plans to bring forward the planed expansion of the
pipelines capacity by 3.2 bcm per year by October 2008 and a further 3.3 bcm by April
2009. The increase was formerly scheduled for 1st October 2011.
Western Austria Gasleitung (WAG) is a key transit route for Russian gas to the
German border. It connects with the Megal system at Oberkappel on the German /
Austrian border for onward transit. The lines capacity is 5 bcm and it is owned by OMV
(51%), Gaz de France (44%) and Ruhrgas (5%).
Hungary-Austria Gasleitung (HAG) connects Baumgarten with the Hungarian border at
Gattendorf, to the south of Baumgarten. Current capacity is around 4.5 bcm per
annum. HAG is owned and operated by OMV.

Penta West is a 3 bcm per annum spur line from the WAG pipeline at Oberkappel to
Burghausen transiting the northwestern corner of Austria. Penta West is owned and
operated by OMV.
The Sud-Ost Leitung (SOL) is another spur line. It feeds off of the TAG pipeline and
transits gas to the Slovenian border. It has a 3.3 bcm per annum capacity and is owned
and operated by OMV.
A report issued in November 2004 by Austrian Gas Grid Management, an operationally
independent part of OMV responsible for gas network coordination, warned that
capacity in the east of the country was insufficient to meet long term needs.
Storage
Gas storage in Austria is made up of depleted gas field in or around Baumgarten.
Ownership of gas storage is dominated by OMV, which owns and operates around
three quarters of current capacity with the remainder owned by RAG.
A new storage facility at Haidach is being planned by RAG. The first phase of the
project will have a 1.2 bcm per year capacity from mid 2007 with plans to double this in
the second phase of the project.

Table 3: Austria, Storage Sites

Name Type Operator Capacity Peak
Deliverability
(mcm) (mcm / day)

Punchkirchen Depleted field RAG 700 6.96
Schoenkirchen / Reyersdorf Depleted field OMV 1,570 17.80
Tallesbrun Depleted field OMV 300 3.84
Thann Depleted field OMV 250 3.12

Total 2,820 31.72



Figure 11: Austria, Gas Grid

Source: OMV D A T A M O N I T O R

CHAPTER 4 BELGIUM
Market summary
Despite not having any indigenous production and comparatively low consumption
levels, Belgium is a key player in the European gas market.
In addition to playing a key role as a transit state, Belgium is also home to Europes
second most liquid trading hub, an LNG import terminal and the UK / Continental
Europe Interconnector.
With various sources of pipeline gas and an LNG terminal, Belgian supplies are well
diversified and very secure.
With different regulatory bodies and market conditions in each of the three main
regions of the country, Belgium is in some senses three distinct markets.

Table 4: Belgium, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.000 0.000 -
Pipeline Imports
Netherlands 6.067 7.302 20.4%
Norway 5.427 4.503 -17.0%
UK 0.000 0.114 -
Other 2.017 1.876 -7.0%


LNG Imports
Algeria 3.184 3.082 -3.2%

Total LNG Imports 3.184 3.082 -3.2%

Total Imports 16.695 16.877 1.1%

Gross Supply 16.695 16.877 1.1%

Exports
0.000 0.000 -

Total Pipeline Exports 0.000 0.000 -

Statistical Diffs -0.119 -0.174 -
Stock Change 0.186 -0.040 -

Net Supply 17.000 17.011 0.1%

DEMAND
Residential 4.219 4.221 0.0%

Total Demand 17.000 17.008 0.0%


Supply overview
With no indigenous production, Belgium is entirely dependent on imported gas.
Given its role as a transit country, and the fact that an LNG terminal and various
pipeline infrastructure is available (see Infrastructure section), Belgian supplies are
amongst the most secure and well diversified in Europe.
In February 2005 another long term LNG supply deal was agreed. Under the terms of
the deal, Distrigas will buy up to 2 million tonnes per year of LNG for a 20 year period
from Qatar.
Figure 12: Belgium, Supply Sources

Other
11%
Algeria LNG
18%
UK
1%
Norway
27%
Netherlands
43%


Demand overview
Growth in the power generation sector has been the key driver of Belgian gas demand
growth in the past decade. Over the 10 years to 2004 demand in this sector grew by
an average of 6.9% per year. Between 2003 and 2004 there was a particularly large
increase in gas use in power generation of over 1 bcm or 29%.
Total demand has grown by an average of 3.1% per annum over the past decade with
growth of 2.3% and 1.4% in the non-residential and residential sectors respectively.

Figure 13: Belgium, Sectoral Demand
Power
Generation
27%
Non
Residential
48%
Residential
25%



Figure 14: Belgium, Historical Sectoral Demand

0
5
10
15
20
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
Non Residential Power Generation Residential


Belgium incorporated the original Gas Directive into federal legislation in April 1999 by
passing the Amendment to the Federal Gas Act 1999. This legislation was an
amendment to existing legislation covering the industry passed in 1965.
Further regulatory developments were made by the Amendment to the Federal Gas
Act 2001, which accelerated the market opening process by replacing negotiated Third
Party Access with regulated Third Party Access.
Regulation in Belgium is split between federal and local regulatory bodies. The three
regions (Flanders, Wallonia and Brussels) control liberalisation policy and distribution
in their individual areas whilst transmission, LNG and storage are regulated at a
Federal level by the Commission de Rgulation de lElectricit et du Gaz (CREG).
In the Flanders region, which accounts for close to 60% of end users in the country, the
regional regulator the Vlaamse Reguleringsinstantie voor de Electriciteits-en Gasmarkt,
oversaw complete market opening by the middle of 2003. Currently there are 11
licensed gas suppliers in the region selling to 1.6 million end user sites.
In the Wallonia and Brussels regions, market opening is somewhat slower. Wallonia
has had an open market for consumers using more than 1 mcm per annum since

January 2004 and is due to implement full market opening on January 1st 2007. In the
Brussels area legislation was passed on the 1st October 2003 bringing the area into
compliance with the second Gas Directive by opening the market to non-residential
users from 1st July 2004 and all customers from 1st July 2007.
In February 2005 a gas exchange was launched at Zeebrugge by APX (formerly known
as the Amsterdam Power Exchange), Endex (the European Energy Derivatives
Exchange) and Huberator (the hub services subsidiary of Fluxys). The exchange
currently offers only short term contracts up to and including Working Days Next Week,
though longer term contracts are planned for the near term future.
The Zeebrugge market was the second wholesale market to emerge in Europe
following the UKs NBP. Zeebrugges emergence as a hub has been driven by the
wide variety of infrastructure located in Belgium. The trading hub came into being in
1999 and, whilst used as a hub in its own right, relies on arbitrages with the NBP for a
significant amount of its liquidity. Gas is usually priced at a differential to the NBP
market.
The Zeebrugge hub is operated by Huberator, a subsidiary of Fluxys, the Belgian grid
company. Following the service agreement signing in February 2006 of the Dutch
company Eneco, there are 47 players signed up to trade with Huberator, a significant
reduction on the 60 or so members registered in 2004 under the previous hub service
agreement. Like the NBP, these customers come from a wide variety of areas in the
value chain and include shippers, utilities, gas companies and banks. Liquidity on the
hub rose by 2% in 2005, with hub firmness increasing to 99%.
Zeebrugge has a trading to physical flow ratio of around 4.5:1, meaning that four and a
half times as much gas is traded than actually flows. Although this is somewhat lower
than the NBPs 10:1 ratio, it remains much higher than many of Europes other hubs.
In June 2004 Huberator, the APX (formerly known as the Amsterdam Power
Exchange) and Endex (the European Energy Derivatives Exchange) signed an
agreement to set up a gas exchange at Zeebrugge. The exchange, known as APX
Gas ZEE, was launched in early February as a screen based trading platform offering
both financial and physical products, initially on just a prompt basis though with longer
term contracts planned at a later date. The exchange now has nine members and
Huberator and Fluxys are investigating ways to increase the current low levels of
liquidity.

Infrastructure
Pipelines
Given its role as a transit country, Belgiums pipeline infrastructure is dominated by
transmission infrastructure, which is also interconnected with the distribution grid. Both
the transmission and distribution grids are operated by Fluxys.
Belgium is connected to the UK via the UK-Belgium Interconnector running between
Bacton on the east coast of the UK and Zeebrugge. Opened in 1998 the pipeline has
the ability to operate in both forward and reverse flow modes thus allowing Belgium to
both import and export gas as market conditions and demand dictate. The
Interconnector has a capacity of 20 bcm per annum in forward flow (exporting gas from
the UK to Zeebrugge) and 16.5 bcm per annum in reverse flow (exporting gas from
Zeebrugge to the UK).

Table 5: Belgium, Interconnector Ownership

Shareholder %
BG Energy Holdings 25
ConocoPhillips (UK) 10
Distrigas 16.41
Eni International 5
E.ON Ruhrgas 17.38
OAO Gazprom 10
Total 10
Source: Interconnector UK

The 16.5 bcm per year reverse flow capacity came into effect in November 2005
following the upgrading from the original 8.5 bcm per year capacity. Further expansion
work is currently underway which will increase capacity to 23.5 bcm per year from
December 2006.
Key transit pipelines in Belgium include:
Zeepipe an offshore line from the Norwegian North Sea to Zeebrugge where it
interfaces with other transit lines and the Fluxys transmission grid.
RTR pipeline runs from Zeebrugge through the centre of Belgium to Eynatten on the
German border with a spur connection to the Netherlands near Zelzate.

Finpipe runs from Zeebrugge to Blaregnies on the French border.
Gas distribution in Belgium is controlled by the countrys municipalities who have
awarded distribution rights in the 20 distribution zones to two companies, Electrabel
Customer Services and Luminus.
Belgium is one of the few countries in Europe to have both high and low calorific value
gas infrastructure. The low calorific pipelines are fed by gas from the Dutch Groningen
field which, due to its highly flexible nature, provides a useful source of swing capacity.
Much of Belgiums infrastructure revolves around its role as a gas transit country. In
late 2004 Distrigas and Gazexport, the export division of Russias Gazprom, continued
their transit relationship by agreeing a deal under which Distrigas will move Russian
gas from the Germany / Belgian border to Zeebrugge. The agreements allow
Gazexport to move up to 2.5 bcm per year to Zeebrugge until 2018. The deal will allow
Gazprom to sell gas at the Zeebrugge hub and, given its stake in the Interconnector, to
the UK where it has ambitious expansion plans.
In November 2004 CREG issued a report concluding that EUR 500 million of
investment in pipeline capacity will be needed between 2005 and 2014 to meet
growing demand and related transport capacity requirements.
LNG
Belgium has played an increasingly important part in Europes growing LNG sector.
Through its subsidiary Fluxys LNG, Fluxys owns and operates the 4.5 bcm per annum
Zeebrugge LNG terminal. All of the terminals capacity is allocated to Distrigas until late
2006 to service its long term supply deal with Algerias Sonatrach.
In early 2003 Fluxys LNG undertook an open season exercise where LNG companies
could express potential interest in booking capacity at Zeebrugge following the end of
the existing Distrigas / Sonatrach contract in late 2006. Interest in securing the
available capacity was strong, leading Fluxys to announce its decision to invest 165
million in doubling the capacity of the terminal to 9 bcm per annum.
All of the capacity from the beginning of 2007 has now been secured via three
separate agreements.
Capacity deals signed
In late June 2004 Qatar Petroleum and ExxonMobil together signed an agreement for
4.5 bcm (3.3 million tonnes) of LNG per annum for a 20-year period. The capacity will
be used to regasify gas from the Ras Laffan project which is 70% owned by Qatar
Petroleum and 30% by ExxonMobil.

The Qatar Petroleum / ExxonMobil deal was closely followed by a deal with Distrigas
for 2.5 bcm (1.8 million tonnes) per annum for 20 years.
In early July 2004, Tractebel Global LNG agreed to purchase 2.1 bcm (1.5 million
tonnes) per annum of capacity.
Storage
With its LNG infrastructure, swing capacity in contracts with the Netherlands and
access to storage in Germany and France, Belgium has a lesser need for storage than
other markets.
The two storage sites in Belgium are operated by Fluxys who then reinject the gas into
their network as required.
An amendment to the Belgian Federal Gas Act in July 2001 regulated storage tariffs
according to a cost based formula. Fluxys is required to submit its budget and cost
proposals to the Federal Regulator for approval each year.

Table 6: Belgium, Storage Sites

Name Type Operator Capacity Peak mcm)
(mcm) Deliverability
(mcm / day)
Dudzele LNG Peak Shaver Fluxys 53 8.9
Loenhout Aquifer Fluxys 580 10

Total 635 18.9


In January 2006, Russian Ambassador to Belgium Vadim Lukov announced a site in
Belgium was under consideration as a gas storage facility, with Dutch and Belgian
companies expressing interest in the project; the facility is expected to be operational
by 2010, to coincide with the opening of the Northern European Gas Pipeline (NEGP).


CHAPTER 5 BULGARIA
Market summary
Unlike many other markets in the Central and Eastern European region, gas does not
play an overly significant role in the Bulgarian primary energy mix with demand levels
remaining relatively modest. In recent years demand levels have fallen owing to
economic downturn. Only a small percentage of demand is accounted for by the
residential sector, indicating considerable medium term demand growth potential.
Despite various movements made towards market liberalisation, the state owned
player, Bulgargaz, remains dominant. Full market opening is expected by 2007.
Indigenous production levels are minimal creating a significant degree of import
dependency on Russian gas. The security of supply issues created by this import
dependency will be eased from 2010 when the NABUCCO pipeline brings a much
needed degree of supply diversity to Bulgarian gas supplies.


Table 7: Bulgaria, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.010 0.010 0.0%
Pipeline Imports
Russia 2.800 2.900 3.6%


LNG Imports
0.000 0.000 -



Gross Supply 2.810 2.910 3.6%

Exports 0.000 0.000 -
-


Net Supply 2.810 2.910 3.6%

DEMAND
Residential 0.169 0.175 3.6%

Total Demand 2.810 2.910 3.6%


Supply overview
With minimal indigenous production, Bulgaria is almost entirely dependent on gas
imports with all but a small proportion of gas supply coming from Russia under the
terms of a long term Take or Pay contract that expires in 2010.
This reliance on one source of supply does create security of supply issues, though
these are mitigated, at least to a certain extent, by the fact that Bulgaria acts as a
transit state for Russian gas supplied to Turkey, Macedonia and Greece. Russia is
currently considering transporting greater volumes of gas through Bulgaria, and of
adjusting the infrastructure to enable another, separate import route into western
Europe.
An additional element of short term supply security is provided by the country's 360
mcm underground storage facility at Chiren in the north west of the country
Demand overview
At less than 15% of primary energy demand, gas plays a relatively small role in
Bulgaria. Somewhat unusually, demand levels have fallen in recent years. Demand
peaked at 6.3 bcm in 1989 and currently stands at just half that figure owing to
economic decline in the early and mid 1990s. Over the past decade demand has fallen
by an average of 5% per year. The economy began to recover in 1997, though gas
demand growth has remained both weak and erratic. More recently demand has
shown signs of growth, though absolute levels of gas demand and demand growth
remain modest. Continued economic recovery and development of the distribution
system are likely to catalyse demand growth in the coming years.
Given that the non-residential sectors are by far the largest end users of gas, demand
is particularly sensitive to the economic cycle. The vast majority of gas is sold by state-
owned Bulgargaz selling directly to industrial customers with only a small percentage
sold through distribution companies to residential and smaller industrial customers.


Figure 15: Bulgaria, Historical Demand

0
1
2
3
4
5
6
7
b
c
m
1965 1970 1975 1980 1985 1990 1995 2000
Consumpti on

Source: BP Statistical Review D A T A M O N I T O R

Figure 16: Bulgaria, Sectoral Demand
Power
generation
35%
Non-
Residential
59%
Residential
6%

Source: Datamonitor / National Sources D A T A M O N I T O R

The Bulgarian energy sector is regulated by the State Energy and Water Regulatory
Commission (SEWRC) which was formed in 1999 and assumed responsibility for the
water sector in 2005.
The main tenet of energy law is the Bulgarian Energy Law which seeks to bring the
market in line with the principles of the EU gas directive. Market opening began in 2004
and currently users of more than 20 mcm per year of gas are eligible to choose their
supplier with full market opening planned by 2007.
The market is dominated by state owned Bulgargaz which owns the infrastructure grid
and is present throughout the value chain. As such the company controls the
importation of gas and also arranges for onward transmission through its grid to
Turkey, Macedonia and Greece.
Infrastructure
State owned Bulgargaz is the owner and operator of the Bulgarian transmission grid
through which it supplies gas directly to major industrial end users and to independent
distributors. The main transmission pipeline for distribution usage is about 1,700 kms
long. There is also a 945 kms transmission pipeline used to transit gas through
Bulgaria to Turkey, Greece and Macedonia, with a ten-year extension to the contract,
due to expire in 2010, currently under discussion.
The distribution network is around 1,150 kms in length and supplies gas to 30
municipalities. The private distribution companies sell gas to end users as well as
owning and operating the distribution grid. During 2006 one distributor, Overgas, plans
to construct another 138 kms of distribution infrastructure and increase its residential
customer base by around 300%.
Bulgaria has one underground gas storage site at Chiren, built in 1974. The facility is
owned and operated by Bulgargaz, and has a capacity of 360 mcm.
Various major infrastructure projects are currently at various stages of development. In
2002 the major Bulgarian, Turkish, Romanian, Hungarian and Austrian gas companies
agreed to construct a transmission grid through their territories from the Caspian region
and Central Asia, including Iran, Azerbaijan, Turkmenistan and Kazakhstan, to Central,
Eastern and Western Europe. Aside from transit fees, the project, known as
NABUCCO, will provide an opportunity for Bulgaria to further diversify its gas supplies.
The pipeline should be operational by 2010 and have a total length of about 3,380 kms.

Figure 17: Bulgaria, Gas Grid

Source: Bulgargaz D A T A M O N I T O R


CHAPTER 6 CROATIA
Market summary
Since gas was first discovered in Croatia in 1918, the country has had a strong degree
of self sufficiency. Until 1978 the country was completely self sufficient, though rising
demand meant that imports began to be necessary.
All imports are currently made from Russia and meet around a quarter of end use
demand. Considerable investments have been made in the upstream sector and
production has increased strongly in recent years. As such, levels of self sufficiency
are likely to remain high.
Since 2001 considerable progress has been made towards restructuring the industry.
Full market opening is likely to occur by the end of 2006, though INA, the former
monopoly player, still remains dominant.


Table 8: Croatia, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 1.750 2.199 25.7%
Pipeline Imports
Russia 1.050 1.053 0.3%


LNG Imports
0.000 0.000 -



Gross Supply 2.800 3.252 16.1%

Exports
Italy 0.342 0.348 1.8%


Statistical Diffs -0.100 0.095 -
Stock Change 0.225 0.200 -11.1%

Net Supply 2.783 3.009 8.1%

DEMAND
Residential 0.742 0.776 4.6%

Total Demand 2.783 3.009 8.1%


Supply overview
Indigenous production makes a significant contribution to meeting Croatian gas
demand. Current production levels are growing rapidly and sufficient to meet around
three quarters of demand. Russian imports began in 1978, before which the country
was entirely self sufficient. Until the end of the 1990s all production was onshore. In
1999 the countrys first offshore production facility, known as Ivana A, came on line.
The key player in the Croatian upstream sector is INA, though a significant role is also
played by Italys Eni. Considerable investments have been made in the upstream
sector and, as such, indigenous production is likely to continue increasing.

Figure 18: Croatia, Gas Production
0
0.5
1
1.5
2
2.5
1986 1990 1994 1998 2002
B
C
M


Demand overview
Despite accounting for around 26% of the Croatian primary energy mix, absolute levels
of gas demand in Croatia remain low at around 3 bcm per annum. Over the past
decade demand has grown at an annualised average rate of around 2.1%.
In common with many other small gas markets, both end use demand levels and
demand growth are very much driven by the power generation sector. End use
demand patterns in other sectors have remained relatively constant in recent years.


Figure 19: Croatia, Sectoral Demand

Power
Generation
43%
Non
Residential
31%
Residential
26%


Figure 20: Croatia, Historical Demand

0
0.5
1
1.5
2
2.5
3
3.5
b
c
m
1986 1989 1992 1995 1998 2001 2004


The Croatian energy sector is regulated by the Croatian Energy Regulatory Agency,
known as CERA. The liberalisation process within the market began in July 2001
following a concerted policy decision by the government to reform the market. New
energy laws were passed covering the gas, power and oil markets.
The 2001 gas market reforms legislated for gas supply and distribution activities being
carried out on the basis of free market principles.
In 2001 a new company, Plinacro, was established to take over responsibility for the
countrys gas transmission activities from INA, the former monopoly incumbent.
Currently users of more than 100,000 cubic metres per year are eligible to choose their
supplier, though full market opening is considered likely to occur by the latter part of
2006 or early 2007.
INA was privatised in October 2003 when 25% and 1 share of the company were
acquired by Hungarys MOL. The remainder of the company is still in Government
hands.
Infrastructure
The first transmission pipeline in the country, from Janja Lipa to Zagreb, was
constructed in 1956. Today the Croatian transmission grid is about 1,660 kms long and
mainly located in the east and north eastern parts of the country.
Gas imports from Russia form a key part of gas supply. These imports are made via
the SOL line through Austria and Slovenia.
The distribution grid is owned and operated by 38 distribution companies, mainly
owned by the local municipalities. Currently the distribution grid is around 14,200 kms
in length.


Figure 21: Croatia, Gas Grid

Source: PLINARCO D A T A M O N I T O R

CHAPTER 7 CYPRUS
Market summary

Cyprus is not currently a consumer of natural gas, however this situation will change
when plans to build an LNG reception terminal at Vasiliko near Limassol materialise.
The technical and commercial bidding process is currently underway meaning that the
project could potentially start up in 2009. In July 2005 an agreement was reached with
Egypt concerning the supply of LNG as well as joint exploration activity.
A planned gas fired power plant near Limassol will be the initial focus of the gas
imports, though the arrival of gas will also catalyse development of a mass market
distribution grid.
Cyprus has also been mentioned as a possible destination point for a future extension
to the EU-Arab pipeline which currently delivers Egyptian gas to Jordan and has
expansion plans to extend to Syria and Lebanon. Despite these plans, the Cyprus
extension is far from certain and LNG remains the most likely source of gas into
Cyprus at the present time.

CHAPTER 8 CZECH REPUBLIC
Market summary
Until 1996, gas consumption in the Czech Republic consisted of town gas as well as
natural gas. Since then all gas consumption has been of natural rather than
manufactured gas.
Gas demand growth has been strong in recent years. Demand growth has averaged
4.3% per annum over the past decade. Despite this growth, coal is still the dominant
fuel in the Czech economy accounting for around 46% of primary energy use. Coal is
slowly being backed out of the energy mix by growing gas consumption.
With reserves of less than 4 bcm, the Czech Republic is heavily dependent on
imported gas to meet demand.
The Czech Republic has long played a role as a transit route for Russian gas going to
Western Europe.

Table 9: Czech Republic, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.168 0.216 28.6%
Pipeline Imports
Norway 2.504 2.335 -6.7%
Russia 7.021 6.486 -7.6%

Total Pipeline Imports 9.525 8.815 -7.5%

LNG Imports
0.000 0.000 -


Total Imports 9.525 8.815 -7.5%

Gross Supply 9.693 9.031 -6.8%

Exports
Austria 0.051 0.088 72.5%



Net Supply 9.658 9.600 -0.6%

DEMAND
Residential 2.958 2.940 -0.6%

Total Demand 9.658 9.600 -0.6%


Supply overview
Town gas was widely used in the Czech Republic until it was finally phased out in
1996. Although the Czech Republic is a gas producer, production volumes are very
small and meet less than 2.5% of demand. Russia has been exporting gas to the
Czech Republic since 1967 and until 1992 was the sole source of supply, though since
then imports have been diversified following the signing of a supply deal with Norway in
1997.
The Czech Republics geographical position and status as a transit route for Russian
gas coming west makes supplies comparatively secure. Reliance on Russian gas is
likely to continue to grow.

Figure 22: Czech Republic, Import Sources

Norway
26%
Russia
74%



Figure 23: Czech Republic, Gas Production

0
0.2
0.4
0.6
0.8
1
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B
C
M


Demand overview
Unlike elsewhere in Europe, the power generation sector, at just 16% of 2004
consumption, plays a comparatively small role in energy demand.
The non-residential sector is the key end use sector accounting for more than 53% of
total consumption. At an average of 4.3% per annum, the residential sector has been
the key driver of demand growth over the past decade, a rate of growth more than
twice that seen in the market overall.

Figure 24: Czech Republic, Sectoral Demand

Power
Generation
16%
Non
Residential
53%
Residential
31%


Figure 25: Czech Republic, Historical Sectoral Consumption

0
2
4
6
8
10
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
Non Residental Power Generation Residential



The Czech energy sector is regulated by the Energy Regulatory Office (ERO) which
was founded in January 2001 under Act 458/2000. An amendment to the Act was
officially passed in January 2005 relating to the unbundling of transmission and
distribution infrastructure as well as full market opening by 2007 in order to comply with
the gas directive.
Compliance with the first gas directive was covered by the Czech Energy Act of 2000
which included legislation that originally intended to open 20% of the market by
January 2005 and 33.3% by August 2008. This legislation was superseded in April
2004 by legislation that opened the market to industrial customers with advanced
metering equipment from 1 January 2005. Under the terms of the amendment officially
passed in January 2005, other industrial customers will become eligible to choose their
supplier from 1st January 2006 with full market opening from January 2007.
Transmission and distribution operations are due to be unbundled by 2007.
Under the terms of Act 458/2000, the ERO sets the maximum price at which Transgas
can sell gas to distributors as well as the maximum price end users pay.
The Czech gas market is dominated by Transgas which is responsible for gas
importation, transmission and storage. Transgas was under state control until May
2002 when 96.9% of the companys stock was bought by RWE with the remainder
acquired in 2003. At the same time RWE acquired the majority stake in Transgas it
also acquired majority shareholdings in 6 of the countrys 8 regional gas distributors as
well as near majority stakes in the remaining two. Since then a 54 new players have
been awarded gas distribution licenses including E. On, Wingas, SPP, Shell as well as
Gazprom which acquired a 37.5% stake in Gas-Invest in February 2005.


