analysis of the impact of the nord stream pipeline's onshore

Analysis of the Impact of the Nord Stream Pipeline’s

Onshore Connections on the Natural Gas Pipeline Transmission Grids in the Czech Republic and

Slovakia

Report by

Energiewirtschaftliches Institut an der Universität zu Köln (EWI)

[Institute of Energy Economics at the University of Cologne (EWI)]

Initiated by Concord Power NORDAL GmbH

April 16, 2009

Institute of Energy Economics at the University of Cologne

Institute of Energy Economics at the University of Cologne (EWI)

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Albertus-Magnus-Platz

50923 Cologne, Germany

Tel.: +49 (0) 221 - 470 2258

http://www.ewi.uni-koeln.de

Authors:

Stefan Lochner

PD Dr. Dietmar Lindenberger


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Table of Contents

Lists of Figures & Tables ........................................................................................................... 3

1 Introduction ........................................................................................................................ 4

2 Methodology ...................................................................................................................... 4

3 Investigated Scenarios........................................................................................................ 6

4 Simulation Results.............................................................................................................. 9

4.1 Natural Gas Flows in Slovakia................................................................................. 10

4.2 Natural Gas Flows in the Czech Republic ............................................................... 13

4.3 Transit Volumes and Asset Utilization .................................................................... 21

5 Security of Supply Considerations................................................................................... 24

6 Conclusions ...................................................................................................................... 26

References ................................................................................................................................ 29


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List of Figures

Figure 1: Nord Stream, onshore connections and Czech and Slovakian pipeline grids............. 7

Figure 2: Natural Gas Flows before Nord Stream (Year 2010) ................................................. 9

Figure 3: Annual Flows Ukraine to Slovakia........................................................................... 10

Figure 4: Annual Flows Slovakia to Austria............................................................................ 12

Figure 5: Annual Flows Slovakia to Czech Republic .............................................................. 13

Figure 6: Gas Flow Overview Czech Republic - Scenario A (2015)....................................... 14

Figure 7: Gas Flow Overview Czech Republic - Scenario B (2015) ....................................... 15

Figure 8: Gas Flow Overview Czech Republic - Scenario C (2015) ....................................... 16

Figure 9: Annual Flows on GAZELLE Pipeline...................................................................... 17

Figure 10: Annual Flows Czech Republic to Germany in Waidhaus ...................................... 18

Figure 11: Annual Flows Transgas South Route (Czech Republic) ........................................ 19

Figure 12: Annual Flows Transgas North Route (Czech Republic) ........................................ 20

List of Tables

Table 1: Scenario Overview....................................................................................................... 8

Table 2: Utilization of the Slovak Gas Transit Grid ................................................................ 21

Table 3: Gas Flows through and Utilization of the Czech Republic's transit network ............ 22

Table 4: Czech Republic’s entry / exit capacities at German interconnection points.............. 24


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1 Introduction As natural gas demand in Europe is likely to rise over the next decades – while domestic

production decreases – the European Union’s dependency on natural gas imports is likely to

increase considerably.1 Due to the rising import demand, a number of projects which would

create additional import capacity in the European Union are being discussed at the moment.

One of them is the Baltic Sea offshore pipeline Nord Stream, which is regarded as a “Project

of European Interest” within the Trans-European Energy Networks (TEN-E)2. As of 2011, the

pipeline could transport up to 27.5 billion cubic meters per year directly from Russia to

Germany; if a second line of the pipeline is built, capacity would double to 55 billion cubic

meters annually.

Within Germany, different connection pipelines which could connect Nord Stream to the

German long-distance pipeline transport grid have been proposed. These are the onshore

pipeline NORDAL, connecting Nord Stream with the German long-distance transmission grid

of ONTRAS, Gasunie and E.ON Gastransport near Berlin, the pipeline OPAL as a connection

to the WINGAS grid and the Czech transport grid at the German-Czech border in Olbernhau,

and the NEL pipeline which would constitute a connection to north-western Germany.

In 2008, the Institute of Energy Economics at the University of Cologne (EWI) analyzed the

different options with respect to their integration into the existing gas supply infrastructure in

the context of different scenarios.3 Based on the results and scenarios of the EWI (2008)

study, this report outlines the impact of the different proposed onshore connections for the

first line of the Nord Stream pipeline on the pipeline transmission grids of the Czech Republic

and Slovakia, two countries which are currently important transit countries for natural gas to

Germany.

