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Gas Storage: a Flexibility Instrument supporting Security of Supply

Lex HuurdemanManager Regulatory Affairs & Commercial Strategy - Europe

2

Current trends in Europe that impact gas storage investments…

• Increasing gas import dependence

• Liberalising markets

• Supply disruptions

• Recession

3

Indigenous production will continue to play a major role

but needs an enabling framework

• Access to resources

• Competitive fiscal and regulatory regime

• Streamlined permitting procedures

• Liberalised gas

market

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EU + Norway gas production and demand

0

100

200

300

400

500

600

700

800

2004 2010 2015 2030

Demand EEAProduction EU

Bill

ion

cubi

c m

eter

s

Source: IEA World Energy Outlook 2006 + IEA Natural Gas Market Review 2007

% of demand metby EEA production

65%60% 50%

40%

Production Norway

Onshore areas with restricted access

Schagen

Waddenzee

Biesbosch

IJsselmeer & Markerwaard

Groningen Compressor Station

Source: provincies Groningen, Friesland, Drenthe, Overijssel, Gelderland, Flevoland, Noord-Holland, Zuid-Holland, Utrecht, Zeeland, Noord-Brabant, Limburg; DLG Groningen; Expertise Centrum Ministerie van LNV; Ministerie van Defensie; Rijksdienst voor het Oudheidkundig Bodemonderzoek (ROB); Rijkswaterstaat; International Maritime Organization (IMO); Centraal Bureau voor de Statistiek (CBS).

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Import Routes

Nigeria LNG

Algeria

Norway

Libya Egypt

48 Tcm

30 Tcm

Qatar

IranIraq

Russia

Caspian9 Tcm

Source: OGP

Diversity of supply and supply routes is security of supply

5

Gas Storage as Flexibility Instrument

• Physical flexibility instruments compete with virtual ones

• Regulation should be market-driven

• Regulatory framework needs to attract investments

• Maintain level playing field in a competitive flexibility market

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A Strategic Role for Gas Storage?

• Commercial flexibility services can deal with most disruption scenarios

• Public Service Obligations when deemed unavoidable for specific exposures

• Impact on commercial playing field should be minimal

• PSO holders purchase flexibility services on the open market