Infrastructure
The Czech pipeline system is controlled by Transgas. The country is supplied by, and
transits, gas delivered from Russia via the Brotherhood line.
Table 10: Czech Republic, Storage Sites

Name Type Operator Capacity Peak mcm)
(mcm / day)
Doln Dunajovice Depleted Gas Field Transgas 700 12
Tvrdonice Depleted Gas Field Transgas 460 7
tramberk Depleted Gas Field Transgas 420 7
Lobodice Aquifer Transgas 150 3.3
Tianovice Aquifer Transgas 240 4.2
Hje Salt Cavern Transgas 55 6

Total 2025 39.5

Source: Datamonitor / Transgas D A T A M O N I T O R

Figure 26: Czech Republic, Czech Republic Distribution Grid

Source: Ministry of Industry & Trade D A T A M O N I T O R


CHAPTER 9 DENMARK
Market summary
Denmarks indigenous production capabilities mean that gas plays a significant role in
the countrys energy mix and accounts for nearly a quarter of energy demand.
However at just over 5 bcm, gas consumption is low by European standards.
Danish gas is exported to Germany and Sweden, and since July 2004, to the
Netherlands.
The Danish gas sector has been outpacing the market opening demands of the EU for
some time and has had a fully open market since the beginning of 2004, some three
and a half years ahead of EU requirements.

Table 11: Denmark, Supply and Demand Balance

BCM 2003 2004

SUPPLY
Production 7.965 9.430
Pipeline Imports
0.000 0.000

Total Pipeline Imports 0.000 0.000

LNG Imports
0.000 0.000

Total LNG Imports 0.000 0.000

Total Imports 0.000 0.000

Gross Supply 7.965 9.430

Exports
Germany 1.896 2.200
Netherlands 0.000 0.921
Sweden 0.972 0.978
Total Pipeline Exports 2.868 4.099

Statistical Diffs -0.004 -0.032
Stock Change 0.053 -0.220

Net Supply 5.154 5.143

DEMAND
Residential 0.753 0.751
Non Residential 1.822 1.818
Power Generation 2.579 2.573

Total Demand 5.154 5.143


Supply overview
Denmark has been a gas producer since the late 1970s. Since then production has
risen steadily, with peak production of 9.43 bcm reached in 2004. Between 2003 and
2004 production grew by more than 18%.
Around a quarter of Danish gas production is reinjected into wells in order to optimise
oil production.
Gas is produced by both the state oil company Dansk Olie og Naturgas and by the
Danish Underground Consortium which is owned by DONG (50%), Shell (23%), Mrsk
(19.5%), and ChevronTexaco (7.5%).

Figure 27: Denmark, Supply Sources

Production
96%
German Imports
4%
Production
96%
German Imports
4%



Figure 28: Denmark, Gas Production

0
1
2
3
4
5
6
7
8
9
10
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
B
C
M


Demand overview
At just over 5 bcm, gas demand in Denmark is comparatively small, despite the
countrys role as an important gas producer. At 27% of primary energy, gas has made
a significant penetration into the countrys energy mix though is still a long way away
from overtaking oil which makes up around half of primary energy demand.
Power generation is the largest sector, both in terms of absolute consumption and
demand growth. Over the past decade, gas demand in power generation has grown
by an average of 6.6%, nearly twice the growth rate of the overall market.


Figure 29: Denmark, Sectoral Demand

Power
Generation
50%
Non
Residential
35%
Residential
15%


Figure 30: Denmark, Historical Sectoral Demand

0
1
2
3
4
5
6
b
c
m
1983 1986 1989 1992 1995 1998 2001 2004


The Danish gas market is regulated by the Danish Energy Regulatory Authority which
was formed on 1st January 2000. The upstream is overseen by the Danish Energy
Agency.
Key aspects of Danish gas legislation are laid out in the Natural Gas Supply Act no 449
which was passed in May 2000. Amendments were made in May and June of 2002,
with the timetable for market opening governed by an Executive Order agreed on 20
May 2003.
Reform and restructuring of the gas market began in 2000. From January 2003
consumers of more than 25 mcm per year were able to choose their supplier. Later in
the year this threshold was reduced to 12 mcm. The final stage of this process took
place on 1st January 2004 on which date the full opening of the market took place,
exceeding the market opening terms of the gas directive by three and a half years.
Since market opening took place DONG, the state-owned energy company, has
increasingly been internationalising and diversifying. In late 2004 it acquired a 10.34%
stake in Norways Ormen Lange gas field from BP as well as a 20% stake in Nova
Naturgas, one of the two main players in Swedens gas market. It also spent the early
part of 2005 buying stakes in various regional distributors. In late 2004 Dong agreed to
merge with Elsam, the Dutch power utility, in which it already holds a 65% stake.
Completion of the proposed merger remains far from clear following objections by
Vattenfall, one of Swedens other power utilities and a 35% shareholder in Elsam.
The division of Elsam's assets between Vattenfall and DONG is currently being
debated by EU competition authorities and it remains unlikely that the issue will be
resolved before the middle of 2006. The need to finalise the current series of
investments and acquisitions mean that plans to privatise up to 50% of Dong in 2005
have been postponed until 2006.

Danish wholesale market activity is a very recent occurrence currently at the very
earliest stages of development. Towards the end of 2003 Gastra and the Nord Pool
set up a joint project to examine the possibility of developing a Danish gas exchange.
Shortly afterwards the prospects for wholesale trading in Denmark took a step forward
when DONG set up a title transfer system allowing gas to be sold amongst parties
using its pipeline system.
The feasibility study set up by DONG and the Nord Pool concluded that there was
insufficient liquidity to justify an exchange but resolved instead to set up a trading hub.
Since 1st May 2004 facilities such as a standard tradable contract and trading boards
have been in place, though liquidity is still very much in its infancy, and interest has
been largely limited to balancing related deals by the ten registered players.
Gastra had intended to officially launch the new hub, to be known as Gashub, in the
latter part of 2004, however this was subsequently postponed owing to a lack of
interest amongst players. The ongoing lack of liquidity in the market means that it
remains unclear when the hub will be launched.
From the start of the gas year on October 1st 2004 Gastra has been offering short term
capacity trading and on the day gas transfer.

Infrastructure
Pipelines
DONG Transmission was legally unbundled to comply with the gas directive in early
2004 and was renamed Gastra.
Gas produced in the Danish North Sea is shipped through DONGs infrastructure to the
Nybro gas processing facility, both of which are open to third parties.
In July 2004 Denmark began exporting gas to the Netherlands, a new destination for its
exports which previously consisted of just Germany and Sweden. A new 100 km
pipeline was constructed between the Tyra West field in the Danish North Sea to the
NOGAT pipeline which then moved the gas onwards to den Helder on the Dutch coast.
The pipeline is operated by Maersk and is owned by the DUC. Capacity rights in the
pipeline are allocated according to the partners shareholdings in the DUC.
Gastra is currently working with Nova Naturgas of Sweden and Statnett of Norway to
construct a pipeline system linking Denmark, Sweden and Norway, which would extend
the existing interconnections between the countries into a so called gas ring. If the
project is successfully agreed and financed, start up of the system can be expected
around 2011.
Storage

Table 12: Denmark, Storage Sites

(mcm / day)

Stenlille Aquifer DONG 330 6 to 11
LL Torup Salt Cavern DONG 420 6 to 12

Total 750 12 to 23

Source: DONG D A T A M O N I T O R

CHAPTER 10 ESTONIA
Market summary
With a population of just over 1.4 million and a primary energy mix more than half
accounted for by coal, the Estonia gas market is unsurprisingly small.
Supply is sourced exclusively from Russia, though barring any unexpected political or
economic disputes, be relatively secure.
Economic growth will continue to drive gas demand in the short to medium term
though with the dominance of coal and the small size of the potential market, Estonia
will remain a marginal gas consumer.

Table 13: Estonia, Supply and Demand Balance

BCM 2003 2004 (est) CAGR

SUPPLY
Pipeline Imports
Russia 0.754 1.400 85.7%


LNG Imports
0.000 0.000 -


Total Imports 0.754 1.400 85.7%

Gross Supply 0.754 1.400 85.7%

Exports
0.000 0.000 -


Stock Change 0.000 0.000 .

Net Supply 0.754 1.400 85.7%

DEMAND
Residential 0.114 0.21 85.7%

Total Demand 0.754 1.400 85.7%


Supply overview
Coal is the dominant component of the Estonia energy mix, meaning that gas accounts
for a comparatively small proportion of demand. The role of gas in the power
generation sector is curtailed by the widespread use of oil shale for generation
purposes.
With no indigenous production, Estonia is entirely import dependent. Currently the only
source of supply is Russia, from which gas is sourced via a long term supply contract
with Gazprom that was extended in 2003 for at least another 12 years.
Demand overview
The non-residential sector accounts for the largest proportion of gas demand. Between
2003 and 2004 gas demand grew strongly, though remained very modest in absolute
terms at less than 1.5 bcm.
Both demand levels, and the sectors this demand occurs in, are unlikely to change
significantly in the short to medium term, despite ongoing expansion and upgrade work
being undertaken to the distribution network.

Figure 31: Estonia, Sectoral Demand

Residential
15%
Non
Residential
58%
Power
Generation
27%


The Estonian gas industry is regulated by the Estonian Energy Market Inspectorate
(EMI), also known as the Energiaturu Inspektsioon. The EMI was formed by the
Ministry of Economic Affairs and Communication in February 2003.
The majority of legislation governing the gas market is contained in the Natural Gas Act
2003 which came into effect on 1st July 2003. The Act gave consumers using more
than 200,000 cubic metres per annum the right to choose their supplier. Existing
legislation means that around 95% of the market is open to competition.
Eesti Gaas is the dominant player in the gas market and operates the transmission
network and much of the distribution infrastructure. It was privatised in 1993 and is
owned by Gazprom (37.02%), E.ON Ruhrgas (33.60%), Fortum (17.72%), Itera
(9.75%) with the remaining 1.91% of stock held by various individuals and institutions.
Infrastructure
Russian gas imports enter Estonia via two pipelines, one in the south east near the
Russian city of Pskov and one in the north east near Narva. Gas then enters the 2,200
kms of distribution pipelines.
Finland's Gasum and Eesti Gaas are currently developing plans to construct a pipeline
between Helsinki and Tallinn. The project will allow Estonia to act as a transit point for
Russian gas exports to Finland. The project has a target start up date of 2010.


Figure 32: Estonia, Gas Distribution Grid

Source: Eesti Gaas D A T A M O N I T O R

CHAPTER 11 FINLAND
Market summary
In order to meet its small, but growing, gas demand, Finland is entirely dependent ion
imported Russian gas.
Finland has applied for, and been awarded, a derogation from the market opening
requirements of the gas directive on account of its reliance on one single supply source
and the fact that it is not connected to the main European transmission grid.
The penetration of gas into the countrys energy mix is low by European standards.
Consumption is heavily dominated by the industrial and commercial, and power
generation sectors.
Fortum, one of Scandinavias leading power market players, has been increasing its
role in the Finnish gas market and now owns 31% of Gasum, Finland's main gas
company and operator of the national gas grid.

Table 14: Finland, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Pipeline Imports
Russia 5.023 4.866 -3.1%


LNG Imports
0.000 0.000 -


Total Imports 5.023 4.866 -3.1%

Gross Supply 5.023 4.866 -3.1%

Exports
0.000 0.000 -



Net Supply 5.011 4.860 -3.0%

DEMAND
Residential 0.031 0.030 -3.1%

Total Demand 5.011 4.854 -3.1%


Supply overview
Finlands lack of gas resources mean that it is entirely dependent on imported Russian
gas. This already weak security of supply situation is exacerbated by the fact that
Finland is not currently connected to the European gas grid and is thus unable to
diversify supplies unless new infrastructure is constructed.
All of Finlands gas is delivered under various long term agreements with Gazprom.
These contracts date back to 1973. In September 2005 these contracts were extended
until 2025, with the amount imported increasing by 15%.
Deliveries are made via two 32 inch pipelines, one of which came on line in 1973 with
the other built in 1998.
Demand overview
At just 14% of primary energy demand, gas plays a less dominant role in the Finnish
energy mix that it does in many other European countries.
The undeveloped nature of both the market and the distribution infrastructure means
that power generation and industrial and commercial users of gas are by far the
dominant off-takers, making up 99% of demand. In the industrial and commercial
sector, the pulp and paper industry is the most significant user of gas.


Figure 33: Finland, Sectoral Demand

Power
Generation
73%
Non
Residential
26%
Residential
1%


Figure 34: Finland, Historical Sectoral Demand

0
1
2
3
4
5
6
b
c
m
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004


Finland's gas market is regulated by the Energy Market Authority, known as the
Energiamarkkinavirasto. Originally the Energiamarkkinavirasto was created to regulate
the power sector, though the passing of the Natural Gas Act on 1st August 2000
widened its remit to include gas.
The sector is governed by the Natural Gas Act, which came into force in August 2000.
Under the terms of the Natural Gas Act, eligible players are allowed to trade on a
secondary gas market operated by Kaasuprssi Oy. Eligible parties are defined as
those that have annual consumption levels in excess of 5 mcm, are connected to
remote meter reading equipment and have agreed their pricing structures after the
Natural Gas Act took effect.
Finland has been given a derogation on the requirement to open its gas market under
the terms of the directive. Countries that have only one source of supply and are not
connected to the main European transmission grid can claim this derogation.
The market opening derogation awarded by the EU means that the prime focus for the
restructuring of the gas market relates to the unbundling of the transmission network.
Currently the Finnish gas market is dominated by Gasum Oy, the sole importer and
supplier of gas as well as the owner and operator of the gas grid. Gasum Oy is owned
by Fortum (31%), Gazprom (25%), the Finnish government (24%) and E.ON Ruhrgas
(20%).
Fortum, one of Scandinavias leading power companies, has recently been developing
its role in the Finnish gas sector. In late 2004 it acquired an additional 6% stake in the
Finnish gas grid, and in January 2006 purchased the City of Espoos 34% holding in
E.ON Finland.
Infrastructure
Pipelines
Finlands gas infrastructure is concentrated in the southern part of the country..
Currently the countrys only import point is on the Russian border, close to Imatra.
Plans are being developed to create another import point, also near Imatra, to import
further volumes of Russian gas from the Shtokmanovskoye development in the
Barents Sea. This project will merely serve as a way of importing increased gas
volumes and will not do anything to reduce Finlands over reliance on Russian gas.

The transmission grid is around 1,000 kms in length whilst the distribution network
consists of 1,145 km of pipeline. Gasum Oy is considering extending gas distribution
within the country, with the prospect of Turku being supplied with gas by 2008 provided
this is likely to be profitable.
Gasum and Eesti Gaas of Estonia are in the early stages of developing plans to
construct a Balticconnector pipeline line between Helsinki and Tallinn (not Paldiski to
Turku, as some early reports claimed) . If this project materialises it would connect
Finland to the Baltic network thus creating a second route for Russian gas imports.
Security of supply would also be boosted by the fact that such a pipeline would allow
Finland direct access to Latvias Inculkans gas storage site allowing storage
withdrawals to be made if pipeline supplies are interrupted. Connecting the Estonia-
Finland pipeline to the North European pipeline, on which construction began in 2005,
has not been ruled out. A decision on the Balticonnector project is expected in 2006,
but the pipeline is unlikely to be completed before 2010.

Figure 35: Finland, Gas Grid

Source: Gasum Oy D A T A M O N I T O R

CHAPTER 12 FRANCE
Market summary
The dominance of nuclear power in France means that gas has traditionally played a
comparatively minor role in the French energy mix. However, this role is growing at a
slow but steady rate, with gas now accounting for 15% of primary energy consumption.
Frances already low levels of gas production continue to decline, meaning that imports
will become increasingly important in the coming years.
The prospects for gas use in the power generation sector remain unclear, particularly
following the French Governments White Paper on energy policy in late 2003 which
resulted from a national debate on energy policy earlier in the year. The paper
recommended the promotion of increased energy efficiency and a significantly greater
role for renewable energy, but most significantly recommended the option to maintain
the right to build new nuclear powered electricity generation capacity. If this were to
happen, it would significantly curtail future gas demand. The White Paper stated that
any decision to adopt gas as a power generation fuel would be dependent on the
evolution of gas prices over the following 10 to 20 year period and pointed out that any
tax on greenhouse gas emissions would give nuclear power a comparative advantage.
A memorandum presented by France at a meeting of EU finance ministers in early
2006 re-emphasised the importance of nuclear power, and also of increasing gas
supplies and infrastructure, for Europe as a whole.
The development of competition in France, particularly in the south of the country, is
currently being hampered by a lack of interconnections with other countries. The LNG
projects currently being undertaken will go some way towards easing this problem,
though serious efforts should be made to create a link with Italy and to supplement the
existing connection with Spain. Without this, there is a danger that France will become
two distinct markets a northern market where the connections with Norway, Belgium
and Germany allow competition to develop efficiently and a southern market lagging
someway behind.

Table 15: France, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 1.583 1.390 -12.2%
Pipeline Imports
Netherlands 7.818 8.714 11.5%
Norway 12.584 11.597 -7.8%
Russia 10.561 9.217 -12.7%
Unspecified 3.418 9.028 164.1%


LNG Imports
Algeria 9.040 5.422 -40.0%


Total Imports 43.421 43.978 1.3%

Gross Supply 45.004 45.368 0.8%

Exports
Unspecified 0.946 0.395 -58.2%

Total Pipeline Exports 0.946 0.395 -58.2%

Stock Change 0.575 0.506 -12.0%

Net Supply 44.594 44.439 -0.3%

DEMAND
Residential 22.628 23.058 1.9%

Total Demand 44.592 45.439 1.9%


Supply overview
Frances very low levels of indigenous production mean that it is heavily dependent on
imports to meet its gas needs. Current reserves are estimated at just 13 bcm, giving a
Reserves to Production ratio of less than a decade. Around 70% of indigenous
production is accounted for by Totals Lacq field in the south west of the country (the
Aquitaine region as a whole accounts for 95% of domestic production), though this
meets just a small percentage of national demand. Lacq has been in decline for a
number of years and is expected to become depleted in the near term.
With increasing demand, declining production and little or no prospect of any significant
discoveries in the foreseeable future, France is set to continue its import dependency
in the coming years. With well diversified sources of supply, various pipeline
connections, two existing LNG import terminals and one at the advanced development
stage, both current and future supply is very secure.
In July 2005 France imported its first cargo of Egyptian LNG, further diversifying LNG
imports from Algerian, Nigerian and Oman.
Figure 36: France, Gas Production

0
1
2
3
4
5
6
7
8
9
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B
C
M



Figure 37: France, Import Sources

Other
8%
Algeria (LNG)
21%
Netherlands
18%
Norway
29%
Russia
24%


Demand overview
The penetration of gas into the French energy mix has been curtailed by the strong
dominance of nuclear power. The role of nuclear has grown substantially in France
over the past 30 years, and now accounts for 38% of primary energy consumption
the highest proportion in the world. The increased reliance on nuclear power has
backed both oil and coal out of the energy mix and has limited gas to a penetration of
15%.
Despite the strong dominance of nuclear power, natural gas consumption has been
increasing steadily, with annualised growth of 3% over the past decade. Much of this
growth has been driven by a steady, movement towards gas as a power generation
fuel. Over the decade to 2004, gas use in power generation grew by an average of
21% per year. More recently this growth has slowed, though still remains strong
having grown by 5% between 2003 and 2004.


Figure 38: France, Sectoral Demand
Power
Generation
9%
Non
Residential
40%
Residential
51%


Figure 39: France, Historical Sectoral Demand

0
10
20
30
40
50
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004


France has shown a marked reluctance to embrace energy market liberalisation and as
such has lagged far behind many of its neighbours in opening its markets. The first EU
Gas Directive (98/30/EC) was only incorporated into French law at the beginning of
2003 through the passing of National Law 2003-8, some three years past the deadline
set by the EU.
Despite this reluctance, and the continued dominance of Gaz de France (GdF), some
degree of progress has been made and a greater willingness to embrace liberalisation
is now perceptible. In August 2000, GdF opened its grid to Third Party Access to
consumers using in excess of 25 million cubic metres per annum. Although this
threshold only included about 100 large industrial users, it did equate to a market
opening of around 20% in volume terms. In August 2003 this threshold was reduced to
include companies using more than 15 million cubic metres per annum, boosting
market opening to a theoretical 28%.
Now that the second Directive is in force, all non-residential users are able to choose
their supplier, which equates to a market opening of around 70% in volume terms and
more than 640,000 sites. However, switching has been much slower than in other
markets with just 16% of eligible volume having switched.
Frances energy sector is regulated by the Commission de rgulation de l'Energie
(CRE). It was formed in 2000 to regulate the power sector and took on responsibility for
gas regulation in 2003. Much of the progress made towards liberalisation can be
attributed to the momentum provided by the CRE.
GdF still has an extremely strong control on the French market, despite the loss of its
monopoly on gas importation and distribution in January 2003. The entry to the market
of firms such as Distrigas, BP and E.ON Ruhrgas does not seem to have had an overly
negative effect on GdFs dominance up to now, despite the market share they are
slowly but steadily gaining amongst large industrial gas users. In November 2005
Gazprom entered the markets and has stated its aim to secure 10% of the market.
Despite the apparent softening in the anti-liberalisation stance adopted by the French
Government, the planned privatisation of the two monopoly energy players, Electricit
de France and Gaz de France, has faced strong opposition, particularly from the
unions. Power and gas supplies have been disrupted by various strikes caused by
Unions voicing their position to the privatisation. The Gaz de France IPO was
launched in July 2005 when 22% of the company was floated raising EUR4.5 billion of
which around EUR2.5 billion was received by the French government with the
remainder going to the company itself. However, the government has capped GDFs

regulated gas tariff increases since the privatisation. While beneficial to consumers,
this has impacted on GDFs profitability.
Key factors limiting the development of competition in France

A marked dichotomy exists between northern and southern France in the conditions
allowing competition to develop and take hold. This is largely due to the fact that the
majority of entry points for competitive gas are in the north and east of the country
rather than the south. The CRE sought to combat this barrier to competition by
introducing various measures to make pipeline capacities more transparent, a
reduction in the number of balancing zones, a three year series of annual gas release
programmes by both GdF and Total in the south of the country and by encouraging the
development of import facilities in the south.
Under the terms of the gas release programme GdF are required to auction 15 TWh
per year and Total 1.1 TWh per year for three years. At the first auction in October
2004 GdF sold all its required volume whilst Total was able to sell only half its volume.
Subsequently in February 2005 GdF sold a further 5 TWh per year to BP and Gas
Natural. The three year auction cycle is intended to help develop competition until the
start up of the Fos II LNG project which will catalyse competition by introducing
competitive supply into the area.
Limited demand exists in the short and medium terms for gas in the power generation
sector owing to the dominant role of nuclear in French electricity generation. The
results of the White Paper on energy policy issued in late 2003 indicate that nuclear
power is likely to remain dominant with few signs of a dash for gas towards gas fired
power of the type seen in the UK and elsewhere.
Frances short to medium term gas requirements are already being met by existing
long term contracts from sources such as Russia, the Netherlands, Norway as well as
Nigerian and Algerian LNG. On average these contracts still have around 15 years left
to run. Consequently, the scope for new supply sources and spot gas to break into the
market is diminished, particularly given the decision by GdF in 2003 to sign new
contracts with the Netherlands and Egypt as well as extending an existing contract with
Russia until 2015. To combat this problem the CRE has indicated that it regards
making it easier for large industrial users to secure gas at European hubs such as the
TTF and Bunde as being a high priority.

A very limited wholesale market exists, at least in theory, in France following the
creation of notional trading zones, known as Points dEchange de Gaz or PEGs, in
2004. So far the limited volumes that have been traded by the fifteen registered
players have seen deals transacted at levels close to Zeebrugge levels. The PEG
market is operated by GRT Gaz, previously known as GdF transport.
Despite being small, volumes are growing rapidly having reached surpassed the 800
transactions per month stage in November 2005, though this equates to a total volume
of less than 0.5 bcm.
So far the majority of trading activity has taken place in one of the northern PEGs
owing to the fact that this is the only area where sufficient supply diversity exists to
create liquidity.
This reflects the fact that, in many ways, France is actually two distinct markets the
northern half of the country is home to the majority of entry points for competitive gas
with its pipelines connections importing gas from Norway, Belgium, Russia, the
Netherlands and the UK. In contrast the southern half of the country has just one entry
point for gas imports the Fos-sur-Mer LNG terminal near Marseille.
This north / south divide in the availability of competitive gas will continue to hold back
and restrain the development of the French wholesale gas market, though the situation
will be eased to some degree when an additional LNG terminal, a joint project between
Total and GDF, comes on line at Fos-sur-Mer (Fos Cavaou) in 2007. The Euskadour
pipeline, which imports gas from Algeria via Spain into south west France, began to
give further impetus to reducing this north / south divide following its inauguration in
November 2005. Its current capacity is 0.5 bcm per year, but studies are under way to
assess the feasibility of raising this to 3 bcm per year.
In December 2004 a standardised trading agreement for PEG deals was devised by
the European Federation of Energy Traders. These standardised terms will facilitate
easier trading and are likely to give a boost to liquidity.

Infrastructure
LNG
After Spain, France is Europes largest importer of LNG. LNG is an important element
in meeting French gas demand and ensuring security of supply. The vast majority of
LNG supply is sourced from Sonatrach in Algeria, though small volumes are also
supplied by Nigeria and Oman.
Currently there are 2 operational regasification terminals in France, with another
planned. The new capacity will not only introduce new supplies to the market but will
also help catalyse the liberalisation process by bringing new entrants to the market.
The Fos II project is particularly necessary given that the existing Fos terminal cannot
accept the new generation of large modern tankers and is already operating at full
capacity. In October 2004 Total agreed to buy 2.25 bcm of the project's 8.25 bcm
capacity. In order to facilitate greater competition, the CRE has recommended that no
individual supplier be allowed to have access to more than two thirds of the new
regasification capacity and that at least 10% of the new capacity be used for short-term
spot supplies. The current status of ExxonMobils projected facility (Fos III) is not clear.