2 Methodology

The methodological approach of this report is identical to the EWI (2008) study. Hence, it is

based on natural gas flow analyses with a complex natural gas infrastructure model. Such a 1 See for example European Commission (2008). 2 See Nord Stream (2008). 3 Study “Modellgestützte Untersuchung der Nord Stream-Anbindungsleitungen NORDAL und OPAL“ (EWI, 2008).


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model-based analysis allows considering the utilization of the Nord Stream pipeline and its

onshore connections as well as of all other natural gas pipelines within the framework of the

defined gas market scenarios. All interdependencies within the European gas infrastructure

are taken into account. Hence, the analysis conforms with § 23 (3) of the German Regulator’s

Directive of Incentive Regulation (ARegV, Anreizregulierungsverordnung) which stipulates

that applications for the approval of investment budgets have to be substantiated with an

analysis of the necessity of the investment based on gas flow analyses with a network model

(Bundesnetzagentur, 2008).

Such an approach avoids considering existing and proposed new pipelines as isolated, single

elements, but allows analyzing them in the context of the complex European natural gas

supply infrastructure taking all interdependencies between the single elements into account.

The Institute of Energy Economics at the University of Cologne (EWI) has developed a tool,

the so called TIGER-Model (Transport Infrastructure for Gas with Enhanced Resolution)

which enables such analyses. The model covers the whole of Europe as it is applied in

combination with a database which incorporates individual data on all major long-distance

transport pipelines, all natural gas storages as well as all LNG import terminals in Europe.

Furthermore, information on planned new storages, pipelines and LNG terminals are made

available which may be included in the analysis depending on the investigated scenario.

Temporally, the model’s granularity is monthly. Hence, seasonal patterns will be covered by

the analyses. The results of the model are the physical natural gas flows in the European

natural gas transport infrastructure assuming an efficient usage of the available assets.4 Thus,

the model results are based on the infrastructure and cost fundamentals of the natural gas

market, strategic considerations of market players are not taken into account.

This report uses the scenarios developed in EWI (2008) and provides analyses of how the

Nord Stream pipeline’s different proposed onshore connections will impact natural gas flows

– and the utilization of the existing infrastructure – in the Czech Republic and Slovakia.

Additionally, as one of the proposed onshore connections provides new entry capacity from

Germany into the Czech Republic, the need of additional import capacity for the integration

of the two markets and security of supply will be investigated.

4 A detailed description of the model can be found in EWI (2008) in German. An English description is provided by Lochner and Bothe (2007).


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3 Investigated Scenarios

The scenarios considered in this study are entirely based on EWI (2008). To focus on Nord

Stream and its onshore connections, EWI (2008) defined a most-likely framework regarding

natural gas supply, demand and all other infrastructure projects which was not altered

between the scenarios. The demand scenario is based on Gas Strategies (2008) and the supply

scenario on Bothe and Lochner (2008). All included infrastructure projects are listed in the

appendix of the study (EWI, 2008, p. 61).5

The Nord Stream pipeline (first line) is included with an annual capacity of 27.5 billion cubic

meters as of October 2011 (Nord Stream, 2008). The following onshore connections options

(see also Figure 1 for a visualization of the pipeline routes) are possible for the first line of

Nord Stream6:

1. The onshore connection NORDAL with a capacity of 30 billion cubic meters per year.

The pipeline runs from the landing site of Nord Stream (Lubmin, Germany) to

Börnicke north of Berlin and enters operation at the same time as Nord Stream

(October 2011). From Börnicke, an expansion of the capacity of FGL 302 and 303

pipelines westwards and of the NETRA pipeline west of Steinitz up to 34 billion cubic

meters annually would allow transporting the Nord Stream gas to the north-west. This

takes place in combination with increased interconnection, i.e. new interconnectors as

well as the expansion of existing ones, between NETRA and the grids of E.ON

Gastransport, WINGAS Gastransport and Gasunie Deutschland Transport Service in

north-western Germany. The capacity expansion and increased interconnectivity is

assumed to be available when Nord Stream enters operation in October 2011. This

connection, thus, stipulates Nord Stream’s integration into the TEN-E NG-1 Axis (na-

tural gas import corridor in northern Europe)7 and allows deliveries into the countries

Nord Stream volumes are contracted for (Nord Stream, 2009).

