2009 Bemip Ramboll Bemip Final Report

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Transcript of 2009 Bemip Ramboll Bemip Final Report

Prepared for the EU Commission DG TREN C1

Future Development of the Energy Gas Market in the Baltic Sea RegionFinal Report

June 2009

Ref. 953106/BEMIP Final report

Prepared for the EU Commission DG TREN C1

Future Development of the Energy Gas Market in the Baltic Sea RegionFinal Report June 2009

Ramboll Oil & Gas Teknikerbyen 15 2830 Virum Denmark Phone +45 4598 6000 www.ramboll-oilgas.comRev. Date Made by Checked by Appr. by Description

2009-06-12 PEJ/SFK PEJ/SFK/ADM PEJ/SFK Final Report Ref 953106Ref. 953106/BEMIP Final report

Table of contents

0. 1. 1.1 1.2 1.3 2. 2.1 2.2 2.2.1 2.2.2

Executive summary Introduction Baltic Energy Market Interconnection Plan this report The Amber project different definitions Nord Stream, Yamal-Europe II, Nabucco Conclusions and recommendations Status of conclusions and recommendations Market Issues No need for permanent derogation of Baltic gas markets Polish gas transmission pipeline Yamal-Europe should be opened for market access in normal and reverse flow directions and preferably integrated with Gaz-system network Integration of the gas networks in the East Baltic Sea countries (Finland, Estonia, Latvia and Lithuania) will be an advantage for the market Establishment of uniform regulation in order to ensure investment incentives in region A time limit to 2014 should be used for the full opening of all markets and the establishment of new infrastructure Low gas end-user prices gives room for investment in market opeing and security of gas supply without jeopardizing social aspects Suspension of Skanled raises uncertainty about Norwegian gas supply to EU and in particular to the Baltic Sea region and opens for LNG Infrastructure Focus on market integration and security of supply East Baltic Sea bridging the gas islands to the integrated EU gas transmission system and securing alternative gas supply. Further investments in East Baltic Sea depends on the status of the YamalEurope pipeline with respect to reverse flow West Baltic Sea depletion of Danish field requires urgent action for new supply to Denmark and Sweden. LNG recommendations Interconnection of the East Baltic gas markets opens for development of large scale, strategic and commercial, underground gas storage in Latvia Financial crises and lower oil prices reduce cost and time of establishing gas network substantially Russian gas system development may impact the project usage in the longer term, but should not delay implementation of recommended projects Objectives and criteria Analysis of indigenous production/transmission/storage and LNG Gas demand around the Baltic Sea Indigenous production/transmission/storage/LNG capacities Norway is the main gas source in North-West Europe

1 4 4 5 5 6 6 6 6

7 8 8 8 9 9 10 10 10 11 12 13 14 14 14 14 15 15 17 18

2.2.3 2.2.4 2.2.5 2.2.6 2.2.7 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.3.7 2.3.8

3. 4. 4.1 4.2 4.2.1

Ref. 953106/BEMIP Final report

I

4.2.2 4.2.3 4.2.4 4.2.5 4.2.6 4.3 4.3.1 4.4 4.4.1 4.4.2 4.5 4.6 5. 5.1 5.2 5.2.1 5.2.2 5.2.3 5.2.4 5.2.5 5.3 5.4 5.5 5.6 5.7 5.8 6. 6.1 6.2 6.2.1 6.2.2 6.2.3 6.3 6.3.1 6.3.2 6.4 6.4.1 6.4.2 6.5 7. 7.1 7.2 7.3 7.3.1 7.3.2 7.3.3

Germany Poland Denmark The Netherlands The UK Gas transmission in the region Integration of gas networks in Germany Gas storage in the region Geological potential, existing and planned facilities Demand for storage capacity in the Baltic countries and Finland LNG around the Baltic Sea Conclusions on gas reserves and indigenous production Links of the three Baltic countries with the Gazprom system Overview over system Capacity assessment of normal operation 2009 Pipeline capacities Demand peaks during cold periods Supply-demand balance area 1 Supply-demand balance area 2 Supply-demand Finland Capacity assessment after Nord Stream in operation Summer operations of the Baltic gas system Latvian gas storage interrupted Belarus supply interrupted Russian supply interrupted Dispatching structure and decision making Identification of the benefits of the interconnections through the value of capacity Benefits of the interconnections whole sale prices net back value of gas Russian gas supply prices Gas import prices and contracts Netback prices in the Baltic countries and Finland Impact of decreasing transportation costs Gas retail prices Low retail prices compared to other EU member states Potential for market integration LNG prices EU LNG import prices LNG price in the Baltic Sea Conclusion on prices Main infrastructure gaps and bottlenecks Missing links Principles for interconnections around Baltic Sea Bottlenecks in the system Latvian/Lithuanian border Polish- German border - Reverse flow in Yamal-Europe pipeline Denmark-Germany