Table 16: France, LNG Infrastructure

Name Operator Size Status

Fos GdF 4.5 bcm Existing
Montoir GdF 10 bcm Existing
Fos II GdF 7 bcm Under construction expected start up 2007
Fos III ExxonMobil 7 bcm At planning/development stage


Pipeline infrastructure

Through its previous monopoly status, GdF controls all pipeline import capacity. To
drive competition the CRE has introduced various gas release schemes.
Key French pipelines include:

Franpipe the inauguration of the Franpipe in late 1998 was a key milestone for the
French gas industry: for the first time France had had a direct pipeline link with a
foreign source of supply. The 16 bcm per annum pipeline connects the Norwegian
Draupner platform with Dunkirk on the northern French coast, 521 miles away.
Franpipe is operated by Gassco and owned by the Gassled partners. As Frances
import dependency grows due to increased demand and an imminent plateau in
production, Franpipe will play an increasingly large role in supplying the market.
MEGAL jointly owned by GdF and Ruhrgas, MEGAL delivers Russian gas to France
and the French / German border via the Czech Republic and Austria.
Belgian transit lines various pipelines carry Dutch, Norwegian and occasionally UK
gas into northeastern France.
Les Marches du Nord-Est a transit pipelines in eastern France routing Norwegian
gas to Italy.
Trans-Pyrenean Pipeline a transit pipeline delivering Norwegian gas to Calahorra in
northern Spain.
Pipelines
In mid 2003, the CRE (along with the Spanish and Portuguese regulators) openly
declared their intention to offer incentives to encourage increased pipeline
interconnections between France and Spain. Investment of this type is central to
redressing the imbalance between the import capabilities of northern and southern
France which is causing pipeline system congestion and curtailing the development of
competition in the south.
Subsequent to this, the CRE announced its decision to allow a 12% pre-tax rate of
return (as opposed to the usual 9%) to the Euskadour 1 project which began importing
Algerian gas via Spain to south west France in November 2005, thus easing the north /
south divide and stimulating the gas markets in the south of the country.
In October 2004 the EU Competition Authority approved plans for Total to acquire
various pipeline assets in south west and central France from GdF. In an attempt to
mitigate the monopoly on gas transport and storage in the south west that the deal will
give Total, the CRE imposed a series of conditions relating to the provision of effective
TPA. The deal is part of the dissolution of cross-shareholdings Total and GdF hold in
two network operators - Compagnie Franaise du Mthane and Gaz du Sud-Ouest.
The deal will see Total will absorb GdFs 30% stake in Gaz du Sud-Ouest, various
transmission lines, the Izaute storage site, various Compagnie Franaise du Mthane
customers in central France and a 33.3% stake in the Fos II LNG site. Part of the
financial element of this deal involves GdF adding Totals 45% stake in CFM to its
existing 55% stake, thus giving it full ownership of the company. Estimates made by

the CRE indicate that the deal will give GdF 85% of the French market, Total 11% and
new entrants 4%.
Table 17: France, LNG Infrastructure

Name Type Capacity (mcm)

Etrez Salt Cavity 430
Manosque Salt Cavity 260
Tersanne Salt Cavity 200
Beynes profons Aquifer 350
Beynes superior Aquifer 190
Cere-la-Ronde Aquifer 350
Cerville-Velaine Aquifer 650
Chemery Aquifer 3.45
Germignysur Colombs Aquifer 760
Gournaysur Aronde Aquifer 1,000
Izaute Aquifer 1,250
Lussagnet Aquifer 720
St Claire sur Epte Aquifer 410
Saint-Illiers Aquifer 580
Soings-en-Sologne Aquifer 220



Figure 40: France, Transmission Grid

Source: CRE D A T A M O N I T O R

CHAPTER 13 GERMANY
Market summary
Despite being Europes second largest gas market in consumption terms, Germany
has been particularly slow, not to mention reluctant in some quarters, to liberalise its
gas market.
The threat of legal sanctions by the European Commission has encouraged a more
proactive approach to adopting and complying with the terms required by the gas
directive, though it was only as recently as July 2005 that a key piece of legislation was
officially adopted bringing the liberalisation process in line with EU legislation.
Germany is a complex gas market with a number of players active in the ownership
and operation of distribution, transmission and storage infrastructure. Distribution is
particularly fragmented with around 700 regional distribution companies known as
Stadtwerke.

Table 18: Germany, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 22.217 20.559 -7.5%
Pipeline Imports
Netherlands 19.350 22.486 16.2%
Norway 23.918 25.140 5.1%
Russia 37.287 39.111 4.9%
Others 3.923 3.372 -14.0%

LNG Imports
0.000 0.000 -


Total Imports 84.478 90.109 6.7%

Gross Supply 106.695 110.668 3.7%

Exports
Unspecified 7.681 8.810 14.7%



Net Supply 100.972 100.339 -0.6%

DEMAND
Residential 33.986 33.773 -0.6%

Total Demand 100.972 100.339 -0.6%


Supply overview
Indigenous production is a key element of German gas supply and accounts for 20% of
total consumption. At 200 bcm Germany currently has an R/P ratio of 12 years. All of
Germanys fields, with the exception of one, are located onshore.
The majority of production is located in the north west of the country in Lower Saxony,
close to the Dutch border. This means that German gas production shares many of the
geological and geophysical characteristics of Dutch supply namely a high degree of
flexibility and a combination of both low and high calorific value reserves.
LNG does not currently play a role in the German energy mix, though may do so if E.
Ons plans to develop a terminal at Wilhemshaven are successful.

Figure 41: Germany, Gas Production
0
5
10
15
20
25
30
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B
C
M



Figure 42: Germany, Imports By Source

Others
4%
Netherlands
25%
Norway
28%
Russia
43%

Demand overview
In consumption terms, Germany is the biggest gas market in the EU with the exception
of the UK. At 23% of total demand, gas consumption in the power generation sector is
comparatively low owing to the fact that the majority of gas fired power in the country is
used only for peak rather than baseload generation.
As the German government seeks to phase out nuclear power by 2021, the role of gas
in the German power generation market will grow significantly in the short to medium
term. Over the past decade gas use in power generation has been the fastest growing
sector, increasing at an annualised average rate of 3.5% compared with grown of less
than 2% in the market overall.


Figure 43: Germany, Sectoral Demand

Residential
34%
Non
Residential
43%
Power
Generation
23%


Figure 44: Germany, Historical Sectoral Consumption

0
20
40
60
80
100
120
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004


Germany's gas sector is governed by three main pieces of legislation:
The Energy Industry Act, known as the Energiewirtschaftsgesetz, which outlines the
principle concepts relating to gas distribution, transportation, storage and supply.
The Federal Mining Act (Bundesberggesetz) relates to E & P activity as well as
underground storage.
The Act Against Restraints to Competition (the Gesetz gegen
Wettbewerbeschrnkungen) relates to general competition law applicable to the gas
sector.
Despite its well developed gas sector in terms of consumption, supply diversity and
infrastructure development, Germanys gas industry has lagged behind many other
markets by lacking a regulatory body. Instead, the sector has traditionally been
governed by general competition law, mainly by the Federal Cartel Office, with a high
degree of self regulation owing to the Verbndevereinbarung agreement signed in July
2000.
In the past, attempts to reform the German market have relied on negotiated access
with little, if any, emphasis placed on mandatory access. The Government delegated
the task of improving the system to the industry rather than setting out legislation itself.
In 2002 the industry steering groups agreed a system under which pipeline and storage
site owners were obliged to offer available capacity to third parties on an open and
non-discriminatory basis. Whilst theoretically a step forward in liberalisation terms, the
agreement failed to make a significant impact because it lacked legal backing, meaning
that refusals to offer available capacity could only be appealed against under the Act
Against Restraints to Competition legislation.
Germanys lack of pro-action in liberalising its energy market resulted in the European
Commission threatening to invoke legal proceedings in 2001 if the process of
liberalisation was not initiated. This threat did catalyse some action, but Germany has
still been noticeably reluctant to embrace the gas directive. The threat of sanctions
resulted in the German government proposing a Bill to amend and update the
Energiewirtschaftsgesetz, though it took until May 2003 for the legislation to come into
force following long and drawn-out (legislative) delays in the German parliament.
The updated legislation required the German Ministry of Industry to undertake a
monitoring report analysing the progress made in reforming the market in accordance
with the terms of the gas directive. The report was delivered in August 2003 and
concluded that progress made so far towards liberalising the market had been minimal.

The report found that a lack of transparency in available pipeline capacity data and the
fact that standardised contracts were not being used meant that competition was being
stifled. The Monitoring Report also concluded that virtual trading should be introduced
by merging the broad based ownership of pipelines into a small number of balancing
zones and that an entry-exit model be introduced.
In April 2004 the German cabinet passed a draft law confirming various previously
discussed liberalisation measures, including the widening of the remit of the postal and
telecoms regulator to include the energy sector and the unbundling of companies in the
gas sector. The new law came into force in July 2005, officially establishing the energy
regulator and bringing Germany into full compliance with the EU directive.
Following the results of a legal challenge by Marathon regarding refused network
access, the European Commission, BEB and E.ON Ruhrgas collectively agreed to the
introduction of an entry-exit model. A 3 zone entryexit model became operational on
the BEB system in July 2004, with E.ON Ruhrgas introducing a 5 zone entry-exit model
in November 2004. In May 2005 RWE replaced its point-to-point access system with
an entry-exit model whilst Wingas followed suit in June 2005.
In May 2004 E.ON Ruhrgas held its second gas auction where 35 of the 39 lots
totalling 3.6 bcm for delivery at Waidhaus were sold to seven parties. This second
auction was much more successful than the countrys first auction where just two
buyers bought gas for delivery at Emden. The 1.7 bcm left unsold from the first auction
was carried over into the second, whilst the 0.4 bcm left unsold from the second
auction was carried over to the 2005 sale. The 2005 auction was held in May with a
total of 39 TWh sold to seven players. The next auction is scheduled for May 17th
2006.
The Bunde market was an early attempt to facilitate continental gas trading. The
Bunde hub is located on the Dutch / German border at Oude Statenzijl and takes its
name from the closest town on the German side of the border. Two hub operators
were originally set up to facilitate trading NWE Hubco to run the German operations
and Eurohub on the Dutch side of the border. The services offered by the two
companies also covered the Emden area where gas from Norway was landed via the
Europipe and Norpipe pipelines. Although showing potential in the early days following
its launch in 2002, the Bunde hub has subsequently been very slow to develop with
progressively negligible volumes traded, largely as a result of difficulties in gaining
access to pipeline capacity in Germany. The formation of the TTF in November 2002
provided stiff competition and further diminished both the liquidity and attractiveness of
the Bunde hub.

In April 2004, NWE Hubco and Eurohub joined forces to create EuroHub GmbH. This
deal means that the new company is now effectively one third owned by Gas Transport
Services B.V (see TTF section) with the remaining two thirds held equally by E.ON
Ruhrgas, Statoil, BEB and Wingas. Interest at the EuroHub has been lacklustre with
just four players signing up for the pilot service agreement in June 2005. The pilot
service agreement period has now been extended until the end of 2005.
The Bunde and Emden area contains the landing sites for gas from the NGT, Europipe
and Norpipe pipelines. Assuming access to pipeline capacity can be obtained, gas can
be moved to a number of destinations in Germany, the Netherlands and surrounding
areas.
Infrastructure
Gas imports, and hence import infrastructure, are key aspects of the German gas
sector. Russian gas is received at import points on the Austrian, Czech and Polish
borders, whilst Norwegian gas comes ashore near Emden on the north coast of
Germany. Gas from the UK and the Netherlands is imported via a border crossing in
the northwest at the Dutch border whilst Danish gas is imported on the border near
Flensburg. In addition to being a gas importer, Germany also plays an important role
as a transit state for Russian gas going further west.
The size, magnitude and ownership of the German grid make it one of the most
complex pipeline networks in the world. Germany has a number of TSOs including
Ruhrgas, Wingas, BEB and VNG. Of these, Ruhrgas is the main TSO in that it carries
more than two thirds of all gas consumed in the country. Germany differs from many
other markets in that the ownership of the gas grid is spread amongst a number of
players. This reflects the fact that in the past market development was driven by a
number of players who enjoyed legal protection of their investments rather than the
emergence of a single, dominant monopoly required to grant access to third parties. In
January 2006 Vattenfall announced that it would revive its German gas trading arm,
which had been frozen since 2004.
Distribution is undertaken by around 700 regional distribution companies known as
Stadtwerke. Usually the Stadtwerke are owned by the relevant municipality.
Key pipelines in Germany include:
MEGAL - co-owned by GdF and Ruhrgas, MEGALs 22 bcm annual capacity delivers
Russian gas in Germany as well as acting as a conduit for onward transmission to
France.

TENP - runs from the Netherlands into Germany and then onwards to both Switzerland
and Italy. Current capacity is around 19 bcm. TENP is also used to import UK gas via
the Netherlands.
STEGAL - brings Russian gas into Germany via the Czech Republic. 8 bcm annual
capacity.
NETRA - an internal pipeline moving gas from Wilhelmshaven in the north to Bernau.
MIDAL - moves gas from Emden, close to the Dutch border to Ludwigshafen in
southwest Germany.
JAGAL - owned by Wingas, JAGAL moves Russian gas into and around Germany
from the Polish border.
Norpipe Norwegian gas is imported to Germany at Emden via the Norpipe.
Europipe Like Norpipe, the Europipe brings Norwegian gas into Germany, slightly
north of Emden at Dornum.
Polish Link - In early 2005 Polands PGNig and VNG agreed to construct a 1.5 bcm per
annum pipeline between Germany and Poland. Work is likely to begin in the second
part of 2006.
NEGP (Baltic Piepline) - Two of Germanys largest suppliers, BASF and E.On along
with Gazprom are jointly developing a new pipeline link between Russia and Germany.
The project, known as the North European Gas Pipeline Project or the Baltic pipeline,
is scheduled for completion in 2010. BASF and E. On collectively own 49% with
Gazprom holding the remaining 51%. The 27.5 bcm pipeline is being constructed
underneath the Baltic Sea and will transit Russian gas directly into northern Germany,
bypassing the traditional Eastern European transit routes. Plans have also been
mooted to double capacity to 55 bcm by 2012.


Table 19: Germany, Storage Sites

(mcm / day)

Bad Lauchstadt Depleted Gas Field VNG 426 5.7
Bierwang Depleted Gas Field Ruhrgas 28.8 1.3
Breitbrunn Depleted Gas Field RWE 550 6
Dotlingen Depleted Gas Field BEB 2.025 20.2
Inzenhan West Depleted Gas Field RWE 500 6.7
Rehden 1 Depleted Gas Field Wingas 4.2 57.6
Reitbrook Depleted Gas Field Preussaa 283 8.4
Uelsen 1 Depleted Gas Field BEB 380 5.4
Wolfersberg Depleted Gas Field RWE DEA 320 5
Berlin Aquifer Gasag 570 7.2
Bad Lauchstadt 2 Salt Cavity VNG 661 20
Bremen Lesum 1 Salt Cavity SW Bremen 81 3.17
Epe 1 Salt Cavity Thyssengas 192 7.7
Epe 2 Salt Cavity Ruhrgas 1.528 36
Etzel Salt Cavity Ruhrgas 500 31.4
Harsefeld Salt Cavity BEB 140 7.2
Huntorf 1 Salt Cavity EWE 60 8.4
Krummhorn Salt Cavity Ruhrgas 116 6
Nuttermoor 1 Salt Cavity EWE 910 24
Ronne bei Kiel Salt Cavity SW Kiel 62 3.6
Stassfurt 1 Salt Cavity KSS 22 2.4
Xanten Salt Cavity Thyssengas 195 6.7


CHAPTER 14 GREECE
Market summary
With minimal gas reserves, Greece is heavily dependent on imports to meet its gas
demand.
Until relatively recently Russia was the only source of gas imports, raising some
important security of supply issues. The issues surrounding this over-reliance on a
single import source has since diminished to a degree with the arrival of Algerian LNG
and the decision to construct a pipeline link with Turkey to allow the importation of
Azeri gas, due on stream by the end of 2006.
Greeces geographical location means that it has a potential role in the future as a
transit state to take gas from eastern supply sources to markets in the west. The
completion of a pipeline link with Italy will be a key part of this development when it
comes on line in 2010.
With low levels of gas penetration and the increased availability of new gas, demand
growth in Greece is likely to be strong in the future.

Table 20: Greece, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.027 0.023 -14.8%
Pipeline Imports
Russia 1.863 2.172 16.6%


LNG Imports
Algeria 0.555 0.469 -15.5%

Total LNG Imports 0.555 0.469 -15.5%


Gross Supply 2.445 2.664 9.0%

Exports
0.000 0.000 -


Stock Change -0.005 0.029 .

Net Supply 2.440 2.693 10.4%

DEMAND
Residential 0.023 0.025 10.4%

Total Demand 2.440 2.693 10.4%


Supply overview
Greece has one gas field from which production levels are negligible. This means that
imports form the core of gas supply. Greek gas imports first began in 1997 when
Russian gas was imported via Bulgaria. Currently over 80% of gas is sourced from
Russia, with the remainder of imports arriving from Algeria in the form of LNG. Gas is
supplied from Gazprom under a long term contract that runs until 2016, although
discussions are currently underway regarding the extension of this contract.
On going pipeline projects mean that Greece has considerable future potential to act
as a gas transit state acting as a conduit for Iranian and Azeri gas going to southern
Europe and beyond (see Infrastructure).
Following completion of the currently under construction link with Turkey, Greece will
begin importing 0.75 bcm per year of gas from Azerbaijan.

Figure 45: Greece, Indigenous Production

0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
0.11
0.12
0.13
1982 1986 1990 1994 1998 2002
B
C
M


Demand overview
Over the past decade Greek gas demand has grown at an almost unprecedented 54%
per annum. However, despite this strong growth, the market remains very small at less
than 3 bcm per annum.
Greeces undeveloped market means that demand is accounted for almost entirely by
the power generation and non-residential sectors.
As the distribution structure expands, demand in the residential sector will grow rapidly.
At just 6% of the primary energy mix, there is enormous potential for Greek gas
demand to grow in the short to medium term.
Figure 46: Greece, Sectoral Demand

Residential
1%
Non
Residential
26%
Power
Generation
73%



Figure 47: Greece, Historical Sectoral Demand

0
1
2
3
b
c
m
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004


The Regulatory Authority for Energy (RAE) is responsible for the regulation of the
Greek gas and power markets. The RAE was created under Law 2773/22-12-99, and
the subsequent amendment to article 5 of Law 2837/2000.
The Greek gas market is heavily dominated by DEPA, which is 35% owned by Hellenic
Petroleum and 65% by the Greek government. In 2003 Spains Gas Natural was
awarded the right to buy a 35% stake in the company, though no deal has yet been
finalised and the deal appears to be increasingly unlikely following a change of
government in Greece.
Greece has a derogation from the terms of the gas directive, due to expire in
November 2006, awarded as a result of its status as an emerging market, though is still
required to transpose the terms of the directive into national law. In November 2005
the Greek government submitted to the EU a bill outlining its planned timetable for
deregulating the market when the derogation expires. The bill proposed to unbundle
DEPA into separate legal entities and to facilitate customer switching.

In February 2006, the European Investment Bank (EIB) granted Greece 95 million to
support its gas diversification objective, including an allowance for the construction and
operation of the Greece-Turkey pipeline.
Infrastructure
The future development of the Greek gas market is heavily dependent on the
construction of new import infrastructure to meet growing demand levels. Various
projects to meet this aim have been mooted in recent years.
In March 2002 a memorandum of agreement was signed concerning the construction
of a link between Karacabey in Turkey and Komotini in northern Greece which will
allow the importation of Azeri (and potentially Iranian) gas. Following a series of
delays, construction work has now begun with completion expected in the latter part of
2006. When complete, the project will give a much needed added element of security
of supply. So far DEPA has agreed to import 0.75 bcm per year under a contract
signed in late 2003. Initial capacity of the line will be 3.4 bcm per year with the
potential to upgrade to 11 bcm being built into the project. By virtue of its geographical
location, Greece may be able to transform itself into a transit state by acting as a
conduit for eastern gas going to western markets. If it manages to achieve this, the link
with Turkey will be upgraded to the potential 11 bcm capacity.
The possibility of a link between Greece and Italy has been examined via a feasibility
study completed in early 2005. This was followed in November 2005 by the signing of
a governmental agreement. Edison and Depa are understood to be involved in the 8
bcm project, known as IGI. When developed, the link will provide another way in which
Greece could act as a transit country for eastern gas going to western markets: Russia
has already discussed the possibility of transporting Russian gas through this pipeline.
Completion of the project is expected by 2010.
LNG
The arrival of Greeces first LNG shipment in November 1999 removed the precarious
total import dependence on Russia. The LNG arrived under the terms of a 21 year
supply deal agreed between DEPA and Algerias Sonatrach. The LNG is imported to
DEPAs 0.65 bcm regasification terminal at Revithoussa near Athens.
In November 2004 DEPA announced plans to expand capacity at the terminal in order
to meet demand growth. Work to expand the terminal's regasification capacity to 1,000
cubic metres per hour from the current 267 cubic metres per hour will begin in late
2006.

CHAPTER 15 HUNGARY
Market summary
Hungary has a very high level of gas penetration, far in excess of its Eastern European
neighbors and even ahead of many much more developed gas markets. The high
levels of gas penetration mean that the market is either at, or close to, saturation point,
thus limiting future demand growth prospects.
Hungarys indigenous gas production has traditionally supplied a small, but important,
proportion of gas demand. However, since a peak in production was reached in 1986,
the subsequent decline in production means that as demand continues to grow, a
greater role will need to be played by imports
As import dependency rises, the need to diversify supply sources will grow. Currently
Hungarys role as a transit state and its location close to the Brotherhood pipeline, one
of the key export routes for Russian gas going to western markets, gives it an added
element of supply security.

Table 21: Hungary, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 2.945 2.963 0.6%
Pipeline Imports
France 0.412 0.413 0.2%
Germany 0.719 0.720 0.1%
Kazakhstan 0.000 0.395 -
Russia 11.045 9.217 -16.6%
Turkmenistan 0.000 0.369 -
Uzbekistan 0.000 0.304 -

LNG Imports
0.000 0.000 -


Total Imports 12.176 11.418 -6.2%

Gross Supply 15.121 14.381 -4.9%

Exports
0.000 0.000 -


Stock Change -0.418 0.083 -

Net Supply 14.576 14.339 -1.6%

DEMAND
Residential 4.764 4.687 -1.6%

Total Demand 14.576 14.339 -1.6%


Supply overview
Hungarian gas production has been decreasing for a number of years, making the
country increasingly dependent on gas imports, which come mainly from Russia.
With a disproportionately high amount of imports coming from one source, it could be
argued that Hungary suffers a lack of supply diversity. However, Hungarys location
close to the Brotherhood pipeline, one of the key Russian export lines, does give an
added element of supply security.

Figure 48: Hungary, Gas Production

0
1
2
3
4
5
6
7
8
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
B
C
M



Figure 49: Hungary, Imports By Source

Russia
81%
Turkmenistan
3%
Uzbekistan
3%
France
4%
Germany
6% Kazakhstan
3%

Demand overview
At 49% of primary energy demand, Hungary has a notably high gas penetration, much
in excess of both its eastern European neighbours and more mature gas markets such
as the UK and Germany.
With more than 93% of urbanisations already connected to a gas supply, future
demand growth is likely to be at a slower rate than has been seen in the past,
particularly in the residential sector. Demand growth over the past decade has
averaged 2.2%, driven primarily by the power generation sector.


Figure 50: Hungary, Sectoral Demand

Power
Generation
30%
Non
Residential
37%
Residential
33%


Figure 51: Hungary, Historical Sectoral Demand

0
2
4
6
8
10
12
14
16
b
c
m
1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004


The Hungarian gas market is regulated by the Magyar Energia Hivatal, known as the
MEH, which was established in 1994. The MEH also regulates the power sector.
Plans for the reform of the Hungarian energy market (were begun) began in 2000.
Subsequently, Act XLII was passed in 2003 which began the process of reforming the
gas sector, leading to the first phase of market opening in January 2004 allowing large
industrial buyers to choose their supplier. Hungary is in full compliance with the first
phase of the gas directive with the non-residential market having been open from July
2004 and the residential market scheduled to be open before July 2007.
Switching activity amongst eligible consumers has been minimal, largely as a result of
difficulties in obtaining access on transmission lines.
To comply with the terms of the directive, MOL (the incumbent monopoly) legally
unbundled its supply, storage and transmission assets into three separate units in
2000. The three units, Foldgazellato (wholesale marketing and supply), Foldgaztarolo
(storage), and Foldgazszallito (transmission), were originally 100% owned by MOL and
were put up for sale in early 2004 as part of the liberalisation process.
In November 2004 a deal was signed with E.ON under which stakes in the unbundled
units were sold for a total consideration of up to EUR 2.2 billion depending on the
exercising of various options included in the deal. The assets acquired by E. ON were
75% minus one share in Foldgaztarolo, 75% minus one share in Foldgazellato and
25% plus one share in Foldgazszallito. Also included in the sale, subject to joint
venture partner approval, was a 50% stake in Panrusgaz, a gas import joint venture
with Gazprom. Completion of the deal was approved by the Hungarian Energy Office in
June 2005.
In January 2006, MOL announced it had reached an agreement regarding the sale of
Foldgazellato and Foldgaztarolo to the German company EON at a price between
900 million and 1.19 billion. EON will release up to 2bcm of gas to the free market
annually (around 14% of total consumption), as required by the Commission.
Hungarys six regional distribution companies have been privatised since 1995 with
various foreign players, including RWE, E.ON Ruhrgas, GdF and Eni, making
investments in the distribution companies.

Infrastructure
Pipelines
Russian gas is imported to Hungary via a section of the Brotherhood pipeline. Since
the inauguration of the Hungary-Austria Gasleitung (HAG) pipeline in 1996, small
volumes of imports have been sourced from Austria.
Mol and Slovakia's SPP are exploring the possibility of developing another import
pipeline to serve as a third entry point to the Hungarian market. The plans entail a link
from Tupa-Sahy in Slovakia which will connect with MOLs existing infrastructure at
Vecses.
In 2000 an interconnection was built with Croatia, supplementing the existing
interconnections with other surrounding countries.
The gas network totals around 73,000 kms and is connected to in excess of three
million end users.
Storage
In January 2006 the Hungarian government announced plans for a new 1.2 bcm
capacity storage facility. The project should become operational by 2010.