2. The onshore connection OPAL running from Lubmin via Groß Köris (west of Berlin)

to Olbernhau at the German-Czech border with a capacity of 36 billion cubic meters

annually, entering operation in October 2011. (The Lubmin-Groß Köris part is re-

5 The relevant projects in the region this study is concerned with are the Nabucco pipeline, which was included in the simulation with a capacity of 8 billion cubic meters per year as of October 2013 and 25.5 bcm/year as of 2019, and RWE’s Trans Germany Pipeline MET with a capacity of 5 bcm annually as of 2013 according to EGM (2007). 6 A second line of Nord Stream doubling capacity was also investigated in EWI (2008), this scenario is however not relevant for this study which focuses on the onshore connections of the first line of the pipeline. 7 As intended by the EU as the project got its “project of European interest” status as part of this import axis for natural gas (see EU (2006), Nord Stream (2008)).


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ferred to as the northern section of OPAL; Groß-Köris to Olbernhau as the southern.)

From the Czech border, the GAZELLE pipeline as a new pipeline in the Czech

Republic would connect the German-Czech border in Olbernhau / Hora Svaté

Kateřiny (HSK) with the Czech-German border in Waidhaus with a capacity of 38

billion cubic meters per year (also as of October 2011).8 Hence, OPAL and

GAZELLE connect Nord Stream to Waidhaus.

The onshore pipeline option NEL, which would run from Lubmin to north-western Germany

with a capacity of 20 billion cubic meters annually, is not considered in this study as the

pipeline would only be available as of 2012, hence, for a potential second line of Nord

Stream. Furthermore, due to its capacity it would not be able to fully take up the volumes of

one line of Nord Stream. Therefore, it can only be a compliment to one of the other options.

Figure 1: Nord Stream, onshore connections and Czech and Slovakian pipeline grids

POLAND

SLOVAKIA

CZECH REPUBLIC

GERMANY

AUSTRIA

South Route

North Route

Slovak transit pipelines

CZECH TRANSGAS

SYSTEM

OPAL

GAZELL

E

NORDALOPALNETRA

FGL 302/303

Nord Stream

8 See http://www.rwe-transgasnet.cz/en/transmission-system/Development/ and http://www.rwe-transgasnet.cz/en/New-projects/gazelle/ . The pipeline is sometimes also refered to as Gazela (EGM, 2009). In this report, we will use the terminology from RWE Transgas.


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These potential infrastructure projects were combined to five scenarios in EWI (2008). In this

study, three of them will be considered (see Table 1 for an overview):

Scenario (A) “NORDAL” assumes that the NORDAL pipeline as well as the

expanded pipelines to the west are available. Hence, this scenario stipulates a

connection of Nord Stream to the existing grid in north-west Germany and Europe

(NORDAL as connection to the existing grid and an expansion of that for east-west

transit in northern Germany).

Scenario (B) “OPAL regulated” presumes that OPAL and GAZELLE are built and

fully integrated into the existing system. Hence, the onshore connection infrastructure

of Nord Stream mainly connects the pipeline to Waidhaus at the Czech-German

border.

Scenario (C) “OPAL partially regulation exempted” aims to depict a possible

illustration of the decision of the German regulator (Bundesnetzagentur) regarding the

regulation exemption of OPAL. This decision includes that natural gas volumes on

OPAL, which do not remain in Germany, are exempted from regulation. At the time

the EWI (2008) study as completed, only one exit point in Germany (4.5 billion cubic

meters of annual exit capacity in Groß Köris) had been confirmed by the pipeline

operators. Hence, this scenario assumes that the remaining volumes on Nord Stream

(27.5 less the 4.5 billion cubic meters) would be transported on to the Czech Republic.

The following model-based simulations are based on these three scenarios9, an overview of

which is provided in Table 1.

Table 1: Scenario Overview

Scenario(A)

NORDAL(B)

OPAL regulated(C)

OPAL partially regu-lation exempted

NORDAL X

OPAL X X*

GAZELLE X X

Grid expansion to north-western Germany X

*In the case of exemption from regulation, exit capacity in Germany is limited to 4.5 bcm. The remaining volumes will be transported to the German-Czech border in Olbernhau / Hora Svaté Kateřiny.

9 Scenarios (A), (B) and (C) thereby correspond to Scenarios (1), (3) and (4) of the EWI (2008) study. Scenarios (2) and (5) from EWI (2008) are omitted in this study. Scenario (2) which compared to Scenario (3) assumed that NORDAL provides the onshore connection between Lubmin and the region of Berlin instead of the northern part of OPAL but did not differ otherwise from Scenario (3). As the two pipelines are almost parallel (see Figure 1), there are no implications for gas flows in the Czech Republic or Slovakia. Scenario (5) assumes two lines of Nord Stream.


