Gas competition in SEE: New regional infrastructure - a factor for growth

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1 Gas competition in SEE: New regional infrastructure - a factor for growth Dimitrios E. Manolis International Projects Monitoring Director DEPA S.A. Vienna, 19 September 2013

2 Gas prices in EU, USA and Asia Source: Atlantic Council, April 9 th 2013

3 Border prices differences between NW and SE Europe Bulgaria Sources: ΡΑΕ, Eurostat, BAFA

4 Sources: IHS CERA, BAFA Infrastructure leads to the convergence of EU hub gas prices

5 Infrastructure leads to the convergence of EU hub gas prices In February and March 2013, for the first time since the beginning of trading*, Italian hub PSV recorded an average price lower than major NWE hubs (TTF, Zeebrugge and NBP), with 3/5 /MWh differential in March This is explained by the fact that the Italian market is currently oversupplied at a higher level than the European average, with EU prices recovering faster as spot offer has decreased (see for example drop of spot import to EU that halved from 2011 to 2012) Note: Prices are taken at their logistic locations Source: Italian power market operator newsletter March 14 th 2013

6 The Southern Gas Corridor Slovenia Croatia Hungary B&H Serbia Romania Russia Italy Montenegro Kosovo Bulgaria Albania FYROM TANAP Greece Turkey Aegean East Mediterranean Pipeline TAP South Stream East Med IGI Poseidon IGI Onshore IGI Other Interconnectors Terminal

7 Summary From Sources to SEE s market Germany SEE s market is: Slovenia Croatia Hungary Romania the closest market to new sources, including through Greece; Italy B&H Serbia Montenegro Kosovo FYROM Bulgaria Russia Georgia a growing market with competitive prices; Albania Greece Turkey Armenia in urgent need to diversify its supply sources and increase its energy security.

8 East Med a New Energy Corridor East Med will be able to carry natural gas from new sources, through a new route with solely EU transit countries. East Med will initially carry 8bcma to Europe thusly opening a New Energy Corridor. East Med is excepted to be granted the label of Project of Common Interest by the EU, allowing for direct Union financing as well as much better terms while negotiating with other financial institutions. Italy Slovenia Croatia B&H Montenegro IGI Poseidon Hungary Albania Serbia Kosovo Greece FYROM Romania Bulgaria Turkey Russia Georgia East Med: Prefeasibility studies have shown conclusively that East Med is technically feasible. Feasibility studies and Reconnaissance Surveys need to be carried out in order to decide on the optimum route/landfalls etc. East Med, provided that prompt decisions are undertaken by the producers, may carry gas to Europe as early as Existing Under construction Under development East Mediterranean Pipeline

9 The East Med Project Southeastern Europe is a key market for the new sources of gas in the Eastern Mediterranean because of: its proximity to the source and its potential for growth. Hungary Slovenia Croatia Romania Russia The Advantages: B&H Serbia Is the most politically and commercially attractive solution; Connectivity with infrastructure to SEE and Italy Works in complementarity with the option, allowing for a win-win scenario; Is the option that may be operational before 2020 and enabling the Mediterranean gas to reach first an attractive developing market. Next steps: Italy Montenegro IGI Poseidon Albania Kosovo Greece FYROM Bulgaria Turkey Georgia The envisaged pipeline is expected to be labeled as a Project of Common Interest (PCI A decision by the producers regarding the quantity of natural gas to be exported to the European Markets; Political decision by the EU to enable the establishment of this new energy corridor to Europe; In depth feasibility study to reinforce the technical and commercial viability of the project. Existing Under construction Under development East Mediterranean Pipeline

10 The Greece Bulgaria Interconnector () acts as a gateway to SEE through Greece, which is situated at the crossroads of all the new sources will be carrying 3bcma, scalable up to 5 bcma. s national importance has been announced by both the Greek and Bulgarian governments. Hungary Slovenia Croatia B&H Italy Montenegro Romania Serbia Bulgaria Kosovo Russia s regional significance has been reaffirmed by the EU, receiving a 45million grant through the EEPR framework. Albania FYROM Greece Turkey : Permitting licensing is in place. in cooperation with the 2 NRAs has launched its Market Test while updating its business plan and financial structure, taking into consideration the mandate signed with EBRD. First phase completed - Expressions of Interest (EoI) received show a very big interest for the quick realization of the project, the binding phase of the Market Test to confirm interest. TAP South Stream East Med IGI Poseidon IGI Onshore IGI Other Interconnectors Terminal

11 The Greece Bulgaria Interconnector () FEED/Technical Design are in the final stage. Linepipe & LLI procurement procedure is in progress. Construction to start in 2014 First gas is expected to flow in 2016

12 The Aegean terminal The planned FSRU in Northern Greece will allow SEE region to have easier access to more capacities (in addition to the terminal in Revythousa). Slovenia Croatia Hungary B&H Serbia Romania Russia The Aegean will be able to send out 5 bcma into Greece and from there, in conjunction with and ITG, to SEE and Turkey Italy Montenegro Albania Bulgaria Kosovo FYROM Aegean The Aegean : Comprises the floating facility It is located at Kavala where DEPA possesses property rights Will have a storage capacity of 150,000m 3 Greece Turkey TAP South Stream East Med IGI Poseidon IGI Onshore IGI Other Interconnectors Terminal

13 Aegean Technical Feasibility Established Technical Feasibility established: Technical development progressing beyond completed feasibility. EIA study awarded in September Natural gas may flow from the Aegean terminal as soon as late 2016.

14 Aegean / Summary Characteristics CAPEX Capacity Completion Shareholders Aegean 270 m Potential for EU Funding 5 bcma 2016 DEPA Other possible investors 220 m Granted EU Funding: 45 m 5 bcma 2016 ICGB A.D. 50% 50% BEH A.D. IGI Poseidon S.A. 50% 50% EDISON DEPA

15 Why the Aegean / System South East Europe needs long-term supply and is a stable growing market. The Aegean is the closest and least expensive route to the Greek, SEE and Turkish markets. Aegean can be the first regasification terminal to target the broader SE European market through, and Turkey through the already operating ITG. Multiple countries can be served through one EU entry point. Aegean is at the crossroads of several key infrastructure projects, including crossborder pipelines and gas storage.

16 Impact of these projects to SEE Development of Interconnecting Infrastructure in SEE The aforementioned projects will play a significant role and will have a great impact in the region: They will address the region s needs for Security of supply, its needs for diversified sources and routes and will enhance the flexibility of the region. They will promote gas to gas competition, allowing a more liquid market to emerge thusly lowering the prices in the region. They will spur the development of more Interconnecting Infrastructure in the region which is a prerequisite for a truly integrated market. Slovenia Hungary Romania Croatia B&H Serbia Italy Montenegro Bulgaria Kosovo Albania FYROM Greece Turkey Russia TAP South Stream East Med IGI Poseidon IGI Onshore IGI Other Interconnectors Terminal