Table 22: Hungary, Storage Sites

Name Operator Capacity
Peak
Deliverability
(mcm) (mcm/day)

Pusztaederics Mol 3301 2.7
Zsana Mol 1300 18
Maros Mol 150 2.2
Kardoskut Mol 160 2.4
Hajduszoboszl Mol 1400 19.2

Source: Hungarian Energy Office D A T A M O N I T O R

CHAPTER 16 IRELAND
Market summary
Ireland is a comparatively new gas market with consumption only beginning in the late
1970s. Since then the industry has progressed at a steady speed with the
development of new import pipelines and significant investments being made in
transmission and distribution infrastructure.
Demand growth has been consistent rather than spectacular, having averaged around
4.2% over the past decade. Continued economic growth, increased supply and the
gasification of new areas of the country, mean that demand will continue to grow in the
short to medium term.
Indigenous production is limited, meaning that around 80% of gas demand is met
through imported supplies.
Levels of market opening in the past have far exceeded those required by the EU Gas
Directives with full opening expected by October 2005, more than a year and a half
ahead of the EU deadline.

Table 23: Ireland, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.673 0.855 27.0%
Pipeline Imports
UK 3.635 3.440 -5.4%


LNG Imports
0.000 0.000 -


Total Imports 3.635 3.440 -5.4%

Gross Supply 4.308 4.295 -0.3%

Exports
0.000 0.000 -



Net Supply 4.308 4.324 0.4%

DEMAND
Residential 0.630 0.632 0.4%

Total Demand 4.308 4.324 0.4%


Supply overview
Ireland's first indigenous gas reserves were discovered off the south west coast in
1971 as a by-product of a search for oil.
Reserves, and hence production, are small in scale meaning that indigenous
production has only ever met a small proportion of demand, currently around 20%.
Despite the imminent start-up of new production facilities, this import dependency is set
to grow as demand growth out accelerates indigenous supply availability.
Currently all production takes place in the southwest of Ireland, offshore of Cork.
Current production facilities are:
Kinsale Head In 1979 Marathons Kinsale Head became Irelands first producing gas
field. In 1991 production was increased with the development of the Ballycotton
satellite field and the Southwest Kinsale field in 1999. Despite these additions, Kinsale
Head production is now in decline.
Seven Heads Around 35 kms south west of Kinsale Head is the Seven Heads field.
Seven Heads is operated by Ramco, with ownership split between Ramco and a
consortium of partners. Gas from Seven Heads is transported and processed through
Marathon's Kinsale Head infrastructure. The field came on stream in December 2003
but has been experiencing severe reservoir problems which have severely limited
production. Initial production of 73 mcf per day was more than sufficient to meet the
requirements of the 60 mcf per day contract Ramco had entered into with Innogy. The
reservoir problems mean that production has fallen significantly forcing the partners to
source gas elsewhere to comply with the terms of the contract. Recent estimates of
recoverable reserves indicate that the field has another 19 bcf of reserves (in addition
to the 9 bcf already produced), significantly down on the original estimate of 283 bcf.
Ramco has stated that it believes this ultimate recoverable reserves figure could be
increased to 83 bcf with further drilling and seismic work. However, the company is
currently in the final stages of disposing of Seven Heads and is understood to have
had extensive discussions with Marathon.
One other big gas development project is currently underway. The Corrib field, located
70 kms offshore the northwest coast, was first discovered in 1996 by Enterprise Oil and
was the first significant new gas discovery in Irish wasters since Kinsale Head. In 2002
Enterprise Oil was acquired by Shell and the operatorship of Corrib transferred to
Shell, with the project owned by Shell E&P Ireland Limited (45%), Statoil (36.5%) and
Marathon (18.5%). The project has undergone various legislative and planning
permission delays, though current indications point to initial gas flows by 2008. The
fields estimated reserves of 24 bcm would increase security of supply and reduce
import dependency on the UK.

In March 2005 an exploration licensing round was launched for 15 year permits
covering 25,000 square kms in the Slyne, Erris and Donegal Basins, located in the
same vicinity as Corrib, off the northwest coast.

Figure 52: Ireland, Gas Production

0
1
2
3
1979 1983 1987 1991 1995 1999 2003
B
C
M


Figure 53: Ireland, Imports By Source

Suppl y Sources
Production
20%
UK Imports
80%


Demand overview
Since consumption first began in 1979, gas demand in Ireland has been growing
strongly at an average of 4.2% per year.
At 7.8% and 7.4% respectively, demand growth has been strongest in the power
generation and residential sectors owing to an ongoing expansion to the distribution
grid and the construction of new gas fired power capacity. Forecasts published by the
regulator indicate demand growth of 7% per annum in the period to 2008 and between
4% and 6% thereafter.
Further expansion work to the distribution grid means that gas demand will continue to
be strong and will continue to back LPG out of the energy mix.
Figure 54: Ireland, Sectoral Demand

Power
Generation
64%
Non
Residential
21%
Residential
15%



Figure 55: Ireland, Historical Sectoral Demand

0
1
2
3
4
5
b
c
m
1979 1984 1989 1994 1999 2004


The Irish gas market is regulated by the Commission for Energy Regulation (CER)
under the terms of the Gas (Interim) (Regulation) Act, 2002. Since its formation in April
2002, the CER has also been responsible for regulating the power market.
Competition was introduced to the Irish gas market in 1995 when users of more than
25 mcm per year were granted Third Party Access to the transmission network of Bord
Gis, the monopoly gas company. In addition to setting up the CER, the Gas (Interim)
(Regulation) Act 2002 also reduced the eligibility threshold to include consumers using
at least 2 mcm per annum and all gas fired power stations irrespective of size.
This threshold was subsequently reduced to 500,000 cubic metres per year from 1st
January 2003 and equates to a market opening of 85% by volume. In compliance with
the gas directive, the whole of the non-residential market became eligible from 1st July
2004. Full market opening is expected by mid 2006, exceeding the July 2007 timetable
required by the gas directive.
Transmission, distribution and supply of gas are currently dominated by Bord Gis, the
national gas incumbent, which was set up under the 1976 Gas Act and is 100% owned
by the Irish Government.

Infrastructure
Irelands 1,850 km transmission network and 8,400 kms of distribution infrastructure
are owned and maintained by Bord Gis.
Gas from the UK currently enters the Irish system via two Interconnectors owned and
operated by BGE. The gas comes onshore in County Dublin and also at Inch in
County Cork where gas from the Kinsale Head field is landed.
Another system entry point will be created in north west Ireland in around 2007 when
the Corrib field is likely to come on-stream see Supply overview.
Several significant pipeline development projects are underway. These include:
Pipelines to Northern Ireland - In 2002 Bord Gis was granted permission to build,
own and operate 2 pipelines linking the Irish transmission grid to Northern Ireland. The
first of these pipelines, between Belfast and Derry, is currently under development and
will supply gas to a power station and end users in the northern area of Northern
Ireland. Work on the second pipeline is due to start in 2006 and will take supplies from
the UK-Ireland Interconnector at Gormanston to Belfast.
Mayo to Galway Pipeline Bord Gis has unveiled plans to build a pipeline to
transport gas from the Corrib field to Galway where it will connect with other
transmission infrastructure. Development of this project is currently on hold until the
development of the Corrib project is finalized.
Despite not currently having any formal commercially available gas storage
infrastructure, some gas storage activity does take place in Ireland. Marathon Oil,
operator of Irelands largest producing field, injects gas from its main Kinsale field into
the Southwest Kinsale satellite to help meet peak winter demand.
In early 2004 the company entered into discussions with the Irish regulator regarding
the possibility of creating the first commercially available storage in Ireland by
converting the Southwest Kinsale field into a permanent storage site. Under the terms
of the proposal, up to 170 mcm could be stored with injection rates of 1.4 mcm per day
and a withdrawal rate of up to 2.5 mcm per day. After various delays there are now
plans to make this storage commercially available from May 2006.


Figure 56: Ireland, Transmission Grid

Source: BGE D A T A M O N I T O R

CHAPTER 17 ITALY
Market summary
Italy is a significant consumer of gas, with consumption levels in excess of most other
European countries.
The role of gas has increased considerably in recent years, and it now accounts for
36% of primary energy demand. A small amount of this demand is met by LNG, though
as new regasification facilities are developed, this proportion will increase.
Italy has outpaced the speed of market opening required by the EU Gas Directive and
has had a fully open market since January 2003.
Supply sources are well diversified: pipeline gas is sourced from the Netherlands,
Russia, Norway and Algeria, as well as LNG delivered from Algeria and Nigeria.

Table 24: Italy, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 13.885 12.961 -6.7%
Pipeline Imports
Algeria 21.500 22.690 5.5%
Libya 0.000 0.523 -
Russia 19.426 21.343 9.9%
Netherlands 7.443 8.091 8.7%
Norway 7.474 8.175 9.4%
Other 0.000 0.678 -


LNG Imports
Algeria 2.020 2.010 -0.5%
Nigeria 4.280 4.383 2.4%

Total LNG Imports 6.300 6.393 1.5%

Total Imports 62.143 67.893 9.3%

Gross Supply 76.028 80.854 6.3%

Exports
Former Yugoslavia 0.005 0.396 -


Statistical Diffs 0.052 -0.015 -

Net Supply 77.354 80.608 4.2%

DEMAND
Residential 20.901 21.780 4.2%

Total Demand 77.354 80.608 4.2%


Supply overview
Despite having the fourth largest gas reserves in the EU, Italian production is
comparatively limited at less than 13 bcm per annum, less than 16% of demand. At
current production levels this gives a Reserves to Production ratio of around 13 years.
Production activity in Italy is almost entirely accounted for by Eni which produces over
90% of indigenous production, mainly through its reserves in the Adriatic and Ionian
seas. Other players active in E and P in Italy include BG and Total.
Production reached a peak in 1995 and has been in decline ever since. Rather then
reflecting a decline in geological conditions, this decrease in production may be more
attributable to an over contracting of supplies and the fact that the regulator has placed
market share limits on Eni, reducing the incentive for it to seek to maximise production.
Despite this, a number of E and P projects are currently underway.

Figure 57: Italy, Gas Production

0
5
10
15
20
25
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000
B
C
M



Figure 58: Italy, Imports By Source

Norway
12%
Other
1% Netherlands
12%
Algeria (LNG)
3% Nigeria (LNG)
6%
Algeria
34%
Libya
1%
Russia
31%

Demand overview
Gas demand has seen continued growth in recent years, despite levels of economic
growth being well below the EU average in both 2003 and 2004.
Total demand grew by an average of 4% per year in the decade to 2004, though in
more recent years average growth has been only around half this rate.
A strong movement towards gas fired power in the mid to late 1990s has seen the role
of gas in the power generation sector grow particularly rapidly, averaging around 9%
per annum over the past decade.


Figure 59: Italy, Sectoral Demand

Power
Generation
33%
Non
Residential
40%
Residential
27%


Figure 60: Italy, Historical Sectoral Demand

0
20
40
60
80
100
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004


Regulation of both the gas and power markets is undertaken by the Autorita per
lenergia elettrica e il gas (AEEG), set up in 1996.
In July 2004, the AEEG completed the regulatory framework for negotiable energy
efficiency certificates (white certificates) due for full implementation at the end of
February 2006. The certificates will require gas and power distributors to reach precise
energy saving targets (155,000 toe in 2005) by carrying out specific projects
throughout the supply chain. A successful project will be awarded a white certificate.
Distributors will be allowed to meet their targets either through the purchase of the
corresponding certificates via GMEs existing web platform, or through projects
completed by specialized energy service companies. Any failure to comply will result in
sanction by the AEEG.
The AEEG oversaw Legislative Decree 164/2000 (also known as the Letta Decree) in
mid 2000, incorporating the terms of the first Gas Directive onto the Italian statute
books. The Letta Decree took a very pro-liberalisation stance and exceeded the
market opening timetable required under the EU Directive by implementing full market
opening by January 2003 and introducing regulated Third Party Access to the gas grid.
The Decree also contained legislation aimed at promoting a competitive market and
security of supply. namely that no single company be allowed to supply more than 75%
of Italian demand (reduced to 61% by 2010).
The unbundling requirements set out by the Directive were also implemented by the
AEEG through the Letta Decree and resulted in the unbundling of Eni.
Despite the unbundling of Eni and the full opening of the market, Eni remains
dominant. In January 2005 the AEEG sent a list of recommendations to the Italian
Government calling on them to introduce legislation to help further promote the
development of competition. These recommendations included the following:
Enis stake in Snam Rete Gas should be reduced to less than 5%.
Eni should end its holding in Stogit, (the monopoly storage operator) and that
consideration should be given to the merging of Stogit and Snam Rete Gas.
Snam Rete Gas should be given ownership of and transmission rights to the import
and export pipelines in Italy.
A proportion of Enis long term import agreements and production capacity should be
transferred to third parties.

The limit on the volume of gas Eni is allowed to import should be extended beyond the
current 2010 expiry date.
In October 2003, the regulator launched the Punto di Scambio Virtuale (PSV), a virtual
spot market trading hub, similar to the UKs NBP. Traded volumes and liquidity so far
remain modest though are likely to grow as the market liberalizes further. In October
2003, the regulator launched the Punto di Scambio Virtuale (PSV), a virtual spot
market trading hub, similar to the UKs NBP. Traded volumes and liquidity so far
remain modest though are likely to grow as the market liberalizes further (see
Wholesale Environment).
Eni has been ordered by the Antitrust Authority to undertake Italys first gas release
programme in order to stimulate competition. The release process began in early
September 2004 with Eni stating that it would release 62 mcm to 37 companies as a
first phase of a 4 year, 63 bcm release programme at the Austrian / Italian border.
Whilst the programme is a widely welcomed step towards introducing competition to
the market, various industry players in Italy have criticised the plan for doing little to
encourage new market entrants or benefiting end users. Opinions are also split
regarding the degree to which the gas release will bring much needed liquidity to the
PSV.
In July 2005 the AEEG allowed TPA to LNG terminals and related facilities, thus
making it easier for new players to enter the market. It has also undertaken various
courses of action to improve access to storage facilities for third parties.
The PSV (Punto di Scambio Vitruale, or virtual exchange point) came into existence on
October 1st 2003. Like the Dutch TTF, it is largely modelled on the NBP and allows
delivery to anywhere within its own system.
Activity at the PSV has been very modest since its inception owing to a lack of both
liquidity and counter-parties. However, the gas release programme ordered by the
Regulator, which will see Eni release a total of 23 bcm to 37 players over a 4 year
period, will potentially help boost liquidity.
Currently there are around 30 players at the PSV, of which around half are active on a
regular basis. The PSV is operated by Snam Rete Gas.

Infrastructure
Pipelines
The main transmission and import lines in Italy are owned by Eni through its Snam
Rete Gas subsidiary. Since late 2003 Third Party Access to the grid has been
governed by a Network Code, meaning that Italy was the first European country, apart
from the UK, to publish such a document. Nearly all imports are undertaken by Eni or
under contracts that were originally entered into by Eni but subsequently acquired by
other parties under the gas release programme. Distribution pipelines are operated at
a local level.
Pipeline gas is imported to Italy via various entry routes:
Trans-Mediterranean Pipeline (Transmed) imports the 21.5 bcm per annum imported
from Algeria. With a full capacity of 27 bcm, scope exists to increase imports via this
route.
TAG importing Russian gas to the north east of Italy via Austria. The 26 bcm line is
jointly owned by Eni and OMV. In February 2006, Eni announced plans to expand
pipeline capacity by 3.2 bcm per year from October 2008 and a further 3.3 bcm from
April 2009.
TENP is the conduit for Norwegian and Dutch gas into northern Italy.
Transitgas pipeline like TENP, Transitgas brings gas into the north of Italy at Passo
Gries.
TTCP transports Algerian gas to Italy through Tunisia. Eni also plans to increase the
capacity of this pipeline by 3.2 bcm per year from October 2008 and a further 3.3 bcm
from April 2009.
Greenstream is a relatively recent pipeline, completed in the last quarter of 2004. It
imports Libyan gas to Gela, on the southern coast of Sicily and then onwards to the
rest of the Italian grid. All of the projects 8 bcm capacity has been contracted 4 bcm
by Edison and 2 bcm each to GdF and Energia.
There are currently two significant pipeline projects currently under consideration:
Galsi - a consortium consisting of Sonatrach (36%), Edison (18%), Enelpower (13.5%),
Wintershall (13.5%), Hera (9%) and Progemisa (5%) and Sfirs (5%) are currently
undertaking an economic and technical feasibility study regarding the possibility of
linking the Hassi RMel gas field (Algerias main source of gas production) with the
Italian mainland via Sardinia through a 10 bcm, 1,500 km connection which will be built
in order to allow potential upgrading to 18 bcm. A decision on the pipeline's viability is

expected by the end of 2006. If the project materialises it will be become operational
by mid 2009. In March 2005 Edison agreed to purchase up to 4 bcm of gas through
the line, adding to the 2 bcm of delivery through the pipeline already agreed by the
government of Sardinia. If developed, Galso will bring the first gas supplies to Sardinia
(around 2 bcm per year) with the remaining gas going onwards to Italy.
Adriatic Link The possibility of a link between Greece and Italy has been examined
via a feasibility study completed in early 2005. This was followed in November 2005 by
the signing of a governmental agreement. Edison and Depa are understood to be
involved in the 8 bcm project, known as IGI. When developed, the link will provide
another way in which Greece could act as a transit country for eastern gas going to
western markets. Completion of the project is expected by 2010.
LNG infrastructure
Although currently playing only a small role in meeting Italys energy needs (around
8.8% of gas demand in 2003), the role of LNG is set to expand considerably over the
next decade. Italys only LNG regasification terminal is set to be supplemented by a
number of new projects at various stages of development.
Italy has just one LNG regasification terminal currently in operation, at Pagnigaglia,
with a capacity of approximately 3.5 bcm. However, a new plant in the Adriatic Sea, off
Rovigo, is currently under construction while other projects (Brindisi, Tuscany offshore,
Rosignano, Gioia Tauro, Taranto, Trieste onshore and offshore, and Porto Empedocle)
at various states of completion or different stages in the authorization process.


Table 25: Italy, LNG Infrastructure

Panigaglia Snam Rete Gas 3.6 bcm In pre-construction phase.
Expansion possible
Isola de Porte
Levante

Exxon-Mobil / Edison /
Qatar Petroleum
8 bcm
Construction began in
May 2005. Due on line
2007.

Brindisi BG 8 bcm
Attempting to gain
approval. Possible start up
late 2008.

Livorno Toscana
4 bcm

Possible start up in mid-
2007.

Expansion possible.
Trieste Gas Natural 8 bcm Construction due to begin
in 2006. Possible start up
in 2009.
Taranto Gas Natural 8 bcm Construction due to begin
in 2006. Possible start up
in 2009.

Syracuse Shell / ERG Power &
Gas

8 bcm At planning stage.
Construction possible by
2007 with initial deliveries
by


Storage sites

Table 26: Italy, Storage Sites

Name Type Capacity

Bordolano (not operational) Depleted Gas Field
Brugherio Depleted Gas Field 0.30
Cellino Depleted Gas Field 0.11
Conegliano Depleted Gas Field 0.54
Minerbio Depleted Gas Field 0.96
Ripalta Depleted Gas Field 2.36
Sabbioncello Depleted Gas Field 1.58
S.Salvo Depleted Gas Field 0.85
Sergano Depleted Gas Field 2.89
Settala Depleted Gas Field 2.00


Figure 61: Italy, Gas Infrastructure

Source: Snam Rete Gas D A T A M O N I T O R


CHAPTER 18 LATVIA
Market summary
Like its Baltic neighbours, Latvia is entirely dependent on Russian gas supplies.
Although heavily dependent on imported gas, which raises security of supply issues,
the existence of the Inculkans storage facility does give Latvia more security of supply
than is enjoyed by its Baltic neighbours.
The threat of supply interruptions is mitigated, at least to an extent, by Gazproms role
as a major shareholder in the countrys main gas company.
Supply disruptions in early 2004 allowed Latvia to (very temporarily) become a gas
exporter by utilising its storage facility. If plans to link the Baltic network to Finland
materialise, further scope will exist to become an exporter, albeit of already imported
gas and on a small scale.

Table 27: Latvia, Supply and Demand Balance


SUPPLY
Pipeline Imports
Russia 1.629 1.621 -0.5%


LNG Imports
0.000 0.000 -


Total Imports 1.629 1.621 -0.5%

Gross Supply 1.629 1.621 -0.5%

Exports
0.000 0.000 -



Net Supply 1.629 1.621 -0.5%

DEMAND
Residential 0.223 0.22 -0.5%

Total Demand 1.629 1.621 -0.5%


Supply overview
Oil and biomass are the dominant constituents of the Latvian energy mix, together
accounting for over 60% of primary energy demand. Despite this, gas has a
comparatively high level of penetration, accounting for 30% of the mix.
Like its neighbours, Lithuania and Estonia, the Latvian gas sector is entirely dependent
on Russian imports of gas. The majority of gas is supplied by Gazprom, though
smaller amounts of gas are supplied by Itera-Latvija through Gazprom owned
infrastructure.
In February 2004, Latvia temporarily supplied neighbouring Lithuania with small
volumes of gas taken from its storage site at Inculkans following a disruption to Baltic
supply arising from a financial dispute between Gazprom and Belarus. Following this
temporary export arrangement, the possibility of Latvia exporting gas to Lithuania on a
more permanent basis was raised through discussions between the leading gas
companies of the two countries.
In March 2005 plans were mooted by Itera Latvija for the construction of an LNG
terminal, though this development remains at the planning stage.
Demand overview
Gas consumption in Latvia is heavily concentrated in and around the capital city of
Riga, where around three quarters of national supply is consumed.
Demand is lead by the power generation and industrial sectors. The countrys three
largest gas consumers, Latvenergo (the national power company), Rigas Siltums (a
district heating company) and Liepajas Metalurgs (a metals processor), together
account for nearly half of total demand.
Expansion to the gas grid and increased consumption in the industrial sector mean that
gas demand is growing strongly compared with other more mature markets.

Figure 62: Latvia, Sectoral Demand

Residential
14%
Non
Residential
26%
Power
Generation
60%


The Lithuanian gas industry is regulated by the National Control Commission for Prices
and Energy which was formed by Presidential decree in 1997. Various aspects of
energy policy are also undertaken by the State Energy Agency, formed in 1993.
The National Energy Law of 1973, amended in 2002, set the framework for the
liberalisation of the gas and power markets as well as the promotion of renewable
energy.
The importation, transportation and distribution of gas has traditionally been dominated
by Lietuvos Dujos, the former state gas company which was privatised in 2001.
Currently the company is owned by E.ON Ruhrgas (38.9%), Gazprom (37.1%), the
Lithuanian State Property Fund (17.7%) and various individuals (6.3%). New entrants
to the market have decreased Lietuvos Dujos market share to around 29% of overall
consumption.
Since 1992, companies other than Lietuvos Dujos have been free to import gas to
Lithuania. The Energy Law of 2000 that came into effect on July 1st 2001 separated
gas consumers into regulated and non-regulated customers. The non-regulated
customers, namely power plants, consumers of more than 15 mcm per annum, and
distribution companies were eligible to choose their supplier. Separate tariffs exist for
regulated and non-regulated consumers.

In November 2003 a decree was passed lowering the eligibility threshold from 15 mcm
to 1 mcm. In the period preceding its joining of the EU on May 1st 2004, Lithuania
began the process of updating the 2000 Energy Law to take account of the terms of the
gas directive. As such all non-residential consumers were free to choose their supplier
from July 1st 2004. Full market opening will be implemented in accordance with the
July 1st 2007 deadline.
Infrastructure
Pipelines
Latvias pipeline infrastructure consists of around 1,200 kms of transit lines and 3,500
kms of distribution lines.
An interconnection exists with Lithuania, which was used in early 2004 to export gas
from the Inculkans storage site after an interruption of supplies from Russia.
Storage
Latvia has one storage site, known as Inculkans, with a capacity of 2.4 bcm. A
decision is expected in 2006 as to whether Latvijas Gas will proceed with plans to
increase capacity to 6.2 bcm. An on-going modernisation and improvement
programme is being undertaken at Inculkans with assistance from E.ON Ruhrgas and
DONG.
Gasum and Eesti Gaas of Estonia are in the early stages of developing plans to
construct a pipeline line between Helsinki and Tallinn. If this project materialises it will
allow Finland direct access to Inculkans. The project has a target start up date of
2010.

CHAPTER 19 LITHUANIA
Market summary
Lithuanias small, but growing, gas demand is entirely dependent on Russian imports.
The role of gas in the residential sector is particularly small at just 9% of total demand.
As the grid is expanded, we expect this role to grow, though increased penetration into
the residential sector is likely to be a very slow process.
The already strong role the power generation sector plays in gas demand will increase
further as nuclear capacity is decommissioned.

Table 28: Lithuania, Supply and Demand Balance


SUPPLY
Pipeline Imports
Russia 2.882 2.896 0.5%


LNG Imports
0.000 0.000 -



Gross Supply 2.882 2.896 0.5%

Exports
0.000 0.000 -



Net Supply 2.882 2.896 0.5%

DEMAND
Residential 0.257 0.258 0.5%

Total Demand 2.882 2.896 0.5%


Supply overview
Gas is playing an increasingly strong role in the Lithuanian energy mix and currently
accounts for 31% of primary energy consumption.
Nuclear power has long been a dominant component in Lithuanian energy
consumption, though gas is slowly backing this out of the energy mix.
With no indigenous production, LNG infrastructure or ability to import gas from
anywhere else, Lithuania is entirely dependent on Russia to meet its gas demand.
A new supply contract was signed with Gazprom in March 2004 under which former
state monopoly Lietuvos Dujos will import a flexible amount of gas equating to 70% of
total gas demand excluding volumes used by two of the countrys biggest industrial
consumers.
Demand overview
The power generation sector is the biggest consumer of gas in Lithuania accounting for
47% of total demand. The industrial and commercial sector is the other dominant gas
consumer, making up 44% of demand. One company in particular, fertiliser producer
AB Achema, accounts for around a quarter of national demand, thus heavily
influencing demand in the industrial sector.
Gas demand will rapidly increase as the gradual decommissioning of the Ignalina
nuclear power plant is compensated for by the conversion of parts of Ignalina to gas
and also by the increased use of gas fired power at the Visaginas power plant.
Depending on load factors, these two projects will add between 4 and 15 mcm to
annual demand levels. When the final phase of Ignalina is decommissioned in 2010,
incremental gas demand will exceed 105 mcm.