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4 Simulation Results Before we investigate the changes natural gas flows in the Czech Republic and Slovakia

experience due to Nord Stream and its different onshore connection options, we first consider

the gas flows before Nord Stream enters service. Therefore, Figure 2 depicts the physical gas

flows in the region in 2010, which essentially represent the status-quo as no significant new

infrastructure in the region will be completed before 2010.

In the map in Figure 2, the gas transport grid is illustrated with each line representing a

pipeline. Furthermore, pipelines are characterized by three visualizations. The thickness of a

line indicates the volume flow, i.e. the thicker the line, the higher the absolute volume flow in

the year 2010. Furthermore, pipelines are characterized with a colour which indicates its

utilization as a percentage of total annual capacity on the respective route. Finally, for all

major pipelines, yellow arrows indicate the direction in which the natural gas is flowing.

(These visualizations will be the same in all further maps in this report.)

Figure 2: Natural Gas Flows before Nord Stream (Year 2010)

POLAND

SLOVAKIA

CZECH REPUBLIC

GERMANY

HUNGARY

UKRAINE

In Figure 2 for 2010, one can, hence, observe that natural gas is imported from Russia in large

volumes via Ukraine and Slovakia with a relatively high utilization of the respective pipelines

on an annual level. In western Slovakia, the pipeline splits with routes continuing towards

Austria (which further extends to Italy) and the Czech Republic. Thus, Slovakia obtains all its


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natural gas imports via its eastern neighbour Ukraine, transit flows leave the country at its

western border. A large share of these volumes enters the Czech Republic (Lanzhot border

point). There, gas flows split again between a northern and southern route with the latter one

transiting the larger share of the natural gas volumes on to the Czech-German border in

Waidhaus.10 Additionally, small volumes of natural gas are imported at the German-Czech

border in Olbernhau / Hora Svaté Kateřiny (hereafter abbreviated as HSK).

The remainder of this section describes if and how these natural gas flows are affected by the

Nord Stream pipeline’s onshore connections when additional volumes of Russian natural gas

are brought directly to Germany.

4.1 Natural Gas Flows in Slovakia

As illustrated in Figure 2, there is only one major import route into Slovakia from the

Ukraine. Figure 3 depicts how natural gas flows on this route evolve over time and in the

different scenarios:

Figure 3: Annual Flows Ukraine to Slovakia

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

billi

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(A) NORDAL (B) OPAL regulated

(C) OPAL partially regulation exempted Capacity

For all three scenarios, it can be observed that natural gas flows decline in 2011 and

2012 when Nord Stream enters operation.

The decline is smallest if most of the Nord Stream imports are transported on to north-

western Germany and Europe (Scenario (A) “NORDAL”). In this case, transits 10 Historically, the Northern Route was used to supply East Germany, the Southern one to supply the Federal Republic of Germany. However, as an additional route was established to eastern Germany in the 1990s (the Yamal pipeline via Belarus and Poland), the Northern Route has mainly lost its function for transits to Germany.


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through Slovakia fall by about 8 billion cubic meters per year (2012 relative to 2010).

The reason for this observation is that Nord Stream and its onshore connection form a

new import corridor for gas to north-western Europe. Cannibalization of the existing

corridor to central Europe (via Slovakia) is small.

In Scenarios (B) and (C), the decline is much stronger because natural gas volumes on

Nord Stream directly enter the import corridor to central Europe which is already

served by the transit pipelines through Slovakia.

Hence, if the OPAL and GAZELLE pipelines are built, cannibalization of the existing

import corridor by the new one (Slovakia vs. Nord Stream) increases in our model-

based analysis. In 2012, Slovakian transits would decline by about 14 billion cubic

meters per year if OPAL is regulated in Germany, and about 17 billion if it is partially

exempted (relative to 2010). Relative to Scenario (A) the loss in transits is 6 and 9

billion cubic meters per year respectively.

However, increasing demand in Europe will over time compensate this temporary loss

in transit volumes through Slovakia which, in the three scenarios, increases to about

100 billion cubic meters per year in 2020. However, slight differences between the

three scenarios will remain.