19 20 20 21 22 22 24 25 25 25 26 26 27 27 28 28 29 29 29 29 29 30 31 31 32 32

33 33 33 33 34 35 36 36 38 39 39 39 41 42 42 42 43 43 44 45

Ref. 953106/BEMIP Final report

II

7.3.4 8. 8.1 8.2 8.3 8.3.1 8.3.2 8.3.3 8.3.4 8.4 8.5 9. 9.1 9.2 9.3 9.3.1 9.3.2 9.3.3 9.3.4 9.4 9.5 9.5.1 9.5.2 9.5.3 9.5.4 9.5.5 9.6 9.7 9.7.1 9.7.2

LNG storage Identification of pending questions preventing the implementation of an integrated energy market Derogations status and conditions Uniform regulation Security of supply Low security of supply Baltic Sea countries Security of supply costs in general Security of supply costs in the Baltic countries Security of supply costs in Denmark Improving market mechanisms and strengthening incentives Identification of possible market related actions Prioritisation of necessary interconnections, gas storages and LNG terminals Methodologies, suite of models and evaluations Baltic Sea projects are relatively small investments compared to major supply systems to EU List of project and project assessment SWOT Pipeline projects short to medium term SWOT Pipeline projects Long-term SWOT LNG projects SWOT Storage projects Pipelines versus LNG projects LNG assessment Small or large scale LNG Conclusions on LNG size Location of LNG LNG options traditional with storage or direct gasification on ship Gas storage versus pipelines and LNG Qualitative comparison of projects Quantitative comparison model Model description Conclusions on quantitative analysis

45

46 46 47 48 48 50 50 51 51 51

52 52 53 53 53 56 57 58 59 61 61 62 63 63 65 65 67 67 69

List of appendices

A.

[Appendix]

Ref. 953106/BEMIP Final report

III

0.

Executive summaryThe East Baltic Sea member states of Finland, Estonia, Latvia and Lithuania are the only four member states which remain isolated from the present integrated EU gas transmission system. The gas demand in these member states, which can be considered as a separate gas island from the rest of Europe, is approximately 10 bcm per year. The isolation mentioned above is further aggravated by the East Baltic States and Polands continued reliance upon gas supplied from one source, Russian gas, which is supplied either directly from or via Belarus. Subsequently such states are afflicted by both low levels of diversification and security in their gas supplies. Considerable gas reserves are still available in Norway which is in close proximity to the Baltic states and Finland and has significant levels of resources available with 3000 bcm of remaining and a further 1900 bcm in undiscovered fields. This is the only long-term supplier in the region, other than Russia, as gas fields are rapidly being depleted in UK, The Netherlands, Denmark and Germany. However in the short-term these countries still have an active part to play in contributing to gas supply in the region. In addition to the above mentioned suppliers gas can also be supplied as LNG, as all member states are located with direct access to the Baltic Sea. Geological conditions for underground gas storage vary in the region with Finland, Estonia, Sweden and Norway having no suitable locations whilst there remains good conditions in Latvia, Germany, Poland, Denmark and possibly also in Lithuania. The most important gas storage in the region is Incukalns in Latvia. The pipeline system in the Baltic Sea region has historically been developed as two main systems with the West supplied by The Netherlands, Germany and North Sea resources, and the East supplied by Russia. The Yamal-Europe pipeline constitutes the main connection between the two systems but is only open from East to West. The lack of reverse flow possibility in this pipeline constitutes a major hindrance for market integration and security of supply. With the establishment of the Nord Stream pipeline there will be an even stronger connection between the overall systems, but this alone will not solve the issue of gas islands. The capacity from Russia to the East Baltic Sea market is adequate to meet todays demand, however such supply may only be achieved by use of the Incukalns gas storage and the balance is sensitive to disruption of supply from the storage or one of more pipelines from Russia. When Nord Stream is established the balance is dependent upon the supply from new Russian onshore pipelines, the development of the Shtokman gas field and furthermore how flexible the offtake to Nord Stream will be in view of the creation of connection to the large German market with numerous gas storages available. So far the end-user gas prices in the East Baltic Sea region have been lower than in the rest of EU, this is probably due to depreciated gas systems and their vicinity to

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the main gas supplier, however there increasingly seems to be a tendency towards convergence of gas prices within the EU. In the West Baltic Sea area the depletion of gas fields in Denmark means that within a few years time there will be a lack of ca