Figure 63: Lithuania, Sectoral Demand

Residential
9%
Non
Residential
44%
Power
Generation
47%


The Lithuanian gas industry is regulated by the National Control Commission for Prices
and Energy which was formed by Presidential decree in 1997. Various aspects of
energy policy are also undertaken by the State Energy Agency, formed in 1993.
The National Energy Law passed in 2002 legislated for a number of changes in the
energy sector including the privatization of Latvian Gaze, the liberalization of the gas
and power markets, and encouraging the use of renewable energy.
The importation, transportation and distribution of gas has traditionally been dominated
by Lietuvos Dujos, the former state gas company which was privatized in 2001.
Currently the company is owned by Ruhrgas (35.70%), Gazprom (34%), the Lithuanian
State Property Fund (24.36%) and various individuals (5.94%). New entrants to the
market have decreased Lietuvos Dujos market share to around 29% of overall
consumption.
Since 1992, companies other than Lietuvos Dujos have been free to import gas to
Lithuania. The Energy Law of 2000 that came into effect on July 1
st
2001 separated
gas consumers into regulated and non-regulated customers. The non-regulated
customers, namely power plants, consumers of more than 15 mcm per annum, and
distribution companies were eligible to choose their supplier. Separate tariffs exist for
regulated and non-regulated consumers.

In November 2003 a decree was passed lowering the eligibility threshold from 15 mcm
to 1 mcm. This significantly increased the number of eligible customers which,
according to the latest information available, amounts to less than 25 customers.
In the period preceding its joining of the EU on May 1
st
2004, Lithuania began the
process of updating the 2000 Energy Law to take account of the terms of the gas
directive.
Infrastructure
Pipelines
The Lithuanian grid is directly linked to Russian export lines via an interconnection at
Minsk in Belarus. Interconnections to Latvia and the Russian enclave of Kaliningrad
run through Lithuania.
Lithuanias pipeline system is also used to transit gas to the Russian enclave of
Kaliningrad. In mid 2004 Lietuvos Dujos began construction work on an additional
branch line to supplement the existing one in order to increase exports to the region
from the current level of 600 mcm to in excess of 1 bcm.
Construction work is also underway by Lietuvos Dujos to build a new pipeline to the
town of Visaginas, as well as to the Ignalina nuclear power plants which, as it is being
decommissioned, is being converted to use natural gas.
Security of supply in Lithuania is significantly compromised by the fact that the country
is entirely dependent on Russia for its gas supplies. This lack of security of supply was
shown in February 2004 when a dispute between Gazprom and the Government of
Belarus resulted in flows through Belarus being interrupted by Gazprom, consequently
affecting Lithuania imports. Although the shortfall was made up by a rapid deal to
import Russian gas via Latvia, the interruption highlighted the increasing need for an
expansion to existing Lithuanian storage capacity which totals just 20 mcm, sufficient to
cover only around 2 weeks of supply.
At the time of the disruption, Lietuvos Dujos was already undertaking an investigation
into the possibility of developing a storage site near Vaskai. In addition to this,
Lithuanian oil company Geonafta and gas utility Dujotekana began cooperating in April
2004 on a feasibility study relating to a proposed US$120 million storage site. The
result of the feasibility studies were completed in late 2004, but financial issues have
resulted in delays.

CHAPTER 20 LUXEMBOURG
Market summary
With a population of less than half a million people and an economy based on services
rather than industry, the Luxembourg gas market in unsurprisingly very small in size.
Demand is heavily concentrated in the power generation and non-residential sectors.
The power generation sector has been expanding at the greatest rate in recent years,
far outstripping demand growth in the other sectors.

Table 29: Luxembourg, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Pipeline Imports
Belgium 0.603 0.628 4.3%
Germany 0.600 0.733 22.1%


LNG Imports
0.000 0.000 -


Total Imports 1.203 1.361 13.2%

Gross Supply 1.203 1.361 13.2%

Exports
0.000 0.000 -


Statistical Diffs -0.002 0.000 -

Net Supply 1.205 1.361 13.0%

DEMAND
Residential 0.267 0.302 12.9%

Total Demand 1.205 1.361 12.9%


Supply overview
With no indigenous production resources, Luxembourg is entirely dependent on
imported gas. In 2004 imports were made from Belgium and Germany in
approximately equal volumes.
With no indigenous production, or indeed any prospect of any, Luxembourg will
continue to be entirely import dependent into the future.
Demand overview
Demand is heavily concentrated into the industrial and power sectors which together
account for more than three quarters of total demand.
Gas use in Luxembourg was boosted in 2002 when the Esch-sur-Alzette CCGT,
Luxembourg's first gas fired plant, came on line. In addition to creating an additional
source of gas demand, the facility currently supplies around 20% of Luxembourgs
power, thus reducing dependency on imported power supplies.

Figure 64: Luxembourg, Sectoral Demand

Power
Generation
41%
Non
Residential
37%
Residential
22%



Figure 65: Luxembourg, Historical Sectoral Demand

0.0
0.5
1.0
1.5
b
c
m
1970 1976 1982 1988 1994 2000

The Luxembourg gas market is regulated by the Institut Luxembourgeois de Rgulation
which also oversees the electricity and telecommunications markets.
The market is governed by the Gas Law of 6 April 2001, a Ministerial decree in August
2003 and subsequent amendments which have legislated for market opening in line
with the terms of the gas directive and transferred the required legislation onto the
statute books.
The Socit de Transport de Gaz (SOTEG) is the key transmission company and
importer of gas. The company is owned by the Luxembourg Government (21%),
Ruhrgas (20%), Saar Ferngas (10%), Arbed (20%), Cegedel (19%) and SNCI (10%).

Infrastructure
Pipelines
Luxembourg has two interconnections with Belgium and one each with France and
Germany.
The transmission system is owned and operated by SOTEG. Article 24 of the Gas Law
gives the company the right to refuse TPA to the network if it believes granting the
access would interfere with its public service obligations or if insufficient capacity is
available.
TPA to the SOTEG network is charged on a postalized basis with an access fee
payable. Balancing is required on a daily basis with an hourly tolerance of 50% allowed
based on daily nomination volumes. A daily balancing tolerance of 5% is allowed
during summer and 3% during winter, after which penalty clauses are invoked.

Figure 66: Luxembourg, Gas Grid

Source: SOTEG / Datamonitor D A T A M O N I T O R

CHAPTER 21 MALTA
Market summary
Malta is not currently connected to any natural gas infrastructure and has no
indigenous production, thus meaning it does not currently consume natural gas.
Instead, it is a significant user of LPG.
Maltas 571 MW of power generation capacity is run on distillate fuel oil.
Some limited E and P activity has been undertaken in the past, though this was
hindered by a territorial dispute with Libya. Currently exploration activity is being
undertaken by MedOil and Anadarko
Theoretically, Malta could become a gas consumer by building an interconnection with
the Greenstream pipeline which runs between Libya and Sicily. However, the
economics of this are likely to be difficult to make viable given the very small market
potential. The most likely possibility of Malta becoming a gas consumer would be if
commercially viable reserves were found within its territorial boundaries.

CHAPTER 22 THE NETHERLANDS
Market summary
Gas plays a key role in the Dutch primary energy mix, partly due to the presence of
energy intensive industry such as chemicals, metal processing, refining and certain
forms of agriculture.
Significant indigenous reserves mean that the country enjoys a position as a net gas
exporter.
Aside from being a significant gas exporter, the Netherlands plays a crucial role as a
transit state and also as a gas trading hub.

Table 30: Netherlands, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 72.896 85.983 18.0%
Pipeline Imports
Belgium 4.366 1.326 -69.6%
Germany 9.015 7.792 -13.6%
Norway 8.474 6.925 -18.3%
UK 3.633 2.808 -22.7%


LNG Imports
0.000 0.000 -


Total Imports 25.488 18.851 -26.0%

Gross Supply 98.384 104.834 6.6%

Exports
Belgium 8.810 8.064 -8.5%
France 7.677 9.845 28.2%
Germany 21.757 24.503 12.6%
Italy 8.428 9.676 14.8%
Switzerland 0.816 0.870 6.6%
UK 0.623 0.602 -3.4%



Net Supply 50.260 51.302 2.1%

DEMAND
Residential 11.190 11.422 2.1%

Total Demand 50.260 51.302 2.1%


Supply overview
Current gas reserves are around 1,494 bcm, equating to a Reserves to Production
ratio of 22 years.
Dutch gas has long played a key role in meeting European gas demand. The
Groningen field is central to the Dutch gas production industry, not only as a result of
its large size and the fact that it has the lowest technical cost of gas in Europe, but also
as a result of its high swing flexibility.
In 2004 Groningen produced around 32 bcm, 37% of total national output. In the past
it has produced as much as half of national production.
Groningen gas has a low calorific value and a 14% nitrogen content. To accommodate
this, it has to be shipped through dedicated pipelines and burnt using a specific type of
burner tip. Groningen gas can be blended with high calorific value gas, and this
operation is undertaken at one of Gasunies three blending plants.
The majority of the Netherlands reserves are accounted for by Groningen. The
countrys main producer is Nederlandse Aardolie Maatschappij (NAM) which is jointly
owned by Shell and ExxonMobil. The majority of gas is then purchased by Gasunie
(50% owned by the Dutch Government and 50% by Shell and ExxonMobil) for onward
distribution.
In order to prolong the life of Groningen and protect its valuable swing capacity, the
Government has placed a cap on the fields production and also aims to encourage the
development of smaller and more expensive fields.
The majority of other fields produce high calorific gas from reserves located offshore.
Operators of these fields include ChevronTexaco, Gaz de France, Wintershall and
Total.


Figure 67: Netherlands, Gas Production

0
10
20
30
40
50
60
70
80
90
100
110
1
9
6
0
1
9
6
4
1
9
6
8
1
9
7
2
1
9
7
6
1
9
8
0
1
9
8
4
1
9
8
8
1
9
9
2
1
9
9
6
2
0
0
0
2
0
0
4
B
C
M


Figure 68: Netherlands, Imports By Source

Belgium
8%
Germany
49%
Norway
43%


Demand overview
At 0.6%, annualised average demand growth in the Netherlands over the past decade
has exhibited much less spectacular increases than that seen in other, less mature,
markets.
As such, the power generation sector is the only market to have increased in size over
the past decade, having averaged 3% growth over the period compared with 0.1% and
0.5% annualised declines in demand in the non-residential and residential sectors
respectively.
With a mature market, and high levels of gas penetration into the primary energy mix,
the scope for future demand growth would appear to be limited.

Figure 69: Netherlands, Sectoral Demand

Power
Generation
32%
Non
Residential
46%
Residential
22%



Figure 70: Netherlands, Historical Sectoral Demand

0
10
20
30
40
50
60
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

The Dutch gas sector is regulated by the Dienst uitvoering en toezicht Energie (DTe), a
part of the Netherlands Competition Authority (the NMa).
The Netherlands adopted the terms of the first Gas directive into national law through
the passing of the 1998 Gas Act, with the terms of the second directive adopted by
legislation passed on June 29th 2004. The Gas Act 2000 legislated for negotiated Third
Party Access to transmission infrastructure and regulated Third Party Access for
distribution.
The Dutch market officially became 100% open on 1st July 2004 with the DTe granting
in excess of 50 licenses to new market entrants wanting to supply households and
small businesses, the last category of consumers to be opened up to competition.
In June 2004 the DTe announced three new measures aimed at making the market
more transparent. These were:
The inclusion of gas conversion costs (the costs associated with converting high
calorific gas to low calorific gas) within transport tariffs.
A ruling that Gastransport Services, the transmission arm of Gasunie, must introduce a
new balancing regime by 2006.

A requirement for Gastransport Services to provide gas suppliers with information on
historical and future import capacity availabilities.
Before liberalisation, the Dutch gas sector was dominated by Gasunie. However, this
dominance has since begun to be eroded. Very large consumers of gas have been
able to choose their supplier since 1998, resulting in Gasunie losing market share to
other players.
In 2002 Gasunies distribution and trade arms were operationally unbundled. In July
2004 this process was completed with the legal unbundling of the two divisions in order
to comply with the terms of the second directive. Gasunies former transmission arm,
Gas Transport Services, was replaced by a new company, Gas Transport Services
B.V, which has taken on the role as transmission system operator.
In 2005, the DTe published a decision concluding that Gasunie Trade & Supply has a
dominant position on a large part of the market for flexibility services, and explained
how GTS should structure the supply of these services in order to stimulate the
operation of competition, This regulation will apply to the services in which Gasunie
Trade & Supply has a dominant position from 2006 up to and including 2008, after
which the situation will be reviewed.
The Dutch TTF (Title Transfer Facility) market is largely modelled on the UKs NBP and
was launched in November 2002. Although volumes and liquidity at the TTF are much
lower than both the NBP and Zeebrugge, it has seen much more activity than the
nearby Bunde hub. Like the NBP, the TTF is a virtual hub allowing delivery anywhere
within the TTF system rather than at a specific geographic location.
The TTF is operated by Gas Transport Services B.V, a company created from the legal
unbundling of the former Gasunie subsidiary Gastransport Services. Gas Transport
Services B.V is also the Dutch transmission system operator. Trading activity on the
TTF is governed by a network code similar to that in the UK. Currently there are 40
registered players trading at the TTF.
At the end of May 2004, Gas Transport Services B.V and the APX (previously known
as the Amsterdam Power Exchange) signed a Memorandum of Understanding
concerning the setting up of a screen based Dutch gas exchange focused around the
TTF. The exchange, known as APX Gas NL, was launched on February 3rd 2005 and
currently has 15 registered members.
Plans by Endex to develop a gas futures contract have been postponed until at least
2006 owing to a lack of interest amongst traders.

Infrastructure
Pipelines
The majority of imports arrive in the Netherlands via the Gasunie grid. The only
exception to this is gas imported via Essents Zebra pipeline, which is used to supply
gas to its distribution business in the Zeeland area with gas from the UK sent via the
UK-Belgium Interconnector.
Gas pipelines in the Netherlands connect to terminals at Callantsoog, Uithuizen, Wijk
aan Zee, and Maasvlakte. In July 2004 the Netherlands began importing gas from
Denmark via a newly constructed 100 kilometre pipeline between the Tyra West field in
the Danish North Sea to the NOGAT pipeline which then ships the gas to den Helder
on the Dutch coast. The pipeline is operated by Maersk and is owned by the Danish
Underground Consortium (DONG 50%, Shell 23%, Mrsk 19.5%, and ChevronTexaco
7.5%). Capacity rights in the pipeline are allocated according to the partners
shareholdings in the DUC.
A consortium of Gasunie (60%), E. On Ruhrgas (20%) and Fluxys (20%) are in the
process of constructing a link between the Netherlands and the Bacton terminal in the
east of the UK to export Dutch gas. The Bacton to Balgzand project, known as BBL,
will have sufficient capacity to export up to 16 bcm per annum of low calorific
Groningen gas, equivalent to about 14 bcm of high cal gas.
Storage
Traditionally, the swing flexibility provided by the Groningen field has allowed a lesser
emphasis and priority to be placed on investment in storage capacity. However, the
decline of Groningen gas, and resultant decline in swing flexibility, means that storage
is set to play an increasingly important role in the future.
Table 31: Netherlands, Storage Sites
(mcm / day)

Alkmaar Depleted Gas Field BP 500 36
Grijpskerk Depleted Gas Field NAM 1500 55
Norg Depleted Gas Field NAM 3000 51
Maasvlakte LNG Peak Shaver Gasunie 78 31



LNG
In November 2005 Gasunie and Vopak announced their decision to construct a 6 to 8
bcm per year LNG terminal at Maasvlakte in Rotterdam. The project, known as GATE
(Gas Access to Europe), is expected to be ready to accept cargoes by 2010 following
the commencement of construction work in 2007. The decision to build the terminal
represents further Dutch moves towards LNG. Currently ConocoPhillilips and Essent
are exploring the feasibility of developing a project at Eemshaven whilst Petroplus has
begun to develop a terminal at Rotterdam known as LionGas, which is due to become
operational in late 2009.


CHAPTER 23 NORWAY
Market summary
Norway is a major gas producer, though has surprisingly low consumption levels. At
less than 11%, gas plays only a minor role in the countrys primary energy mix.
Production levels continue to grow and, in 2004 reached a record 82 bcm. The vast
majority of gas production is exported with Norway currently the source of around 16%
of EU 25 consumption.
Norwegian exports to the UK will grow significantly following completion of the
Langeled pipeline. Up to 20 bcm, around a fifth of current UK demand levels, will
potentially be delivered through the pipeline from the Ormen Lange field. The first
phase of the project is due on line in late 2006 with full completion expected by
October 2007.
The Government plays a significant role in the gas industry both at a regulatory level
and through its ownership stakes in the countrys main gas industry players.


Table 32: Norway, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 77.310 82.340 6.5%
Pipeline Imports

LNG Imports
0.000 0.000 -



Gross Supply 77.310 82.340 6.5%

Exports
Belgium 6.549 7.500 14.5%
Czech Republic 2.498 2.103 -15.8%
Denmark 0.114 0.074 -35.1%
France 13.334 15.931 19.5%
Germany 24.826 24.720 -0.4%
Italy 5.480 5.712 4.2%
Netherlands 6.048 6.027 -0.3%
Poland 0.416 0.466 12.0%
Spain 2.423 2.373 -2.1%
UK 8.204 10.952 33.5%

Statistical Diffs 2.837 0.937 -67.0%

Net Supply 4.581 5.545 21.0%

DEMAND
Residential 0.002 0.002 21.0%

Total Demand 4.581 5.545 21.0%

Source: Datamonitor . IEA D A T A M O N I T O R

Supply overview
Apart from the UK, Norway is the European regions largest gas producer. Production
in 2004 reached its highest ever level of 82 bcm. Given Norways low utilisation of gas,
the vast majority of Norwegian gas production is exported and accounts for around
16% of EU 25 consumption.
Over the past decade production has grown at an annualised rate of over 10%. With
an R/P ratio of over 30 years and ambitious plans to expand E and P activity,
production is likely to continue growing in the foreseeable future. Currently Norway
only produces natural, rather than liquefied, gas. However this situation will change in
2007 when the Snhvit field starts producing gas which will be liquefied at the
Hammerfest liquefaction plant.

Figure 71: Norway, Gas Production

0
20
40
60
80
100
1974 1978 1982 1986 1990 1994 1998 2002
B
C
M



Figure 72: Norway, Gas Export Destinations

Gas Export Desti nati ons
France
21%
UK
14%
Poland
1%
Netherlands
8%
Italy
8%
Germany
32%
Spain
3%
Belgium
10%
Czech
Republic
3%
Denmark
0.1%


Demand overview
At just 10.5% of primary energy demand, gas has made a surprisingly low penetration
into the energy mix given Norways role as a significant gas producer. At less than 6
bcm absolute demand levels are modest. Over the past decade demand growth has
averaged 3.7%.
Gas has only been used in Norway since 1974 when it developed a role in the non-
residential sector. Consumption of gas was constrained to this sector until 1993 when
gas found a marginal role in power generation. The residential distribution grid
remains very small and gas has only been used by a small number of households
since 2001.

Figure 73: Norway, Sectoral Demand

Power
Generation
1.1%
Non
Residential
98.8%
Residential
0.04%


Figure 74: Norway, Historical Sectoral Demand

0
1
2
3
4
5
6
b
c
m
1974 1978 1982 1986 1990 1994 1998 2002


Government control and influence in the Norwegian energy sector, both at a corporate
and regulatory level, is high. At a corporate level the government owns a 71% stake in
Statoil, the main energy producer in the country and controller of around 60% of
national production. One of the other main energy players in the country, Norsk Hydro,
is 44% owned by the government.

Since 1985 the government has also exerted an influence over the sector through the
State Direct Financial Interest (SDFI). Under the terms of the SDFI the government
invests in upstream projects and in return receives a proportional return similar to that
received by energy industry players investing in the same projects.
Despite the high degree of government involvement in the energy sector there is still a
significant role played by foreign oil majors. These companies, who are legally
required to partner with Statoil, include BP, ConocoPhillips and ExxonMobil.
The Ministry of Petroleum and Energy has overall responsibility for overseeing the
Norwegian gas market. Within the Ministry there are two main departments the
Norwegian Petroleum Directorate (NPD) and the Petroleum Safety Authority. The
NPDs main role is to administer E and P activities from a legal and regulatory
perspective. The PSA oversees a variety of health and safety issues within the
industry.
The government also owns 100% of Gassco which administers key parts of the
national gas network. Gassco itself is the operator of Gassled, a joint venture of
energy producers, which operates the country's gas export infrastructure.
Key pieces of legislation governing the sector are the Petroleum Act and Regulations
(Act 26 November 1996 No. 72; Regulation 27 June 1997 No. 653) which relates to
upstream access to pipelines and the organisation of the gas sector in general.
Downstream legislation is covered by the Natural Gas Act and Regulation (Act 28 June
2002 No. 61; Regulation 14 November 2003 No. 1342).
Gas exploration and production licenses are generally awarded through licensing
rounds. The most recent of these licensing rounds, the 19th so far, was held in
November 2005. In this round 24 applications were received, the results of which will
be known by the end of the first quarter of 2006.
Infrastructure
The nature of the Norwegian gas supply / demand balance means that the onshore
distribution grid remains limited whilst the transmission and export systems are well
developed.
In 2001 the government recognised the importance of having a neutral and
independent gas transport operator and created Gassco to operate the pipeline
system. Prior to that, individual pipelines were owned and operated by various
upstream players.

Gassled is owned by a number of oil and gas companies and by the government
through its ownership of Petoro. Gassled serves a role as the formal owner of the
Norwegian gas transport infrastructure.
Key Norwegian gas pipelines are as follows
Franpipe connects the Draupner platform with Dunkirk on the northern French coast.
Franpipe has a 16 bcm capacity and currently facilitates the export of 11.6 bcm of
Norwegian gas each year.
Zeepipe - an offshore line from the Norwegian North Sea to Zeebrugge where it
connects with various other transit lines and interconnects with the Fluxys transmission
grid in Belgium.
Europipe 1 and 2 exports gas into Dornum, Germany.
Norpipe exports gas into gas Emden, Germany.
Langeled - Norwegian exports to the UK will be significantly increased following
completion of the Langeled pipeline. Up to 20 bcm of gas from the new Ormen Lange
field will be shipped through the pipeline. The projects first phase will supply gas via
the Sleipner platform from late 2006, with the second phase supplying gas from Ormen
Lange by October 2007.

Table 33: Gassled Shareholders
Company
Share
Petoro (Norwegian Govt) 38.29%
Statoil 20.38%
Norsk Hydro Produksjon 11.13%
Total E&P Norge 9.04%
ExxonMobil E&P Norway 5.18%
Norske Shell Pipelines 4.68%
Mobil Development
Norway
4.58%
Norsea Gas 3.02%
Eni Norge 1.67%

Source: Ministry of Petroleum and Energy D A T A M O N I T O R


Figure 75: Norway, Gas Export Infrastructure

Source: Norwegian Ministry for Petroleum and Energy D A T A M O N I T O R

CHAPTER 24 POLAND
Market summary
Poland is very heavily dependent on imports, particularly from Russia, to meet its gas
needs.
Gas plays a minor role in the national energy mix, accounting for just 13% of primary
energy consumption. Abundant reserves mean that the dominant fuel is currently coal.
Indigenous production levels are low and meet less than 40% of consumption.
Production in recent years has remained relatively constant.
The pace of liberalisation has been slow, with various delays and legislative issues
complicating the process.


Table 34: Poland, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 5.626 5.957 5.9%
Pipeline Imports
Germany 0.440 0.407 -7.5%
Norway 0.513 0.506 -1.4%
FSU 8.247 9.050 6.2%


LNG Imports
0.000 0.000 -



Gross Supply 14.826 15.920 7.4%

Exports
Germany 0.047 0.046 -2.1%



Net Supply 14.797 15.491 4.7%

DEMAND
Residential 4.023 4.212 4.7%

Total Demand 14.797 15.491 4.7%


Supply overview
With indigenous production meeting less than 40% of demand, gas imports play a key
role in Polish supply. Current reserves are estimated at 116 bcm giving a reserves to
production ratio of 26 years. Producing fields are mainly located in the south and west
of the country. Production has remained flat in recent years, though began to buck this
stable trend by increasing nearly 6% between 2003 and 2004. Funds from the
privatisation of POGC in September 2005 have been allocated to increasing
indigenous production levels.
Russian gas, the largest source of Polish imports, is imported under a 25 year Take or
Pay contract signed in 1996. In late 2003 POGC and Statoil agreed to cancel a deal
signed in 2001 under which Poland would receive up to 76 bcm of gas between 2008
and 2024 delivered through a newly constructed pipeline. In early 2004 a
Memorandum of Understanding was signed concerning the possibility of Statoil
supplying between 1 and 2 bcm per annum to POGC through a new pipeline, however
the proposal has since been abandoned. Plans are however underway to develop an
LNG terminal (see Infrastructure).

Figure 76: Poland, Gas Production

0
1
2
3
4
5
6
7
8
9
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B
C
M



Figure 77: Poland, Imports By Source

Germany
4%
Norway
5%
FSU
91%


Demand overview
Although it makes up just 10% of total demand, growth in the power generation sector
has far outstripped that in other sectors. Various plant projects over the past decade
have resulted in gas demand in power generation growing by an average of 23% in the
decade to 2004. This growth, although starting from a very small base, has been
sustained with 16% annualised demand growth seen since 2000.
Considerably lower demand growth levels have been seen in the non-residential and
residential sectors which have grown by 2.6% and 0.6% per annum respectively since
2000.

Figure 78: Poland, Sectoral Demand

Power
Generation
10%
Non
Residential
63%
Residential
27%


Figure 79: Poland, Historical Sectoral Demand

0
5
10
15
20
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004


The Polish energy sector is regulated by the Urzd Regulacji Energetyki or URE which
was formed under the terms of the 1997 Energy Act.
Poland had originally applied for a derogation until 2006 in the requirement to open the
gas market according to the terms of the gas directive. However this request was
refused by the EU and the Polish non-household market (around 17,000 customers)
was theoretically opened from July 1st 2004. Plans to open up the full market 2 years
ahead of schedule were abandoned following legislative delays and the market will
now be fully open from the July 1st 2007 deadline.
The Polish gas sector is currently dominated by POGC (also known as PGNiG), the
state- owned oil and gas concern formed in 1976. In August 2002 the Government
adopted a plan to restructure and privatise POGC. The original floatation was
postponed owing to a lack of interest, though finally took place in September 2005.
Gas distribution is now carried out by 6 regional distribution companies, unbundled
from POGC in January 2003. In early July 2004 the company launched a legally
unbundled gas transmission subsidiary known as Gaz System in order to comply with
the terms of the gas directive.
Infrastructure
Pipelines
The Yamal-Europe pipeline transits Russian gas to Germany via Belarus and Poland.
Yamal is currently the only conduit for Russian gas into western Europe that is not
routed through the Ukraine. The Polish section of Yamal is 684 kms in length and is
operated by EuRoPol Gaz, a company jointly owned by POGC and Russias Gazprom.
In July 2005 two new compressor stations were opened on the line increasing its
capacity from 22.8 bcm per year to 29 bcm.
Plans for a second Yamal pipeline have been mooted but no definite plans have yet
been developed to progress the project.
Polands heavy reliance on Russian gas has raised a number of security of supply
issues. The vulnerability of Poland to supply disruptions was highlighted in February
2004 when supplies to Poland were interrupted following a dispute between Gazprom
and Belarus.