As mentioned previously, the route through Slovakia splits in the west of country and

transports natural gas on to both Austria and the Czech Republic. The question whether

natural gas flow differences through Slovakia between the scenarios (observed in Figure 3)

mainly impacts transits to Austria or to the Czech Republic can be answered relatively easily

by considering Figure 4. The diagram depicting annual natural gas flows to Austria illustrates

that those are hardly affected by the Nord Stream pipeline’s different onshore connection

options. I.e. the scenarios only differ marginally.


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Figure 4: Annual Flows Slovakia to Austria

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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Summarizing the findings for Slovakia, the following conclusions can be drawn:

The different onshore connection options only temporarily impact transits through

Slovakia.

Thereby it becomes obvious that if Nord Stream volumes enter the import corridor

served by the transit pipelines through Slovakia to a greater extent, the

cannibalization of transit volumes on that route by Nord Stream is largest. This is the

case if OPAL is partially exempted from regulation and, thus, a greater share of the

natural gas is transported to the Czech Republic (also Section 4.2 and specifically

Figure 9).

The smallest temporary effect is observed in the “NORDAL” scenario as Nord

Stream volumes are then mainly transported on to the north-west. In this case, Nord

Stream basically serves the increasing import demand in north-western Europe. The

impact on the existing import corridor via Slovakia is smaller.

Transits through Slovakia to Austria (and Italy) are not affected by Nord Stream at

all; any the changes in transit volumes concern the route continuing to the Czech

Republic.


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4.2 Natural Gas Flows in the Czech Republic

As discussed in Section 4.1, those transits through Slovakia which are transported on into the

Czech Republic do change significantly between the scenarios. The effects of the Nord

Stream onshore connections on transits from Slovakia to the Czech Republic are depicted in

Figure 5:11

Figure 5: Annual Flows Slovakia to Czech Republic

0

10

20

30

40

50

60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

billi

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Imports from Slovakia decline in all three scenarios when Nord Stream enters

operation.

Again, the smallest impact of Nord Stream on gas transports from Slovakia to the

Czech Republic can be observed if there is no additional route for Nord Stream gas

volumes to the Czech Republic (“NORDAL” scenario).

If Nord Stream volumes are transported into the Transgas import corridor, i.e. via the

OPAL and GAZELLE pipelines, imports via Slovakia decline stronger. With the

regulated OPAL pipeline (Scenario B), they fall by another 5 billion cubic meters

compared to Scenario (A) in 2012. If the pipeline is partially exempted from

regulation (Scenario C), the relative effect is a 9 billion cubic meter decline compared

to Scenario A.

Over time, increasing import requirements in Europe cause imports from Slovakia to

the Czech Republic to increase. Differences between the regulation and partially

11 As flows from Slovakia to Austria were shown to not differ between the scenarios (Figure 4) and Slovakian natural gas consumptions is assumed to be constant across the scenarios, the differences of the residual outflows of Slovakia, i.e. to the Czech Republic, reflect the scenario-patterns of the inflows into the country from Ukraine (Figure 3).


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regulation-exempted case for OPAL decline (Scenario (B) and (C)). If Nord Stream is

connected to the west instead of to the Czech Republic (Scenario A), transits from

Slovakia to the Czech Republic are about 5 billion cubic meters higher in 2020.

The impact on natural gas flows within the Czech transit grid is illustrated in Figures 6 to 8

for the three scenarios:

Scenario (A) “NORDAL” (Figure 6):

Nord Stream gas volumes are essentially routed to the north-west.

The gas flows in the Czech Republic do not change significantly from the pre-Nord

Stream situation (see Figure 2).

Hence, the most of the transit volumes are still sent from Lanzhot through the

Southern route in the Czech Republic towards Waidhaus at the Czech-German border.

Additionally, there are flows on the Northern route as well as a small amount of

natural gas imports in Olbernhau / HSK at the German-Czech border.

Figure 6: Gas Flow Overview Czech Republic - Scenario A (2015)

POLAND

SLOVAKIA

CZECH REPUBLIC

GERMANY

North Route

South Route

AUSTRIA

MEGAL Pipeline


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Scenario (B) “OPAL regulated” (Figure 7):

Imports slightly decline in Lanzhot at the Slovak-Czech border; significant volumes

are now transited into the Czech Republic in Olbernhau / HSK. (In 2015, these are

about 17 billion cubic meters.)

The additional imports, which arrive on the OPAL pipeline from the Baltic Sea coast

in Germany, are transited through the Czech Republic on the GAZELLE pipeline to

Waidhaus, where they re-enter Germany.