Various initiatives have been raised in recent years in an attempt to diversify Polish gas
supplies and thus boost security of supply. The first of these plans was to construct a
pipeline between Norway and Poland, though this plan has faltered due to questionably
viable economics. More recently discussions have taken place regarding the
possibility of importing LNG. GdF and PGNiG are understood to have begun a
feasibility study, the results of which are due in late 2006.
In 1999 E.ON Ruhrgas and Bartimpex were developing proposals to build a pipeline
between Bernau in Germany and Szczecin in Poland, though the plan stalled owing to
a lack of support by both the Polish government of the time and PGNiG. In early 2005
the concept of the link between the two countries re-emerged following an agreement
between PGNiG and VNG for a 1.5 bcm per annum pipeline, though it remains unclear
when the project will be developed.
In September 2005 Naftohaz Ukrayiny of the Ukraine and POGC completed a pipeline
link between Ustilug in the Ukraine and Hrubieszow in south-eastern Poland. Around
70 mcm will be supplied each year until 2007, after which the flow will increase to 200
mcm.

Figure 80: Poland, Gas Transmission System

Source: POGC D A T A M O N I T O R

CHAPTER 25 PORTUGAL
Market summary
Gas is a very new fuel to the Portuguese energy mix. Consumption began in 1997 with
the arrival of Algerian gas delivered via Spain.
Consumption is largely confined to the power generation and industrial sectors, though
as transmission and distribution infrastructure is expanded, consumption will also grow
in other sectors.
Demand is growing rapidly and, between 2003 and 2004, grew by 25% - the highest
rate of year on year growth in Europe.
A lack of indigenous resources makes Portugal entirely dependent on imports for its
gas supply. Until late 2003 all gas imports were delivered via Spain due to a lack of
suitable infrastructure in Portugal, although this situation has since changed with the
completion of the Sines LNG terminal.
Despite being a gas market very much in its infancy demand growth is strong, and
likely to remain strong, in the short to medium term.

Table 35: Portugal, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Pipeline Imports
Algeria 2.481 2.376 -4.2%


LNG Imports
Nigeria 0.545 1.384 153.9%


Total Imports 3.026 3.760 24.3%

Gross Supply 3.026 3.760 24.3%

Exports
0.000 0.000 -


Stock Change -0.008 -0.001 -

Net Supply 3.017 3.758 24.6%

DEMAND
Residential 0.181 0.225 24.6%

Total Demand 3.017 3.758 24.6%


Supply overview
Portugal does not have any direct pipeline connections with any gas exporters, thus all
pipeline imports come via Spain.
Other than small volumes of Nigerian LNG, the only source of gas imports is Algeria.
Gas is imported into Spain via the Pedro Duran Farell pipeline (formerly known as the
GME or Maghreb Europe line) and then re-exported into Portugal at Badajoz.
The construction of the Sines LNG terminal (see Infrastructure section) gave an added
element of security of supply and became the country's first direct link with gas
exporters.

Figure 81: Portugal, Imports By Source

Nigeria (LNG)
37%
Algeria
63%


Demand overview
Portugal has only been consuming gas since 1997. As an emerging market starting
from a very low base of absolute consumption, demand growth rates have been very
strong in the past few years with total gas demand growing by an average of 57% per
year since 1997. These high growth rates hide the fact that the market is still very
small at less than 4 bcm.
Despite demand growth of around 97% per annum since 199, gas penetration into the
household sector is still very low at just 6% of demand. As the distribution grid
continues to expand, this proportion will grow rapidly in the short to medium term.
The decision in February 2005 to allow another 2,868 MW of gas fired power capacity
in the country will be a key element driving (future) continued demand growth in the
power generation sector.

Figure 82: Portugal, Sectoral Demand

Residential
6%
Non
Residential
41%
Power
Generation
53%


Figure 83: Portugal, Historical Sectoral Demand

0
1
2
3
4
b
c
m
1997 1998 1999 2000 2001 2002 2003 2004

In April 1999 the Government passed Decree Law No. 137-A/99 which created
Petrleos e Gs de Portugal (known as Galp) as a holding company to manage the
countrys oil and gas industries. The original main shareholders in Galp were the
Portuguese government (25.77%), Eni (33.34%), Energias de Portugal (EdP)
(14.27%), REN (18.3%), Iberdrola (4%), Parpblica (4.23%) and Setgs and Portgs
(0.04%) each.
Galp was given shares in Petrogal (the oil company), Gs de Portugal (the gas
distribution) and Transgs (the gas importer and transmission company). In April 2003
a plan was approved by the Government to demerge and privatise Galp through
transferring all of the companys gas activities (including the gas transmission business
of Transgs) to Gs de Portugal, with Galp retaining Petrogals overseas oil production
assets and the countrys two oil refineries.
Agreement amongst the shareholders was reached in early 2004 under which EdP, Eni
and Rede Elctrica Nacional (the Portuguese power grid operator) agreed to purchase
100% of the new incarnation of GdP. Under the terms of the proposed deal, Rede
Elctrica Nacional would exit the consortium after 12 months in return for being given
the Transgs business, with the subsequent shareholdings being given to EdP (51%)
and Eni (49%).

Further to this, Eni and EdP also agreed to sell their holdings in Galp to a state-owned
investment firm, whilst in July 2004 the Portuguese government agreed to sell its
33.34% holding in Galp to an investment consortium.
In early 2005 the European Commission blocked the EdP and Eni acquisition of Gas
de Portugal on the grounds that it would result in undue market concentration and was
anti-competitive. In October 2005 signals from within the company proposed an IPO of
between 25% and 30% of Galp before the middle of 2006. Subsequently in December
2005, EdP sold its 14.3% stake in Galp to Americo Amorim, a Portuguese investment
company. Americo Amerim has subsequently increased its share in Galp to 24.7%.
On the 31st of December the Portuguese government reached an agreement with Eni
regarding further share purchases in Galp which will now not exceed 33% (Enis stake
is currently 24.7%, equal to that of Americo Amorim). In January 2006, Iberdrola
announced that they would be divesting their 4% share in Galp, but neither Eni nor
Americo Amerim will be purchasing it.
Gas distribution is undertaken by six regional and four local gas distributors in which
Galp has shareholdings. In February 2005 EdP acquired 59.55% of Portgas and a
10.11% stake in Setgas by exercising EUR 153.3 million of options.
Infrastructure
LNG
A lack of both import pipelines and LNG regasification terminals meant that since
Portuguese gas consumption began, all supplies had to be imported via Spain. This
included LNG which was regasified at the Huelva terminal in southern Spain and then
shipped by pipeline to Portugal.
When the Sines LNG terminal in southern Portugal became operational in October
2003, the reliance on Spanish infrastructure was reduced, thus boosting both security
and diversity of supply. Sines has a capacity of 5.8 bcm, close to half of current
demand levels.
Storage
Due to its complete dependence on imported gas, storage is a key issue in the future
development of the Portuguese gas market if security of supply is to be achieved, and
to facilitate the need for swing gas resulting from the growth in residential demand.
Currently the countrys only storage capacity is in the form of 240,000 cubic metres of
LNG storage at the Sines terminal. However, an underground salt cavern facility at
Carrico near the city of Pombal in central Portugal is currently being developed. The

projects initial 80 mcm of capacity is due to become operational by the end of 2005
with the remaining 220 mcm due online in phases before 2007.
In line with other parts of the world, gas fired power generation is playing an important
part in the development of the Portuguese gas industry and will continue to do so as
gas supplies become more widely available throughout the country. Gas-fired power
generation capacity was increased in April 2004 with the inauguration of the first of
three turbines at the Centraltejo power station at Carregado. Another two turbines will
be coming on line by March 2006, taking the plants total capacity to 1,200 MW.


CHAPTER 26 ROMANIA
Market summary
Although production has been declining in recent years, Romania remains the largest
producer of gas in the Central and Eastern European region. To compensate for the
decline in production, significant imports are made, mainly from Russia.
Demand growth has been erratic in recent years with consumption levels peaking in
1984 though subsequently entering a period of prolonged decline. Current demand
levels are less than half the levels seen as recently as 1990.
Market opening began in 2001 with around half the market now open to competition.
Full market opening is expected by July 2007.
A number of infrastructure developments are currently at various stages of
development including plans to double storage capacity and to develop new cross-
border interconnections with the Ukraine and Bulgaria.


Table 36: Romania, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 12.60 13.20 4.8%
Pipeline Imports
Russia 5.30 4.60 -13.2%
Germany 0.50 1.30 160.0%


LNG Imports
0.00 0.00 -



Gross Supply 18.40 19.10 3.8%

Exports
0.00 0.00 -



Net Supply 18.30 18.80 2.7%

DEMAND
Residential 3.38 3.48 3.0%

Total Demand 18.30 18.80 2.7%

Source: Datamonitor / National Sources / BP Statistical Review D A T A M O N I T O R

Supply overview
Romania is a significant producer of gas, so much so that is the largest producer in the
Central and Eastern European region by a significant margin. Current reserves are
estimated at around 300 bcm giving an R/P ratio of 22 years. Production reached a
peak in 1982 and has since been declining significantly. Over the past decade
production decline has averaged 3.1% per year.
The production decline has meant that imports, particularly Russian, have played an
increasing role in recent years thus reducing gas self sufficiency. In late 2005 the
supply contract with Russia held by Wintershall was extended from the previous 2012
expiry date to 2030.

Figure 84: Romania, Gas Production

0
5
10
15
20
25
30
35
40
1970 1974 1978 1982 1986 1990 1994 1998 2002
B
C
M


Figure 85: Romania, Import Sources

Russia
78%
Germany
22%


Demand overview
Romania is the largest consumer of natural gas in the whole of Central and Eastern
Europe. At 43%, the penetration of gas into the energy mix is extremely high, even
when compared to much more mature and larger gas markets in Western Europe.
Demand growth has been somewhat erratic in recent years. Consumption levels
peaked in 1984 and subsequently went into a prolonged period of decline. Current
demand levels are less than half the levels seen as recently as 1990.
Between 2003 and 2004 there was a very slight increase in demand levels, though
demand remains far removed from the mid 1980s peaks.

Figure 86: Romania, Sectoral Demand

Power
Generation
25%
Non
Residential
56%
Residential
19%


Figure 87: Romania, Historical Demand

0
10
20
30
40
b
c
m
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Consumpti on


Through the Romanian Gas Law no. 351/2004, published in Monitorul Oficial no.
679/July 28, 2004, the natural gas market in Romania is harmonized with the European
Gas Directives. The National Regulatory Authority for Natural Gas Sector, the ANRGN,
was established by the Romanian government in 2000 through the ordinance 41/2000,
approved by Law no. 791/2001.

Until 2000 the Romanian gas market was dominated by Romgaz. Following the
implementation of decision 334/2000 by the Government Romgaz was turned into five
fully state-owned companies: S.C. Distrigaz Sud (supply and distribution), S.C.
Distrigaz Nord (supply and distribution), S.C. Exprogaz (production and storage), S.C.
Depogaz S.A. (storage) and S.N.T.G.N. Transgaz S.A. (transmission and transit). The
year after, through decision 575/2001, the government turned Exprogaz S.A. and
Depogaz S.A. into one company, S.N.G.N. Romgaz S.A., in charge of natural gas
exploration, production and underground storage.
In 2003, through decision 283/2003, the government ruled that the two state owned
distribution companies, SC Distrigaz Sud SA and SC Distrigaz Nord SA, should be
privatized. This process culminated in 2004 when the government sold 51% of
Distrigaz Nord to E.ON Ruhrgas and 51% of Distrigaz Sud to GdF.
E.ON Ruhrgas and GdF have both expressed an interest in investing in Romgaz when
it is privatised, though this is unlikely to occur before late 2006 according to latest
signals from the Government.
In 2001 the opening of the Romanian gas market began. Currently around 100
customers, accounting for 50% of the market, are eligible to choose their supplier. Full
market opening is planned for 2007.
Infrastructure
The Romanian transmission system is operated by the wholly state owned Transgaz
S.A. and has a total length of about 11,800 kms. Two interconnections exist for
facilitating Russian imports. These interconnections offtake gas from the Progress
pipeline from Russia.
In total there are about 20 distribution companies in the Romanian market, each of
which owns and operates its own distribution network. The two main distribution
companies Distrigaz Nord and Distrigaz Sud, are majority owned by E.ON Ruhrgas
and GDF.
Currently Romania has storage capacity of 3 bcm, though plans are currently under
development to double this by late 2008.
Wintershall are currently undertaking feasibility plans regarding the possibility of
constructing two pipeline projects in Romania. The first of this involves a link between
the Suceava region, the location of a number of Romania gas fields, and the Ukraine.
The second involves the construction of a link with Bulgaria.

CHAPTER 27 RUSSIA
Market summary
The Russian gas market is dominated by Gazprom, in which the state is the controlling
shareholder.
Gas exports are a major source of export revenue for Russia and several new gas
export projects are under way or being planned, including the North European Pipeline
under the Baltic Sea, as well as a planned increase in LNG exports.
Gazprom is undergoing the process of internal restructuring aimed at a financial and
organizational unbundling of activities and at achieving greater transparency and
financial efficiency.
Foreign investment opportunities exit mostly on the upstream side. Some German
energy companies, including Wintershall, are looking to invest in the development of
new production fields in return for the right to export equity gas.

Table 37: Russia, Supply and Demand Balance

BCM 2002 2004 CAGR

SUPPLY
Production 583.500 633.500 4.2%
Pipeline Imports
0.000 0.000 -


LNG Imports
0.000 0.000 -



Gross Supply 583.500 633.500 4.2%

Exports
Former USSR 42.300 52.500 11.4%
Germany 31.500 37.700 9.4%
Italy 19.300 21.000 4.3%
Turkey 11.800 14.400 10.5%
France 11.400 11.500 0.4%
Other Europe 54.600 55.900 1.2%



Net Supply 388.900 402.100 1.7%

DEMAND
Residential 68.000 69.900 1.4%
Non Residential 215.900 224.500 2.0%

Total Demand 388.800 402.100 1.7%


Supply overview
Russia is the worlds largest gas producer, with 21.9% of production in 2004. Gas
production, having peaked in the late 1980s, showed a slight decline in the mid-1990s
due to under-investment in exploration and in asset replacement. However, 1998 saw
the beginning of a recovery which continues to this day. In 2004, the country fell just
short of the 1992 production level of 641bcm
The Yamal peninsula is Russia biggest gas production area, yielding 506.6bcm in
2004 (80% of the total), followed by other parts of Western Siberia. Sakhalin Island in
the Far East, where several of the worlds oil and gas majors have been acting since
the late 1990s under production sharing agreements (PSAs), is growing in importance
Russia exports c.30% of its gas output, mostly to the EU, Ukraine and Turkey. The
country is also a major transit route for Central Asian producers

Figure 88: Russia, Gas Production

0
100
200
300
400
500
600
700
1992 1994 1996 1998 2000 2002 2004
G
a
s

p
r
o
d
u
c
t
i
o
n
,

b
c
m
Source: Datamonitor / BP Statistical Review D A T A M O N I T O R

Figure 89: Russia, Gas production by producer type

Gazprom
86%
Independents
14%

Source: Datamonitor / Gazprom D A T A M O N I T O R

Demand overview
Having peaked in 1991 at 431bcm, gas consumption dropped precipitously in the early
1990s due to the countrys economic difficulties. However, it has since recovered
almost to its pre-crisis level, led by a combination of modest growth in industrial output
and growing household incomes
Power generation and industry are the biggest gas consumers, with an estimated 27%
and 31% of the 2004 total, respectively. Housing represents another major source of
demand, as a combination of direct household consumption and district heating. In
fact, much of the power sector demand can also be attributed to the housing sector, as
it includes numerous CHP plants whose heat output is used primarily for district
heating purposes
Finally, a significant proportion of total demand is accounted for by agrochemical plants
which use natural gas as a feedstock in the production of fertilisers

Figure 90: Russia, Sectoral Demand

Residential
17%
Non
Residential
56%
Power
Generation
27%

Source: Datamonitor / BP D A T A M O N I T O R

Gas regulation of what is still an essentially monopoly market remains rudimentary.
The Federal Energy Commission (FEC) sets the tariffs for Gazproms pipeline
transportation services as well as the tariffs for large end users connected to UGSS
grid. Meanwhile, the Regional Energy Commissions (RECs) set end-user tariffs for
small and medium-sized markets in their respective regions.
In August 2005 a working group was set up by the Industry Ministry, the Economic
Development Ministry, the Anti-Monopoly Service, Gazprom, independent gas
producers and RAO UES in order to draw up a blueprint for the development of a
competitive gas market and for corresponding changes in the regulatory regime.
The working group gave preliminary approval to the 5+5 scheme for market opening,
developed by the Industry Ministry and Gazprom. Under the scheme, Gazprom on the
one hand and independent producers on the other will each be able to sell up to 5bcm
at deregulated prices.
The next meeting of the working group, scheduled for September 2005, will discuss
issues such as non-discriminatory third-party access (TPA) to the transmission and
distribution systems, the issue of long-term agreements, and the role of gas in the
countrys fuel mix.

Gazprom estimates that intra-country gas sales will only become a sustainable
business at the commodity gas price in the region of $59-65 per 1,000cm almost
double the current level. Therefore, the company is quite eager to see a quick
development of market-based mechanisms, provided its dominant position is not
threatened.
Industry restructuring
The Russian government has taken a very cautious stance in liberalising the gas
market. It wishes to maintain a high degree of security of supply on the internal market
and protect Gazproms pricing power on the export markets, given that gas exports
contribute some 25% of the Russian budget.
That said, reform has also started in the gas sector. Gazprom is undergoing the
process of organizational and financial unbundling into production, transportation,
distribution and supply, and non-core activities. Whereas the immediate objectives of
this are greater financial transparency and efficiency, in the long run the unbundling
process would enable a relatively quick introduction of deeper market reform.
The liberalized segment of the gas market, while relatively small, is gradually growing.
In 2004 there were 33 independent shippers of gas on the Russian market, accounting
for almost 100bcm worth of transactions. Of that, 44bcm represented transit flows from
Central Asia to Ukraine, and another 41bcm were accounted for by deliveries by
Russian independent producers to Russian customers.
Under the current 5+5 model of gradual market opening, up to 10bcm per annum is
designated for sales on the open market (5bcm by Gazprom and 5bcm by independent
producers). This quota will gradually be expanded over the coming years, until
eventually all industrial and other large business customers buy gas on the open
market. However, households, small businesses and other socially significant
customers (such as government bodies) will remain on regulated tariffs for the
foreseeable future.
Moreover, Gazprom is planning to consolidate its grip on the regional distribution
companies (RGKs), eventually bringing them all under its control under the wholly-
owned Gazpromregiongaz subsidiary. No unbundling of distribution and supply is
envisaged, hence Gazprom would regain its monopoly on the mass market while
allowing competition in the major business user segment.


Figure 91: Russia - The state is planning to increase its stake in Gazprom
to 51% and to expand the open market

Source: Datamonitor / Gazprom D A T A M O N I T O R

Competitive intensity
Over the next three years, a lack of meaningful unbundling between distribution and
supply, as well as Gazproms continuing stranglehold on gas production, will hold back
market development. This will allow Russian gas industrys Market Competitive
Intensity (MCI) score to reach only 2.7, compared with the current 0.9, which will not be
enough to allow the introduction of genuine competition. Below, we provide the
rationale behind this assessment.


Figure 92: Russia, gas market competitive intensity 2005-08


Market framework factors
Currently, FEC is mostly engaged in tariff-setting, as the liberalized segment is very
limited in both scale and scope. It is too early to tell if it will have become a vigorous
enforcer of competition rules by 2008, but it is unlikely that it will have too much room
for independent action.
No TPA rights exist at present, so even an imperfect TPA regime will be a dramatic
improvement. However, it is unclear what type of TPA regime will be introduced, and
the unbundling of UGSS from the rest of Gazprom is likely to remain minimal.
System balancing is now Gazproms internal function, but by 2008 it is conceivable that
an independent system operator will be in place, as well as some sort of arrangement
for data transfer between suppliers.
Supplier push factors
In 2004, Gazprom was responsible for 86% of Russias wholesale gas. By 2008, this
may decline to c.75% as independent producers increase their output.
Currently, Gazprom and its subsidiaries represent 70% of distribution volumes in the
mass market and the bulk of large user sales volumes. By 2008, the company is likely

to cede some market share at the top end of the market but consolidate its grip on
distribution.
There is no genuine wholesale gas market at the moment, but a rudimentary gas
exchange may develop out of Gazproms ETP within the next three years.
Customer pull factors
Gas users at present have no access to independent market information sources and
are not represented in any organized way. Datamonitor expects a modest improvement
in this within the next few years.
At present, there is no proper exchange-based natural gas trading in Russia, although
since the end of 2002 Gazprom has been trialing a proprietary trading platform the
Electronic Trading Platform (ETP). During its 2.5 years of operation, only 2.5bn of gas
was sold through ETP.
Given the relatively trivial volumes, the main benefit of ETP has been in giving Russian
gas industry players an experience of working with competitively formed prices, as well
as creating an additional incentive for independent producers to increase production.
For now, both independent producers and Gazprom itself (to the limited extent that it is
allowed to sell on the open market) sell the bulk of their gas on a bilateral basis,
through either long-term supply contracts or short-term over-the-counter (OTC) deals
with regional distribution companies (RGK) and major end users.

Infrastructure
Upstream
After years of neglect, Russia is stepping up investment in gas exploration, reversing
the late 1990s trend of declining gas reserves. In 2004, proved reserves were
estimated at 48tcm, or 26.7% of the world total. Gazprom alone operates over 6,000
working boreholes.

Figure 93: Russia, Gas reserves

40
42
44
46
48
50
1997 1998 1999 2000 2001 2002 2003 2004
P
r
o
v
e
d

r
e
s
e
r
v
e
s
,

t
c
m
Source: Datamonitor / BP Statistical Review D A T A M O N I T O R

Unified Gas Supply System
Russias Unified Gas Supply System (UGSS), owned by Gazprom, comprises
152,800km of high-pressure pipelines and 262 compressor stations. In 2004, it
transported 687.4bcm of gas, including 99.9bcm on behalf of third parties. However,
almost 60% of the transmission network is over 20 years old and will need to be
replaced before long.

Table 38: Russia, Age of high-pressure pipelines, 2004


UGSS also includes 24 storage facilities with a 494mcm joint daily peak capacity. They
include the worlds two biggest storages the Kasimovskoye underground storage and

the Severo-Stavropolskoye depleted field storage. Another three facilities are under
construction.
The distribution network, 75% of which is owned by Gazproms regional subsidiaries
(GRKs), is c.537,000km long. This is low by OECD standards, where the 10:1 ratio of
distribution to transmission system length is more common.
Export infrastructure
Almost all of Russias exports currently go through the Yamal, Brotherhood &
Friendship Pipelines that cross Belarus and Ukraine into central Europe and the
Balkans, supplemented by the recently completed Blue Stream underwater link with
Turkey.
To decrease its dependence on the political regimes in the eastern European transit
countries as well as transit gas theft, Russia is planning the North European Pipeline
under the Baltic Sea to link it with Germany and, possibly, Scandinavia. Construction
has begun and is due to finish in 2007.

Figure 94: Russia, Main existing and planned export pipelines

Source: EIA D A T A M O N I T O R

Gazprom has also been looking to diversify its gas exports. It is planning the
construction of a major LNG facility near the Shtokmanov field on the Barents Sea
shelf, in order to target the US market. Asian markets, primarily China, Japan and
South Korea, are also likely future export destinations.

CHAPTER 28 SLOVAKIA
Market summary
Like many Central and Eastern European countries, Slovakias significance in gas
terms comes from its role as a transit route for Russian gas going to the west rather
than its minor role as a consumer and producer of gas.
With Western Europes reliance on Russian gas increasing, Slovakia is well placed to
see a consequential increase in the volumes of gas it moves to the west.
Slovakias location near some of the largest Russian export pipelines, its storage
capacity and the fact that transit volumes can easily be increased mean that it is in a
strong position to take commercial advantage of the liberalizing European markets.

Table 39: Slovakia, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.197 0.165 -16.2%
Pipeline Imports
Russia 6.795 5.066 -25.4%
Turkmenistan 0.000 1.882 -


LNG Imports
0.000 0.000 -



Gross Supply 6.992 7.113 1.7%

Exports
0.000 0.000 -



Net Supply 6.989 6.719 -3.9%

DEMAND
Residential 1.984 1.907 -3.9%

Total Demand 6.989 6.719 -3.9%


Supply overview
The majority of Slovakian gas supply is imported from Russia. In 2004 gas supplies
were given an added degree of diversity following the introduction of imports from
Turkmenistan.
Indigenous production volumes are low, amounting to less than 0.2 bcm per annum or
2.5% of national demand. Aside from Nafta Gbely, the dominant gas utility, much of
the E and P activity in Slovakia is undertaken by Carpathian Resources of Australia
which has been exploring in the Western Carpathian area on the Austrian / Slovakian
border. Latest estimates indicate reserves of less than 15 bcm.

Figure 95: Slovakia, Gas Production

0
0.5
1
1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B
C
M



Figure 96: Slovakia, Imports By Source

Russia
73%
Turkmenistan
27%


Demand overview
Demand growth in Slovakia has been much weaker than in other European markets.
In the decade to 2004, total demand grew by an average of just 0.4% per annum. The
residential sector provided the majority of this growth, with the non-residential and
power generation sectors declining over the period by 0.6% and 1.2% respectively.

Figure 97: Slovakia, Sectoral Demand

Residential
28%
Non
Residential
46%
Power
Generation
26%


Figure 98: Slovakia, Historical Sectoral Demand

0
2
4
6
8
b
c
m
1968 1972 1976 1980 1984 1988 1992 1996 2000 2004


The Slovakian energy sector is regulated by the Regulatory Office for Network
Industries, known as URSO, which was created by the Act on Regulation of Network
Industries number 276/2001. URSO also has responsibility for regulating the power
sector.
The majority of legislation governing the Slovakian gas sector was laid out in the
Energy Act No. 70 passed in 1998, which sought to bring the sector into line with the
European Energy Charter.
Parts of the non-residential market were opened in mid 2002 with the remaining parts
of the non-residential market open from January 2005. So far, the number of
customers switching supplier has been very minimal. Legislation passed in November
2004 will ensure that all of the market is fully open by July 2007 in order to comply with
the EU directive.
The Slovakian gas sector is dominated by Slovensky Plynarensky Priemysel (SPP),
which imports, transmits and distributes gas, and Nafta Gbely, which produces and
stores gas and oil. SPP is owned by E.ON Ruhrgas (24.5%), Gaz de France (24.5%)
and 51% by the Slovakian government. Gazprom had an option to buy a 16.33% stake
in the company before the end of 2005, though has decided not to exercise this option.
Nafta Gbely is 56% owned by SPP, 40% by E.ON Ruhrgas and 4% by miscellaneous
other shareholders. Legislative changes to the law on monopolies in mid 2004 will
make it easier for the government to divest its stake in SPP, though it does not
currently have any plans to do so.
In October 2005 the Government agreed draft legislation which will unbundle SPP into
a transmission and a distribution operation. The parent company of the proposed new
companies will own the national transmission grids whilst the distribution unit will own
the low pressure distribution grid. Completion of the unbundling process is expected
during 2006.

Infrastructure
Pipelines
Slovakias role as a conduit for Russian gas going to the west is the key feature of the
Slovakian gas industry. Two key pipelines for exporting Russian gas, the Brotherhood
and Soyuz pipelines, run through the country transiting a volume equivalent to around
25% of Western European gas consumption and close to 80% of Russian exports to
the west.
In 2004 82.7 bcm was moved through the transit system, equating to 88% of the
systems 94 bcm capacity, meaning that potential exists to increase flows at minimal
marginal cost.
The distribution network run by SPP totals around 24,000 kms in length. Transit lines
total 2,300 kms in length.
Storage
Slovakias geographic position make it ideally placed to use its ample supply of storage
capacity to full commercial advantage as the European markets both develop and
liberalize.
In May 2004 Ruhrgas paid $75 million for RWEs 40% stake in Nafta Gbely, the owner
and operator of all Slovakias storage capacity.

Table 40: Slovakia, Storage Sites

Name Operator Capacity Peak Deliverability
mcm (mcm/day)

Lab 1 to 3 Nafta Gbely 1705 24.85
Lab 4 Nafta Gbely 785 24.85


Figure 99: Slovakia, Gas Grid

Source: SPP D A T A M O N I T O R

CHAPTER 29 SLOVENIA

Market summary

Although only a minor player in the European gas market, Slovenia is at a notably
advanced state of liberalization.
Gas currently accounts for around 13% of the primary energy mix.
At around one bcm, demand is very small with the power generation and non-
residential sectors playing a surprisingly minor role. Although supply volumes are
small, they are diversified.

Table 41: Slovenia, Supply and Demand Balance


SUPPLY
Pipeline Imports
Austria 0.050 0.088 75.0%
Algeria 0.400 0.383 -4.3%
Italy 0 0.003 -
Russia 0.654 0.621 -5.0%


LNG Imports
0.000 0.000 -


Total Imports 1.104 1.094 -0.9%

Gross Supply 1.104 1.094 -0.9%

Exports
0.000 0.000 -



Net Supply 1.104 1.094 -0.9%

DEMAND
Residential 0.836 0.829 -0.8%

Total Demand 1.104 1.094 -0.9%


Supply overview
Until 1992 Slovenia was entirely dependent on Russia for its gas supplies. However a
contract with Algerias Sonatrach changed this and gave an added element of diversity
and security of supply.
The import contract signed with Sonatrach in 1992 contains a provision that will
gradually increase imports up to a peak of 0.6 bcm by 2007. Smaller volumes are also
imported from Italy and Austria.

Figure 100: Slovenia, Imports By Source

Russia
57%
Italy
0.3%
Algeria
35%
Austria
8%

Demand overview
The residential sector dominates gas use and accounts for more than three quarters of
demand.
A combination of economic growth, expansions to the distribution grid and investments
in gas fired power mean that strong demand growth can be expected in the short to
medium term.
Despite this expected demand growth, absolute consumption levels will remain
modest.

Figure 101: Slovenia, Sectoral Demand

Residential
15%
Non
Residential
58%
Power
Generation
27%


The Slovenian gas sector is regulated by the Slovenian Energy Agency which was set
up in 2002 to oversee the gas and power markets. The Energy Law of 1999 began
reforming the energy sector with subsequent amendments to incorporate EU
legislation. Central to this was the Slovene Energy Act of July 2004. The first phase of
market opening took place in 2003 when the country's 20 large industrial consumers
became eligible to switch their supplier. Subsequently in July 2004 the non-residential
market opened in line with the terms of the gas directive. Full market opening is
scheduled before the July 2007 deadline.
The market is monopolised by Geoplin which is responsible for the supply and sale of
gas directly to eligible end users and distributors. In order to ensure compliance with
the unbundling requirements of the gas directive a new company, Geoplin Plinovodi,
was created at the beginning of 2005. However the current lack of new market entrants
and the strength of Geoplin will ensure Geoplin retains much of its dominant position
for some considerable time. In the distribution sector there are currently 17 licensed
players
The attractiveness of the Slovenian energy market to new entrants is constrained by
the small size of the market and the fact that many of the larger energy buyers in the
country are shareholders in Geoplin and thus have little or no incentive to switch
supplier.

Infrastructure
Pipelines
Slovenia is interconnected with Austria via the Sud-Ost Leitung (SOL), a spur
connection feeding off the TAG pipeline. SOL has a 3.3 bcm per annum capacity and
is owned and operated by OMV. An interconnection with Italy also feeds from the TAG
line.
Geoplin is currently undertaking various projects to expand and upgrade the gas grid
which is at, or close to, full capacity. Increased capacity is required to facilitate the
likely increase in gas demand over the coming years.
The countrys distribution network totals around 1,000 kms in length.

Figure 102: Slovenia, Gas Grid

Source: Slovenian Energy Agency D A T A M O N I T O R

CHAPTER 30 SPAIN
Market summary
Strong GDP growth through the late 1990s combined with rapid industrialisation have
contributed to above average growth in both gas and energy demand in Spain. Over
the past decade gas demand growth has averaged more than 13% per year.
This has boosted the role gas plays in the primary energy mix from 7% to 17% over the
ten years to 2004.
Despite a softening in economic growth in recent years, gas demand is likely to show
continued strength in the coming years with no indications that the Governments goal
of seeing gas account for 22.5% of primary energy demand by 2011 will not be met.
Demand for gas in power generation has driven much of this growth and will continue
to do so in the coming years.
Limited indigenous resources make Spain heavily import dependent. These imports
are sourced as pipeline gas and LNG from Algeria, pipeline gas from Norway
transported via the French border, and LNG from a variety of sources.
The production and supply landscape of the Spanish gas market is expected to change
significantly after the Spanish Supreme Court gave conditional approval for Gas
Natural to take over Endesa in January 2006, though it remains to be seen if the deal is
actually transacted following a surprise bid by E. On.

Table 42: Spain, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.215 0.339 57.7%
Pipeline Imports
Algeria 6.130 7.380 20.4%
Norway 2.300 2.190 -4.8%


LNG Imports
Algeria 7.170 6.440 -10.2%
Libya 0.715 0.658 -8.0%
Nigeria 3.921 4.771 21.7%
Oman 0.547 1.255 129.4%
Qatar 1.893 3.770 99.2%
Trinidad 0.032 0.000 -
UAE 0.372 0.311 -16.4%
Others 0.087 0.177 103.4%

Total Imports 23.167 26.952 16.3%

Gross Supply 23.382 27.291 16.7%

Exports
0.000 0.000 -



Net Supply 23.269 27.430 17.9%

DEMAND
Residential 3.037 3.580 17.9%

Total Demand 23.269 27.430 17.9%


Supply overview
With reserves of less than 3 bcm, Spains scope for meeting gas demand indigenously
is very limited and production meets less than 1% of demand.
The majority of production comes from Repsol-YPFs Poseidn field, with smaller
volumes coming from the Valle de Guadalquivir field. National production fell by more
than 50% between 2002 and 2003 due to production problems at Poseidn which was
shut in for 5 months during the year. However production has since grown again, albeit
to still modest levels.
Despite the dominance of Algerian gas, supply sources are very well diversified
reflecting security of supply legislation which sets a 60% limit on the proportion of
national demand any one gas supply source can constitute. In February 2005 Union
Fenosa imported Egyptian LNG to Spain for the first time from its Damietta project
which it jointly owns with Eni.

Figure 103: Spain, Gas Production

0
1
2
1983 1987 1991 1995 1999 2003
B
C
M



Figure 104: Spain, Imports By Source

Oman (LNG)
5%
Qatar (LNG)
14%
Others (LNG)
2%
Nigeria
(LNG)
18%
Libya (LNG)
2%
Algeria
27%
Norway
8%
Algeria (LNG)
24%


Demand overview
Over the past decade, Spanish gas demand has grown strongly at an average of
12.5% per year. Gas fired power plants have been the driving force of this demand
growth and resulted in power generation gas demand growing by an average of 23%
per year in the decade to 2004. Continued construction of new CCGTs will continue to
provide significant impetus to gas use in power generation.
The residential and non-residential sectors have also shown extremely strong growth
of 13% and 10% per annum respectively owing to significant and ongoing expansion to
both the transmission and distribution grids. Demand is likely to continue to show
strong growth in the short to medium term, although the rate of growth is likely to slow
as gas penetration increases in the longer term.


Figure 105: Spain, Sectoral Demand

Residential
13%
Non
Residential
62%
Power
Generation
25%


Figure 106: Spain, Historical Sectoral Demand

0
5
10
15
20
25
30
b
c
m
1969 1973 1977 1981 1985 1989 1993 1997 2001


The hitherto immature and undeveloped nature of the Spanish gas market has allowed
the country to adopt a very pro-liberalisation stance in recent years, at least partly due
to the fact that such a stance would help catalyse development of the industry.
The speed and momentum of liberalisation policy in Spain has consistently exceeded
that required by the EU. The liberalisation process was begun with the Hydrocarbons
Act in 1998 which laid out plans for market opening and set up the Comisin Nacional
de Energia (CNE) to act as a regulator. Further pro-liberalisation legislation came with
the passing of Royal Decrees in 1999 and 2000.
All Spanish energy consumers have been able to choose their supplier since January
2003, some five and a half years ahead of the full market opening deadline of July
2007 set out by the second EU Gas Directive.
Initially switching rates were very low with just 167,000 customers (3%) switching
supplier in 2003. However switching rapidly developed in 2004 with more than 1.2
million (21% of the market) having switched by the end of the year as a result of
extensive advertising and special offers by utilities. By the end of the third quarter of
2005 this figure had increased to 1.766 million customers or 28% of the total.
Prior to liberalisation, the Spanish gas market was almost entirely controlled by Gas
Natural. Although still holding a commanding position, Gas Naturals position has been
eroded by pro-liberalisation policies whilst its attempts to expand have been curtailed.
Strong demand growth and a liberalized market make Spain an attractive target for
European gas players looking to internationalise their activities in response to
liberalisation induced market share erosion in their own markets. Foreign players who
have entered the Spanish market include Eni, BP and Shell.
Gas Naturals position is also being eroded by Spanish power utilities who have
entered the gas market. These include companies such as Union Fenosa, Iberdrola,
Hidrocantbrico and Centrica via its Luseo Energia subsidiary.
Spain had a gas release programme between the end of 2001 and early 2004 under
which one third of the 6 bcm being piped by Gas Natural was re-allocated to other
companies.
In January 2006 the Spanish Supreme Court decided to allow a proposed merger
between Gas Natural and Endesa, an electricity producer though it remains to be
seen if the deal is actually transacted following interest from other parties. Although
the Courts ruling incorporated some strict conditions aimed at preventing anti-

competitive practice, the merger will still create a very significant presence within the
market; a merged entity would control 40% of gas and electricity distribution, 60% of
sales and 65% of supply.
A fledgling gas wholesale gas market has been emerging in Spain though it will still
be a considerable time before meaningful liquidity develops, despite growing volumes
and a growing number of longer term deals including some for 1 year periods being
transacted.
The small amount of trading activity undertaken by around 14 players is more closely
related to swap rather than spot or forward deals with volumes changing hands
between parties and then the same volume being passed back again at a later date at
an equal price. Usually these deals are done on the basis of the weighted average
cost data published by Enags (the grid operator) rather than having any element of
market based price formation in them. LNG time swaps are an increasing part of this
emerging market and will continue to be so as more cargoes are imported.
In February 2005, new balancing rules were introduced which have the potential to
bring more liquidity to this swap activity. The new rules mean that Enags will store
gas free of charge for 5 rather than the original 10 days at LNG terminals and for 2
rather than 5 days at the Centro de Gravedad, the country's technical balancing point
which takes the form of a virtual hub like the UKs NBP or Italys PSV.
The changes will force shippers to balance on a more disciplined basis. Whilst this
may help catalyse wholesale activity in the longer term, it will probably encourage a
wider role for the existing swap deals in the shorter term.

Infrastructure
LNG
LNG has long played a key role in the Spanish gas market accounting for 63% of total
consumption. At 17.4 bcm per annum, Spain is the worlds fourth largest LNG importer
after the US, Japan and South Korea and accounts for more than 49% of Europes
LNG imports.
Sources are well diversified, with seven separate countries delivering LNG, a degree of
diversification second only to Japan.
Spain currently has five operational terminals, with another two under construction.
Although geographically in Portugal, the Sines terminal is connected to the Spanish
grid.
The regulator has been keen to encourage Third Party Access to LNG facilities. In late
2002 it ruled that GdF, Eni and Iberdrola were entitled to access capacity at LNG
terminals, overruling the claim by Enags that there was no spare capacity because it
had all been allocated to Gas Natural.

Table 43: Spain, LNG Infrastructure


Barcelona Enagas 11 bcm Operational
Cartagena Enagas 8 bcm Operational
Huelva Enagas 8 bcm Operational
Bilboa BP, Iberdrola, Cepsa, EVE 3 bcm Operational
Sines Transgas 5.2 bcm Operational, located in
Portugal
Reganosa Fenosa, Endesa, Sonatrach 3.4 bcm Under construction, start up
due 2007
Sagunto Fenosa, Iberdrola, Endesa 6.6 bcm Under construction, start up
due 2007


Pipelines
Gas is imported to Spain by Enags via two cross-border pipelines:-
The Lacq-Calahorra pipeline on the French border allows the importation of Gas
Naturals 2.4 bcm per annum contract with Norway. Given its 4 bcm capacity, imports
could theoretically be increased via this route, though capacity constraints in the
French system mean that this remains problematic.
Euskadour - In mid-2003, the French, Spanish and Portuguese regulators jointly
declared their intention to offer incentives to encourage increased pipeline
interconnections between France and Spain in order to ease bottlenecks and
congestion. This aim has since been achieved with the development of the Euskadour
pipeline which, following its inauguration in the latter part of 2005, allows Spain to re-
export gas to south west France.
The Pedro Duran Farell pipeline (formerly known as the GME or Maghreb-Europe
line) brings Algerian gas into the south of Spain via Morocco. In 2004 a large capacity
expansion was undertaken, increasing throughput to close to 12 bcm per annum.
Small volumes of gas landed at the Sines LNG terminal in Portugal are also imported
to Spain via two cross-border links.
Spains transmission system is owned and operated by Enags. Third Party Access
tariffs are published by the government, based on an entry-exit model.
Pipeline developments
Medgas - A consortium including Spanish oil company Cepsa, Algerias Sonatrach,
BP, GdF, Endesa and Iberdrola signed an agreement in 2001 to construct an 8 bcm
per annum link between Algeria and Spain to supplement the existing connection. The
project, known as Medgas, has been subject to delays caused by financing difficulties
though received final regulatory approval in June 2005. Construction is due to start in
July 2006. Assuming these timings are adhered to, initial flows are likely by early
2009.


Figure 107: Spain, Gas Grid

Source: Comisin Nacional de Energia D A T A M O N I T O R

Storage

Total storage capacity at Spains storage sites totals just over 1.4 bcm, equivalent to
only a few weeks average supply. This shortage of storage means that storage tanks
at the countrys LNG sites are of added importance.
The CRE has expressed concern at the lack of storage capacity. The CREs 2002
energy plan made a number of suggestions to boost capacity, including the possible
conversion of the Poseidn field to a storage site and the expansion of the Gaviota
site. Spains only new storage project currently under development is a plan by
Canadas Eurogas to convert the Amposta field in the Gulf of Valencia to a 1 bcm per
annum storage facility when the oil reservoir depletes in 2009.
The CRE has also expressed concern at the utilisation made by Spains 14 gas traders
of existing storage capacity, and has pointed out to the traders that, under the terms of
the 1998 Hydrocarbons Bill, they are required to maintain at least 35 days of supply in

storage. In response, the traders argue that the current storage pricing regime gives
insufficient incentive for them to store beyond their short-term needs.
Storage in Spain is operated under a non-discriminatory Third Party Access model
overseen by the regulator.
Table 44: Spain, Storage Sites

(mcm / day)

Gaviota Depleted gas field Enagas 770 5.7
Serablo Depleted gas field Enagas 635 4.9

Total 1405 10.6


CHAPTER 31 SWEDEN
Market summary
Gas plays only a very small role in the Swedish energy mix owing to the strong
dominance of both hydro and nuclear power.
Gas has only been consumed in the country since 1985. All gas consumed in Sweden
is currently imported from Denmark, although scope does exist to diversify supply
sources when required.
The residential sector is a very small consumer of gas and is likely to increase its role
as the distribution grid reaches new areas of the country.

Table 45: Sweden, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Pipeline Imports
Denmark 0.983 0.979 -0.4%


LNG Imports
0.000 0.000 -


Total Imports 0.983 0.979 -0.4%

Gross Supply 0.983 0.979 -0.4%

Exports
0.000 0.000 -



Net Supply 0.888 0.884 -0.5%

DEMAND
Residential 0.043 0.043 -0.4%

Total Demand 0.888 0.884 -0.4%


Supply overview
Sweden did not become a gas consumer until 1985. A lack of indigenous production
means that all gas supply has to be imported. Currently the sole source of supply is
Denmark, though various plans have been mooted, including an LNG terminal, to
increase both the size of imports and the diversify of supply sources.
Gas penetration has been held back by the dominance of nuclear and hydro power,
which together account for 61% of the primary energy mix. By contrast, gas makes up
less than 1.5% of primary energy demand.
Swedens geographic position means that it would be relatively simple to build pipeline
infrastructure to import Russian, Dutch and Norwegian gas when sufficient demand
exists. Given the current very low levels of demand in Sweden, interconnections of this
type will not be needed in the short, or probably medium, term.

Demand overview
Current levels of demand are low compared to other European countries, owing to a
lack of infrastructure and the dominance of other fuels.
Gas is currently consumed in just 30 of Swedens 289 municipalities. In these
municipalities gas has a penetration of around 20%, a level comparable with many
other more developed gas markets. However, the small number of municipalities
connected to the gas grid means that overall gas penetration for the country is far
lower.
In mid 2004 the future prospects for gas demand growth were advanced, following the
connection of Swedens main petrochemical complex at Stenungsund to the gas grid.

Figure 108: Sweden, Sectoral Demand

Residential
5%
Non
Residential
57%
Power
Generation
38%


Figure 109: Sweden, Historical Sectoral Demand

0.0
0.5
1.0
b
c
m
1985 1988 1991 1994 1997 2000 2003


The Swedish gas market is regulated by the Swedish Energy Agency, known as
STEM, which was formed in 1996. In addition to the gas market, STEM also regulates
the power market. Sweden transposed the terms of the first gas directive into national
law via the Natural Gas Act of August 2000 and opened the market to consumers using
more than 15 mcm per year (around 10 users). Subsequent amendments were made
in order to comply with the accelerated directive, though the opening of the remaining
part of the non-residential market in July 2005 took place one year behind the EU
deadline. Full market opening in line with the directive is planned for July 2007.
There are currently two main players in the Swedish gas sector: Nova Naturgas and
Sydkraft. Nova Naturgas is owned by E.ON Ruhrgas (30%), Statoil (30%), DONG
(20%) and Fortum (20%), whilst Sydkraft is owned by E. ON (55%), Statkraft (44.6%)
and various minority interests (0.4%).
In January 2005 the Swedish government issued a report in which it expressed
reservations about the structure and undeveloped nature of the market. Of specific
concern was the dominance of Nova Naturgas and the fact that Dong is both the only
source gas imports and a 20% stakeholder in Nova.
In late 2004 the role of gas TSO was passed to Svenska Kraftnat, the country's power
TSO. Previously Nova had been acting as TSO on an unofficial and informal basis as

well as acting as a distributor. The decision to appoint Svenska Kraftnat as TSO was
something of a surprise given that the TSO role was widely expected to have been
awarded to Nova.
Infrastructure
Pipelines
Danish gas is imported into Sweden via a subsea pipeline under the Oresund sea and
lands at Klagshamn, close to Malmo where it enters the Swedish grid.
The majority of the Swedish network is owned and operated by Nova Naturgas with a
small number of minor branch lines owned by Sydkraft. The Swedish grid runs in two
main sections the north to south axis runs between Trelleborg in the south and
Gothenburg in the north (owned by Nova Naturgas), whilst the east west axis runs from
Kristianstad to the west coast (owned by Sydkraft). Sydkraft is in the process of
expanding its network further to the east,
The low levels of gas penetration in Sweden mean that there remains scope for the
continued development of the grid to gasify the inland municipalities not yet connected
to the gas gird. Various initiatives are underway to expand the existing infrastructure.
During 2004 Nova Naturgas and Sydkraft were in discussions regarding the possibility
of forming a joint venture company to unify their infrastructure and to expand the
transmission network. However these negotiations were abandoned in March 2005
following an inability to agree on the value of the assets involved.
In September 2004 Sydkraft was given permission to build the Baltic Gas
Interconnector, a 210 kms pipeline linking Trelleborg in Sweden with Rostock in
Germany. When the 5 bcm per annum project become operational in 2010 it will give a
much needed element of supply diversity to the Swedish market.
Currently Sydkraft is developing plans to build a 1.5 bcm to 2 bcm LNG reception
terminal at Oxelsund on the east coast. When developed, the project would not only
diversify Swedish supply but would also bring gas to the east of the country for the first
time. If developed the project is unlikely to be operational before at least 2010.
In addition to the supply diversity benefits that these two project will bring to the
market, they will also catalyse a more competitive market by providing supply to
potential new market entrants.


Figure 110: Sweden, Gas Grid

Source: Sydkraft D A T A M O N I T O R

CHAPTER 32 SWITZERLAND
Market summary
At just over 9% of the primary energy mix, and total annual demand levels of less than
3.5 bcm, gas plays a much lower role in Switzerland than it does in other nearby
markets at similar stages of economic development.
Market opening and liberalisation is yet to take place in the Swiss market and all but
the very largest end users are able to choose their supplier. Possible market opening
and liberalisation options are currently being explored to liberalise the market though
any developments in this regard are not expected in the short to medium term.
Switzerland has no indigenous gas resources and is therefore entirely dependent on
imports. Russia is the main source of imports and accounts for more than half of
supply volumes. Imports are well diversified coming from a range of sources.


Table 46: Switzerland, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.000 0.000 0.000
Pipeline Imports
France 0.521 0.346 -33.6%
Germany 1.458 1.720 18.0%
Italy 0.118 0.182 54.2%
Netherlands 0.706 0.748 5.9%
Russia 0.406 0.315 -22.4%

LNG Imports
0.000 0.000 -



Gross Supply 3.209 3.311 3.2%

Exports


Net Supply 3.209 3.311 3.2%

DEMAND
Residential 1.174 1.211 3.2%

Total Demand 3.209 3.311 3.2%


Supply overview
A lack of indigenous resources means that Switzerland is entirely dependent on
imports of natural gas. The largest single source of imports is Germany, accounting for
more than half of supplies.
Smaller volumes are imported from other neighbouring markets.
Figure 111: Switzerland, Import Sources

Russia
10%
Netherlands
23%
France
10%
Germany
52%
Italy
5%


Demand overview
At just over 9% of the primary energy mix, gas plays a much lower role in Switzerland
than it does in other nearby markets at similar stages of economic development.
Despite accounting for around 2.5% of European GDP and 1% of population,
Switzerland accounts for less than 0.5% of European gas demand.
Demand growth has averaged 2.1% per year over the past decade. At 5.4% per
annum, by far the largest demand growth rates have been seen in the power
generation sector. Growth in the residential and non-residential sectors has averaged
2.1% and 1.8% respectively over the period.

Figure 112: Switzerland, Sectoral Demand

Power
Generation
8%
Non
Residential
55%
Residential
37%


Figure 113: Switzerland, Historical Sectoral Demand

0
0.5
1
1.5
2
2.5
3
3.5
b
c
m
1970 1974 1978 1982 1986 1990 1994 1998 2002


The main regulatory body in the Swiss gas market is the Swiss Federal Office of
Energy (SFOE) which is part of the Federal Department of Environment, Transport,
Energy and Communication.