In Waidhaus, transit volumes increase compared to Scenario (A) as total transit

volumes through the Czech Republic, which all leave the country in Waidhaus,

increase.

In this scenario, there are almost no flows on the Northern route in the Czech Republic

which is only used to supply some regions in the centre and the north of the Czech

Republic.

Figure 7: Gas Flow Overview Czech Republic - Scenario B (2015)

POLAND

SLOVAKIA

CZECH REPUBLIC

GERMANY

North Route

South Route

AUSTRIA

MEGAL Pipeline

OPAL

GAZELLE


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Scenario (C) “OPAL partially regulation exempted” (Figure 8):

There are significant differences compared to the scenarios with the regulated OPAL

pipeline (Scenario B) and the connection pipelines to the north-west (Scenario A).

As less gas leaves OPAL in Germany, a significantly greater amount of natural gas

would be transited into the Czech Republic (23 billion cubic meters compared in 2015

compared to the 17 billion cubic meters in the OPAL regulated scenario (Scenario B)).

These volumes are transited on GAZELLE to the Czech-German border in Waidhaus.

However, transports to Waidhaus also still take place on the Southern Route (from

Slovakia). As available capacity in Waidhaus is limited (with no expansion being

planned), this creates a bottleneck in Waidhaus and some of the transits from Slovakia

are also “pushed” onto the Northern Route.

Hence, natural gas volumes would once again (like in the past) be transported on the

Northern Route in the Czech Republic towards Olbernhau / HSK.

From an economic perspective, this creates inefficient natural gas flows, especially at

the Olbernhau / HSK interconnection points, where gas volumes are transported from

the north to the south on the OPAL and onto the GAZELLE pipeline – and from the

south (Czech Transgas grid) to the north, i.e. the WINGAS Gastransport and

ONTRAS grids in Germany.

Figure 8: Gas Flow Overview Czech Republic - Scenario C (2015)

POLAND

SLOVAKIA

CZECH REPUBLIC

GERMANY

North Route

South Route

AUSTRIA

MEGAL Pipeline

OPAL

GAZELLE


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The flows on the different pipelines across the scenarios are presented in Figures 9 to 12. This

allows the following observations:

GAZELLE (Figure 9):

In Scenario (B), almost 20 billion cubic meters are transported on GAZELLE to

Waidhaus 2012. However, over time, a larger amount of natural gas from Nord Stream

actually remains in Germany. Consequently, flows on the GAZELLE pipeline decline

and less than 10 billion cubic meters are transported to Waidhaus on the GAZELLE

pipeline in 2020.

If OPAL is partially exempted from regulation and, thus, only a limited amount of the

Nord Stream volumes stays in eastern Germany, the remaining volumes would be

transported to Waidhaus on the GAZELLE pipeline (Scenario C). Flows and

utilization of the pipeline are significantly higher than in Scenario (B).

Figure 9: Annual Flows on GAZELLE Pipeline

0

5

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35

40

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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(B) OPAL regulated (C) OPAL partially regulation exempted Capacity

Flows on GAZELLE have implications for the interconnection point to Germany in

Waidhaus (Figure 10):

If Nord Stream is connected to the north-west (Scenario A), flows from the Czech

Republic to Germany in Waidhaus decline by about 6 billion cubic meters per year on

an annual level in 2012. Over time, they increase with western Europe’s rising import

dependency and exceed 30 billion cubic meters on an annual level by 2020.


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If the OPAL and GAZELLE pipelines are built, the capacity limit on an annual level

will already be reached in 2016 (Scenario B) or even 2015 (Scenario B). Imports in

Germany in Waidhaus in general will increase significantly from pre-Nord Stream

levels.

Figure 10: Annual Flows Czech Republic to Germany in Waidhaus

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35

40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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As natural gas volumes in Waidhaus hardly differ between Scenario (B) “OPAL regulated”

and Scenario (C) “OPAL partially regulation exempted” although flows in GAZELLE differ

significantly between the scenarios (see Figure 9), the difference has to stem from transits on

the Southern Transgas Route to Waidhaus (Figure 11):

In Scenario (A), the GAZELLE pipeline is not required and, thus, does not transport

natural gas to Waidhaus. Hence, flows to Germany in Waidhaus are transported on the

South Route. Although these transits decline when Nord Stream enters operation, they

increase again to almost 30 billion cubic meters per year by 2020.