The SFOE has a traditional regulatory remit and is responsible for issues such as
regulating transmission TPA, promoting security of supply, increasing energy efficiency
and contributing to national energy policy. Further to this the SFOE has a remit in
areas not often seen by other regulator such as its role in nuclear safety and oil
transportation health and safety issues.
The Swiss gas market is controlled by a small number of players. Of these, Swissgas
AG, which accounts for 75% of the country's imports is by far the largest. The majority
of gas imported by Swissgas is then sold on to four regional associations consisting of
local utilities cooperating together to secure gas supplies for onward sale to end users.
These regional associations are Gasverbund Mittelland AG, Erdgas Ostschweiz AG,
Gaznat SA and Ergas Zentralschweiz AG.
Gas distribution is undertaken by around 100 utilities. These utilities vary greatly in
size with the seven largest accounting for half the market and the remainder having a
market share of just a few percent. In general these utilities are owned by local
governments. The ownership of Swissgas AG is shared by the four regional
associations as well as the Association of the Swiss Natural Gas Industry.
A lack of political willingness to open up the market and the ongoing monopolies held
by the regional players mean that consumer choice and freedom to choose supplier
are not currently prevalent in the Swiss market. The SFOE is currently examining
possible liberalisation options, though developments in this regard are unlikely to occur
in the short term.
The only exception to this monopoly control and lack of consumer choice is in the
Major Energy User segment. Since the 1960s Art. 13 of the pipeline Act has allowed
major industrial gas users direct third party access to the transmission grid. This
process is overseen by the Koordinationsstelle Durchleitung (KSDL), part of
Swissgas AG.
Infrastructure
The Swiss natural gas grid is well integrated with the European gas grid allowing
imports to be made from a diverse range of sources. In the mid 1970s the first natural
gas was imported from Europe via a pipeline built through Switzerland to Italy from the
Netherlands. This became known as the Transitgas system, 51% owned by Swissgas
AG.
The Transitgas system led to the development of a transmission grid which is currently
around 2,100 kms in length and a 14,000 kms long distribution grid. About two thirds of
the Swiss population live in municipalities connected to a local gas grid.

The transmission grid includes about 290 kms of the Transitgas system and about
1,600 kms of regional high pressure pipelines. Most of the remaining part belongs to
the Swissgas AG system and consists of four high-pressure pipelines leading from the
Transitgas pipeline to the various regions. These four pipelines are:-
Eastern natural gas pipeline diameter 400 mm, length 43.8 kms (Aargau Zurich)
Western natural gas pipeline diameter 400 mm, length 538 kms (Aargau Bern)
Rhone valley natural gas pipeline diameter 250 mm, length 48.5 kms (Valais
Vaud), diameter 300 mm, length 92.5 kms (Visp Bex)
Central Switzerland natural gas pipeline - diameter 250 mm, length 13.8 kms
(Lucernbe Lucerne)

Figure 114: Switzerland, Gas Grid

Source: Swissgas AG D A T A M O N I T O R


CHAPTER 33 TURKEY
Market summary
Despite having seen strong demand growth of over 12% per annum over the past
decade, Turkish gas demand has fallen considerably short of forecasts.
In the late 1990s strong economic growth resulted in extremely bullish demand growth
forecasts, which in turn led to the construction of a number of large pipeline projects.
A severe economic downturn in 2001 meant that much of the forecast demand growth
did not materialise, leading to significant excess supply and Take or Pay disputes.
Indigenous production remains modest, with no imminent signs of any significant
increase. As such, Turkey is heavily import dependent. Although around two thirds of
imports are sourced from Russia, the presence of an import link with Iran and LNG
supplies from Nigeria and Algeria mean that imports are relatively secure and diverse.


Table 47: Turkey, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 0.000 0.000 0.000
Pipeline Imports
France 0.521 0.346 -33.6%
Germany 1.458 1.720 18.0%
Italy 0.118 0.182 54.2%
Netherlands 0.706 0.748 5.9%
Russia 0.406 0.315 -22.4%

LNG Imports
0.000 0.000 -



Gross Supply 3.209 3.311 3.2%

Exports


Net Supply 3.209 3.311 3.2%

DEMAND
Residential 1.174 1.211 3.2%

Total Demand 3.209 3.311 3.2%


Supply overview
Turkish indigenous production levels are extremely low so gas imports play a key role
in the countrys growing gas demand. Gas imports began in 1987 following the
signature of a long term contract with Russia.
Currently less than 3% of Turkish demand is met indigenously. As rapid demand
growth continues, self sufficiency levels will diminish even further.
The majority of imports are sourced from Russia, though imports from Iran also play a
role. Since 1994 LNG has played a key role in meeting gas supply and imports are
now made from Nigeria and Algeria.

Figure 115: Turkey, Gas Production

0
100
200
300
400
500
600
700
800
1981 1984 1987 1990 1993 1996 1999 2002
M
C
M


Figure 116: Turkey, Imports by Source

Nigeria
(LNG)
5%
Russia
65%
Iran
16%
Algeria
(LNG)
14%


Demand overview
Excessively bullish forecasts of gas demand growth made in the late 1990s have
turned out to have been unfounded following a period of severe economic problems in
2001. However, since then the economy, and hence energy demand, have both
recovered meaning that Turkey has nonetheless seen demand growth significantly
above many other markets.
In the decade to 2004 annualised demand growth averaged over 12%. In common
with other relatively immature gas markets, the key driver of this growth has been the
power generation sector which has grown by 14.5% over the period. Growth in the
residential and non-residential sectors has also been strong at 12.1% and 7.6%
respectively.

Figure 117: Turkey, Sectoral Demand

Power
Generation
62%
Non
Residential
19%
Residential
19%


Figure 118: Turkey, Historical Sectoral Demand

0
5
10
15
20
25
b
c
m
1982 1986 1990 1994 1998 2002


The Turkish energy sector is regulated by the Energy Market Regulatory Authority
(EMRA), which was established in 2001 under Law no. 4628. Subsequently its remit
was widened to include the gas sector following the passing of the Natural Gas Market
Law no. 4646.
Turkey is a candidate country for EU membership and as such has legislated for
market opening in line with the EU gas directive. The market is currently 80% open
with users above 1 mcm per year eligible to choose their supplier. However, in reality,
the strong position held by BOTA, which until 2001 held a monopoly on the gas
market, means that very little consumer choice exists. Theoretically, full market
opening will take place by July 2007.
A Network Code governing use of the transmission and distribution grids came into
force in September 2004. End user prices are regulated by the EMRA and will remain
so until it rules that sufficient competition has become established. Given that the
distribution sector is currently being opened to competition this process is continuing,
though the dominance of BOTA remains a severe constraint on the development of
competitive conditions.
Plans have been mooted for BOTA to be unbundled by 2009. In tandem with this
there are plans requiring the company to gradually forfeit market share so it is left with
20% of the market by 2009, though continued legislative disputes make the exact
nature of these plans unclear.
Each year BOTA undertakes a gas auction under which it makes available to new
entrants 10% of its contractual gas purchase quantities.
Infrastructure
The first, and most important, piece of Turkish gas infrastructure is the pipeline
importing Russian gas into Turkey via Bulgaria. When this pipeline became
operational in 1986 it was used exclusively to supply the Trakya CCGT plant at
Hamitabat. Over the course of the following two years a larger distribution grid was
constructed allowing supplies to be made to both the residential and non residential
sectors in Ankara. Subsequently the transmission and distribution grids were
expanded bringing gas to larger areas of the country.
The development of this pipeline was followed in January 2002 by the start up of an
import line from Iran, though lower than expected demand growth resulted in significant
flow interruptions and legal disputes.

In February 2003 a third pipeline, known as Blue Stream, came online supplying gas
from the Russian Federation. Blue Stream runs underneath the Black Sea and lands
gas at Samsun before going overland to Ankara. Like the Iranian pipeline, lower than
expected demand growth has meant that Blue Stream has flowed considerably less
gas than had originally been forecast, resulting in a six month suspension in flows soon
after its inauguration.
Plans had been developed for another import project known as the Trans Caspian Gas
Pipeline (TCGP) from Turkmenistan, though weaker than expected demand growth
and the presence of the existing import pipelines means that the project is unlikely to
materialise in the short to medium term.
LNG imports began in 1994 at the Marmara Ereglisi terminal which has an annual
capacity of 3.2 bcm. Currently imports are made from Algeria and Nigeria.
Gas storage does not currently exist in Turkey, though various projects continue to be
assessed.

Figure 119: Turkey, Gas Grid

Source: BOTAS D A T A M O N I T O R

CHAPTER 34 UNITED KINGDOM
Market summary
Since natural gas production from the UK continental shelf (UKCS) first began flowing
in the mid-1960s, gas has increasingly played a key role in the UK energy mix, with
strong demand growth both in the past and forecast for the future.
Traditionally, indigenous supplies have allowed the UK to be a net exporter of gas,
however the UKCS has now matured resulting in the UK becoming a net gas importer
at the end of 2004.
This decline in indigenous production has resulted in a growing need for gas imports
from other parts of the EU, Russia and Norway, as well as other more distant supply
sources in the form of LNG.
The UK has a long history of gas market liberalisation dating back to 1995 and is now
the most liberalized market in the EU.

Table 48: UK, Supply and Demand Balance

BCM 2003 2004 CAGR

SUPPLY
Production 108.532 101.182 -6.8%
Pipeline Imports
Belgium 1.323 3.428 159.1%
Norway 6.528 8.678 32.9%


LNG Imports
0.000 0.000 -


Total Imports 7.851 12.106 54.2%

Gross Supply 116.383 113.288 -2.7%

Exports
Belgium 11.744 6.565 -44.1%
Ireland 4.051 3.557 -12.2%
Netherlands 0.311 0.263 -15.4%



Net Supply 100.606 102.347 1.7%

DEMAND
Residential 34.982 35.587 1.7%

Total Demand 100.606 102.347 1.7%


Supply overview
Current reserves on the UKCS stand at 590 bcm, giving a Reserves to Production ratio
of 6 years.
Production in 2004 totalled around 101 bcm, a 7% decrease on 2003. Exports totalled
10.4 bcm (down from 16.1 bcm in 2003) whilst imports reached 12.1 bcm (up from 7.8
bcm the previous year). Overall this meant that imports exceeded exports by 1.7 bcm
compared with the previous years 8.3 bcm net surplus. The movement to net importer
status came as no surprise given the ongoing production decline, though it had not
been expected until at least 2006. Despite the movement to net importer status, the
UKCS still has considerable production capacity both now and in the future. This
means that, given current reserves, imports are unlikely to exceed production until at
least 2012, a date that will move further back if significant new reserves are found by
current exploration activity.
The majority of production activity takes place in the North Sea, though smaller
volumes are produced both onshore and in the Irish Sea.
Most reserves are in the form of non-associated gas located in three distinct areas
the central North Sea, the northern North Sea and the Southern Basin.
Offshore reserves are landed via 4 main pipeline systems see Infrastructure.
The 3.4 bcm of gas the IEA classifies as being imported from Belgium is in reality
sourced from the Netherlands and Germany, though is delivered from Belgium via the
Interconnector.
Figure 120: UK, Gas Production

0
20
40
60
80
100
120
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000
B
C
M



Figure 121: UK, Imports By Source

Belgium
28%
Norway
72%

Demand overview
As an established and mature market, gas demand growth rates are much less
spectacular in the UK than in other markets at earlier stages of development.
Total demand in the UK has risen by an average of 3.1% over the past decade. A
concerted movement towards gas fired power in the 1990s, the so called Dash for
Gas, meant that the power generation sector has played a key part in this demand
growth, though the growth in this sector was subsequently curtailed by a temporary
moratorium on new gas fired power capacity. Over the decade to 2004, demand in the
power generation sector grew by an average of 8.7% per year, compared with 1% and
1.8% in the non-residential and residential sectors respectively.

Figure 122: UK, Sectoral Demand

Residential
35%
Non
Residential
34%
Power
Generation
31%


Figure 123: UK, Historical Sectoral Demand

0
20
40
60
80
100
120
b
c
m
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
Residential Non Residential Power Generation


As one of the worlds most liberalized gas markets, regulatory policy in the UK differs
from that in other EU countries in that it focuses more on policing the market rather
than on seeking to introduce competition.
The liberalization of the UK gas industry began with the 1986 Gas Act, which legislated
for the privatization of British Gas. In the same year, OFGAS (the Office of Gas Supply)
was created to regulate the industry and promote the interests of gas consumers.
Further legislation relating to consumer protection and energy pricing was contained in
the Utilities Act 2000 which also merged Ofgas with Offer (the power industry regulator)
to form Ofgem (Office of Gas and Electricity Markets).
Currently, Ofgem does not have any jurisdiction over issues relating to offshore gas
production, although it is currently lobbying the government for an extension to its
powers to take over this responsibility from the Department of Trade and Industry.
The first gas market opening in the UK came in 1992, when competition was
introduced to large Industrial and Commercial consumers, a process which
encouraged new players to enter the market. At this point however, British Gas
maintained a monopoly over non-Industrial and Commercial supplies. Competition was
encouraged with a gas release program to aid new market entrants.
British Gas continued to hold this monopoly until the passing of the 1995 Gas Act,
which opened up the whole market to competition. Competition was introduced
regionally over a 2 year time period in order to allow processes and systems to be
perfected before national roll-out. The market officially became fully open to
competition in late May 1998.
Competition has become well established in the UK, with around 50% of customers
having switched their supplier, with significant numbers of consumers having chosen to
switch their supplier more than once.
Since the market opened, average bills have fallen by around a third, collectively
saving consumers around a billion pounds each year.
Rates of switching in the gas market are higher than in other markets. In the telecoms
sector, which was liberalized 14 years before the gas markets, only around 30% of
customers have exercised their right to switch from the former monopoly supplier.
The interests of customers have been further advanced by the existence of the UKs
wholesale gas market, where gas is traded on a bi-lateral basis between producers
and shippers. Wholesale trading in the UK is subject to the rules laid out by the
Network Code, the terms of which are overseen by Ofgem.

Most gas is traded at a notional point within the UK gas grid known as the National
Balancing Point (NBP) (see Wholesale Environment) which accounts for the vast
majority of wholesale liquidity in Europe.
The National Balancing Point (NBP) is Europes leading and most active wholesale gas
market and accounts for the bulk of European wholesale market liquidity.
Aside from the commercial opportunities that exist from trading at the NBP, there are
also significant opportunities available for arbitraging with the Zeebrugge market by
utilising either the Interconnector or the power market in the form of spark spreads.
Gas is traded in various contract lengths ranging from within day to up to two years.
An NBP futures contract has been traded on the International Petroleum Exchange
(renamed ICE Futures after its parent company the Intercontinental Exchange in
October 2005) since January 1997.
Rather than being a physical hub located at a specific point, the NBP is a notional or
virtual point allowing delivery anywhere within the UK gas grid.
Currently there are around 60 active NBP players at various stages in the value chain.
These players are primarily gas shippers, but also include producers, power generators
and financial institutions. To trade at the NBP, players need to obtain a shippers
license from Ofgem.
An indication of the NBPs strength is the fact, in the past, its ratio of trades to physical
flow has averaged between 9:1 and 10:1, meaning that between nine and ten times as
much gas is traded as actually flows. However, this liquidity has diminished
significantly recently, particularly in the forward part of the curve given that many
players have been unwilling to take significant long term positions in light of the upward
movement in prices seen in 2004 and 2005. Another factor attributable to the
decrease in liquidity is the growing trend for utilities to vertically integrate by buying
upstream assets, thus reducing their wholesale market purchasing needs.

Infrastructure
Transmission and distribution

The UK National Transmission System (NTS) is one of the few elements of the UK gas
industry still under monopoly control. The infrastructure is owned and operated by
National Grid Transco (NGT), an incarnation of the now demerged former monopoly
British Gas. Ofgem oversees the regulation of the NTS through the use of price
controls governed by an RPI minus formula reviewed every five years. Gas enters
the NTS at 6 coastal terminals around the UK. From here it exits the system in any
one of 8 Local Distribution Zones (LDZs).
Historically the LDZs were owned by NGT, although in 2003 the company invited
interested parties to express their potential interest in purchasing a number of the
zones. In August 2004 deals were concluded with Australias Macquarie Bank and a
consortium of United Utilities and CKI who each bought one zone, with Scottish and
Southern Energy buying two. Completion of the deal occurred in June 2005.
Entry capacity to the NTS is auctioned in monthly tranches. The 60 users of the NTS
are obliged to obtain a shippers license from Ofgem and are governed by the terms of
the Network Code, a set of rules governing use of the system. A key requirement for
shippers is to balance their deposits to and withdrawals from the NTS on a daily basis.
Short term wholesale gas prices are heavily influenced by the shippers efforts to keep
the system in balance.
Offshore infrastructure

Key infrastructure for landing gas in the UK includes:-
The SAGE (Scottish Area Gas Evacuation), FLAGS (Far North Liquids and Associated
Gas System), Fulmar, Vesterled and FRIGG pipelines all land gas at St. Fergus in the
north east of Scotland.
CATS (Central Area Transmission System) lands gas at Teesside from central North
Sea fields.
The Easington and Theddlethorpe terminals, to the south of Teesside, also land
central North Sea gas.
The SEAL (Shearwater Elgin Franklin Area Line) lands gas at Bacton, on the east
coast.

Gas from the Morecambe North and South fields in the Irish Sea is landed on the UKs
north west coast.
Gas is exported from the UK mainland via the following pipelines:
UK-Belgium Interconnector - runs between Bacton and Zeebrugge, Belgium. The
pipeline has the ability to operate in both forward and reverse flow modes. Current
capacity is 20 bcm per annum in forward flow (exporting gas from the UK to
Zeebrugge) and, following expansion completed in late 2005, 16.5 bcm per annum in
reverse flow (exporting gas from Zeebrugge to the UK). Further expansion work will
increase this to 23.5 bcm by the end of 2006.
Gas from the UK is exported to Ireland via two Interconnectors running from south
west Scotland to the County Dublin area. The first was built in 1993, with the second
completed in 2002. A spur from the second Interconnector also supplies the Isle of
Man.
SNIP (Scotland to Northern Ireland Pipeline) ships gas from the UK mainland to
Northern Ireland.
Two significant pipeline projects are currently being built with one other significant
project possible:
Langeled Norwegian exports to the UK will be significantly increased following
completion of the Langeled pipeline. Up to 20 bcm of gas from the new Ormen Lange
field will be shipped through the pipeline. The project is being developed in 2 phases.
The first phase will supply gas to the UK via the Sleipner platform from late 2006, with
the second part of the pipeline supplying gas from Ormen Lange by October 2007.
BBL the Bacton to Balgzand project linking the Netherlands to the Bacton coastal
terminal in the east of the UK is currently being constructed. The planned project will
have sufficient capacity to import up to 16 bcm per annum of low calorific Groningen
gas to the UK, equivalent to about 14 bcm of high cal gas. Regulatory delays in
obtaining a license to exempt the pipeline from Third Party Access requirements in
order to provide sufficient capital return on the project had delayed construction work,
though this finally began in October 2004. Initial flows are expected by early 2007.
North European pipeline Gazprom, BASF and E.On are currently developing plans
to construct a 30 bcm pipeline supplying Russian gas to Britain and other parts of
Western Europe under the Baltic. Initial flows are expected by 2010.

LNG
The UK had a long history as an LNG consumer and became the worlds first importer
of LNG in 1964, before closing its regasification facility in the early 1980s following the
growth in indigenous production.
The maturing of UK indigenous supply, increasing demand and improvements in LNG
economics, have meant that LNG is set to re-emerge as a key source of UK gas
supplies.
Three new regasification projects are currently under way:
Isle of Grain Located on the River Medway, 20 miles from London, NGTs Isle of
Grain project came online in July 2005. All of the projects 4.4 bcm per annum capacity
has been reserved by BP and Sonatrach. NGT has been awarded permission to
expand capacity to 14.7 bcm which could be operational by late 2007 or early 2008.
Milford Haven Two separate projects are currently under development at Milford
Haven in Wales. The Dragon project being developed by Petroplus, BG and Petronas
is a 6 bcm facility and is expected to enter service by late 2007. Qatar Petroleum and
ExxonMobil have now resolved various regulatory and financing issues at their 10.5
bcm South Hook project and completion of the project is now expected by the end of
2008. Plans are being developed to double the plant's capacity to 21 bcm.
Two other potential LNG projects have been mooted, although both are in the very
early stages of development, and as such are not certain to reach the construction
stage.
UK supplier Centrica, Calor Gas and LNG Japan have lodged a planning application to
develop a new LNG terminal on Canvey Island in the east of England. The 150-200
million terminal will have enough import capacity to supply 5.4 bcm per year, meeting
5% of the UKs gas needs. If planning permission is agreed the project should be
operational by 2010.
Canatxx of the USA has stated its intention to construct a terminal on the Isle of
Anglesey.
ConocoPhillips is currently seeking planning consent to build an LNG terminal at the
Teeside oil terminal in northeast England.
Despite the future supply gap created by demand growth and indigenous supply
contraction, it is far from clear if these projects will be able to find room for their LNG in
the market (at least in the short term), given the larger projects already at far more
advanced stages of development and the existence of various competing pipeline
projects.


Table 49: UK, LNG Infrastructure

Name Operator Size Status / Expected start up
(bcm)
Isle of Grain NGT 4.4 Operational
South Hook Exxon
Mobil/Qatar
Petroleum
10.5 Under construction/2008
Dragon Petroplus 6 Under construction/2007
Canvey Island Calor Unspecified Early planning stage/2008
Amlwch Canatxx Unspecified Early planning stage/2008


Storage

As self sufficiency in gas diminishes, the role of storage in the UK will take on a greater
importance in order to meet peak demand swings and to protect against supply
disruptions.
In the past, the development of storage capacity has been a low priority for the UK gas
industry. Plentiful supply and the fact that many of the older fields on the UKCS had
high swing capabilities mean that the UK now has much less storage capacity than
continental Europe.
Existing storage capacity in the UK is dominated by Centricas Rough site which, at
2,800 mcm, accounts for 77% of the UKs total storage capacity and is able to meet
10% of peak day demand.
In addition to Centrica Storage, the other key player in the UK storage market is
Scottish and Southern Energy which operates the Hornsea facility.
With the changing supply dynamics now prevalent, increased levels of storage are
likely to be needed in the short to medium term.
A number of new projects to meet the projected need for additional storage capacity
are now at various stages of development. These include:
Scottish and Southern Energy and Statoil are currently developing a 420 mcm site at
Aldbrough, Humberside due to be opened in 2007.

EDF Trading is doubling the size of its Hole House Farm facility. An additional 150
GWh will be on line from early 2007 with another 150 GWh from early 2009.
Star Energy, the owners of the Humbly Grove facility inaugurated in November 2005,
are also developing four other projects. The most advanced of these is at Welton in
Lincolnshire which is due online in 2008.
In May 2004 Scottish Power was awarded planning consent to construct a 168 mcm
facility at Byley in Cheshire, due to come into service by 2009.
Canatxx is planning to develop a 1,600 mcm site at Fleetwood in Lancashire, though
the project is now subject to a planning enquiry. As such we do not expect it to be
operational before at least Q2 2010.
Eural Trans Gas has indicated that it is considering acquiring a depleted offshore gas
field to be converted into a storage facility.
Warwick Energy is seeking to convert its Caythorpe field into a 180 mcm storage site
by 2007.
Centrica and Amerada Hess are examining the possibility of converting the York field
into a storage site.
Wingas has applied for planning permission to extend the life of its Saltfleetby gas field
in Lincolnshire by converting it to a storage facility with expected capacity of more than
700 mcm.

Table 50: UK, Storage Sites

(mcm / day)
Rough Depleted Field Centrica Storage 2,800 42
Hornsea Salt Cavity Scottish and
Southern
325 18
Hatfield Moors Depleted Field Scottish and
Southern / EOG
134 1.7
Hole House Farm Salt Cavity EDF Trading 12 2.7
5 LNG Peak
Shavers
LNG NGT 374 75
Humbly Grove Depleted Field Star Energy
Total 3,925 167.4


Appendix

CHAPTER 35 APPENDIX
Data sources
Statistical data is sourced from the International Energy Agency (IEA). Data for
countries not members of the IEA (Algeria, Bulgaria, Croatia, Cyprus, Estonia, Latvia,
Lithuania, Malta, Russia, Romania and Slovenia) is sourced from national sources
such as regulators, energy companies and government departments.
Data Adjustments
IEA source data does not disaggregate LNG and pipeline imports therefore
proportions have been taken from the BP Statistical Review of World Energy and
applied to the IEA imports total.
Sectoral Demand - End use demand data breakdowns have not been provided for
the latest year by the IEA.
End use proportions for the previous year have been used and applied to the latest
total demand data.
End use sectoral consumption is disaggregated by the IEA into various industries
such as the mining industry, chemical processes, manufacturing etc. Datamonitor
aggregates this data up into the following groups :-
Residential consists of end use consumption by households.
Non-Residential - consists of end user consumption in the Industrial and Commercial
sectors including public services.
Power Generation - gas used by gas fired power stations for conversion into
electricity. This includes gas inputs to both public and private power, CHP and heat
production generation.
Statistical differences are balancing adjustments used to compensate for conversion
differentials and differing calculation assumptions in IEA source data.
Appendix

Definitions
Aquifer a type of gas storage facility using the site of former underground water
deposits.
Associated gas gas found alongside oil deposits.
bcf billion cubic feet
bcm billion (10 to the power of 9) cubic metres
E and P Exploration and Production.
IEA International Energy Agency
LNG Liquefied Natural Gas
mcf million cubic feet
mcm million cubic metres
mtoe million tonnes of oil equivalent
Non-Associated gas gas that occurs in its own structure rather than alongside oil
deposits.
RPI Retail Price Index
Salt Cavern A type of gas storage facility using former salt mines.
Town Gas Gas manufactured by collecting the methane emitted from burning coal.
TPA Third Party Access
TSO Transmission System Operator
UKCS United Kingdom Continental Shelf

Appendix

Future readings
DMEN03417 - Market Competitive Intensity: Current and Future Trends Assessments
of Competitive Development in Key European Gas and Power Markets
DMEN0370 - Future Development of European Wholesale Energy Markets: The likely
development of wholesale gas and power markets in selected European countries
DMEN0401 European 33 Electricity Market Profiles: Q1 2006 Update

SPP writing team
Andrew Hill Lead Analyst adhill@datamonitor.com
Karl Lindstrom Associate Analyst klindstrom@datamonitor.com
For more information on this report or other European energy market research,
please contact your Datamonitor account or the author.
Appendix

How to contact experts in your industry
eAutomotive eautomotive@datamonitor.com
eConsumer econsumer@datamonitor.com
eEntertainment eentertainment@datamonitor.com
eFinancial Services efinancialservices@datamonitor.com
eHealth ehealth@datamonitor.com
eLogistics elogistics@datamonitor.com
eProfessional Services eprofessionalservices@datamonitor.com
eTechnology etechnology@datamonitor.com
eUtilities eutilities@datamonitor.com

Bold indicates the contact area for deeper content knowledge regarding this
particular Market Report.

European 33 Gas Market Profiles 2006

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

European 33 Gas Market Profiles 2006

Uploaded by

Copyright:

Available Formats

www.datamonitor.

You might also like