In Scenario (B), the magnitude of the temporary decline of transits on the South Route

is larger as GAZELLE brings additional volumes to Waidhaus. However, as these

volumes decline over time (see Figure 9), volumes on the South Route increase again

to level similar to Scenario (A).

If OPAL is partially exempted from regulation (Scenario C), transits on the South

Route cannot greatly exceed 12 billion cubic meters per year. This is because:


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o OPAL and GAZELLE transport up to 23 billion cubic meters per year to

Waidhaus,

o and the exit capacity in Waidhaus is limited to about 35 billion cubic meters

per year.

Hence, the bottleneck created in Waidhaus in Scenario (C) limits flows on the South

Route.

Figure 11: Annual Flows Transgas South Route (Czech Republic)

0

5

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30

35

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Flows on the South Route, in turn, have implications for flows on the North Route of

Transgas (Figure 12):

In Scenario (A), gas flows remain largely as they are today as no significant additional

volumes are transported to the Czech Republic from Germany.

If OPAL is regulated (Scenario B), flows on the North Route decline to below 2

billion cubic meters on an annual level.

If OPAL is partially exempted from regulation (Scenario C), flows on the North Route

increase by more than 10 billion cubic meters annually compared to the situation

today. This is caused by the GAZELLE transits to Waidhaus, which create a

bottleneck and push volumes from the South Route to the North Route towards the

Czech-German border in Olbernhau / HSK.


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Figure 12: Annual Flows Transgas North Route (Czech Republic)

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16

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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(A) NORDAL (B) OPAL regulated (C) OPAL partially regulation exempted

Summarizing the findings on gas flow changes in the Czech Republic, the following

conclusions can be drawn:

If the Nord Stream volumes are fully transported towards north-western Germany /

Europe, the gas flow situation would not change significantly from today.

If OPAL is regulated, between 10 and 20 billion cubic meters per year would be

transported on the new GAZELLE pipeline in the Czech Republic (though transports

decline over time). Exports to Germany in Waidhaus would increase.

If OPAL is partially exempted from regulation, the capacity limit in Waidhaus would

be reached earlier as larger natural gas volumes from Nord Stream are transported to

the Czech Republic.

Due to the limited export capacity to Germany in Waidhaus, a bottleneck is created at

the interconnection from the Czech Republic to Germany. Hence, transits from the

Czech Republic towards Germany would be pushed on the Transgas North Route.

This causes inefficient, partly oppositely directed gas flows in the north of the Czech

Republic.


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4.3 Transit Volumes and Asset Utilization

To measure how the existing and the new infrastructure in the Czech Republic and Slovakia

are utilized, this section compares total gas flows through the countries (i.e. transit volumes

and imports for domestic consumption) with available capacity. The analysis thereby focuses

to the transit networks of these two countries.

For Slovakia, the utilization of the transit system12 in the different scenarios is presented in

Table 2:

The results thereby mirror the findings of Section 4.1: The transit volumes through

Slovakia decline temporarily. By 2018, utilization is again as high as before Nord

Stream.13

The magnitude of the temporary effect depends on the onshore connection.

If Nord Stream is connected to the north-west (Scenario A), the decline is about 6

percentage points smaller than in the scenarios where Nord Stream is connected to the

Czech Republic with OPAL and GAZELLE.

Even though the difference between the scenarios declines over time, slight difference

which amount to 1.0 to 1.5 percent remain in 2018.

Table 2: Utilization of the Slovak Gas Transit Grid

Scenario 2008 2013 2018Scenario (A) NORDAL 83.9% 80.0% 86.6%

Scenario (B) OPAL regulated 83.9% 74.3% 85.2%

Scenario (C) OPAL partially regulation exempted 83.9% 74.1% 85.5%

The situation is less intuitive for the Czech Republic, whose transit system does not only

consist of essentially one pipeline and where infrastructure assumptions, due to a potential

new pipeline (GAZELLE)14, differ between our scenarios. Therefore, apart from the

utilization of the total transit grid, Table 3 also contains information on flows on the existing

network and the GAZELLE pipeline separately. Furthermore, in addition to the percentage

value, volume kilometres are also displayed. These are calculated as the sum over all

pipelines of the product of transported volume times transported distance. Even if

12 Distance, time and volume-weighted, average utilization of the transmission pipeline system. 13 See the discussion regarding Figure 3 on page 10. 14 Only the GAZELLE project is included in the simulations (except Scenario A). A second project, the so called LBL pipeline as a bi-directional link from the southern Czech Republic to Baumgarten /Austria was not included as it had not been announced when the EWI (2008) study was completed.


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transportation costs are not identical for all pipelines, volume kilometres can provide an

indicator for the trend in how variable transportation costs change across the scenarios.

For the Czech Republic’s transit grid, the following observations can be made:

For the year 2013, the data confirms that total transit flows in the Czech Republic will

decline in all scenarios from its 2008 level.

The utilization of the existing infrastructure remains highest in Scenario (A) if Nord

Stream is not directly connected to the Czech transit system.

Total gas flows within the Czech Republic are, however, higher if the OPAL pipeline

is built but partially exempted from regulation. The reason for that are the partly

oppositely directed gas flows which could be observed in the north of the country (see

Section 4.2).

The same holds true for 2018: Utilization of the Czech infrastructure is maximized in

Scenario (A); transports are highest with the regulation exemption for OPAL. The

reason for that is that OPAL (and GAZELLE) then transports gas volumes to

Waidhaus which are physically not required there.

Table 3: Gas Flows through and Utilization of the Czech Republic's transit network

Year Scenario (A)NORDAL

Scenario (B)OPAL regulated

Scenario (C)OPAL partially reg-ulation exempted

Existing Transit Systemb 8,625 5,960 5,802

GAZELLE 2,546 3,115

Total Transit System 8,625 8,505 8,916

Existing Transit Systemb 41% 28% 28%

GAZELLE 49% 60%

Total Transit System 41% 33% 34%

Existing Transit Systemb 10,475 9,743 9,570

GAZELLE 1,569 3,115

Total Transit System 10,475 11,312 12,684

Existing Transit Systemb 50% 47% 46%

GAZELLE 30% 60%

Total Transit System 50% 43% 49%

Scenario

2008 values: 11,955 Volume kilometers / 57.1 % utilization

b Existing Transit System refers to the Transgas Grid w/o GAZELLE; Total System includes GAZELLE (where applicable)

a Volume kilometers = Transported Gas Volumes in Gas Transit System [in bcm] * Transported Distance [km]

2013

2018

Volume kilometresa

Utilization

Volume kilometresa

Utilization


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For the two countries at the focus of this study it can, hence, be concluded that the onshore

connections of Nord Stream have a largely temporary impact on transit volumes in Slovakia.

These remain highest if Nord Stream is primarily connected to the north-west.

In the Czech Republic, the onshore connections have a larger impact. The existing

infrastructure is best utilized – and variable costs in the system are lowest – if Nord Stream is

connected to north-western Germany via NORDAL and a NETRA expansion. If OPAL and

GAZELLE as onshore connections are built, and if the former is partially exempted from

regulation, utilization of the existing system is lowest. As such a scenario implies additional

flows on the existing grid towards Germany (see Figure 8), the total transportation of gas in

the Czech Republic’s natural gas transportation network increases relatively leading to higher

variable transport costs than in the other scenarios.


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5 Security of Supply Considerations While the changing natural gas flows in the Czech Republic have an impact on the usage of

the transit system, new infrastructure projects concerning the country might also impact

security of supply as it is claimed that the OPAL pipeline increases interconnection of the

German and Czech gas markets.15

The daily entry and exit capacities of the Czech RWE Transgas Net grid with the German

grids are presented in Table 4.16 These amount to 162 million cubic meters exit capacity (i.e.

from the Czech Republic to Germany) and 60 million cubic meters entry capacity. On an

annual level, this equates to about 60 billion cubic meters exit and 22 billion cubic meters

entry capacity.

Table 4: Czech Republic’s entry / exit capacities at German interconnection points

Entry ExitDeutschneudorf (DE)* 21 32Olbernhau (DE)* 20 30Waidhaus (DE) 19 100

Total entry / exit from Germany 60 162*German border points in HSK to the two girds of ONTRAS (Deutschneudorf) and WINGAS (Olbernhau)Source: GIE (2008)

Capacity [Mio. Nm³/day]Interconnection Point

In 2008, the total average flow at the entry points in Olbernhau and Deutschneudorf

(equivalent to Czech HSK) was only 16.9 million cubic meters per day (and 0 from

Waidhaus, see RWE Transgas (2009a)). Hence, entry capacity in HSK was 41 percent utilized

on an annual level; total import capacity from Germany was 28 percent utilized. On average

in 2008, flows in the other direction were 65.6 mcm / day implying an annual utilization of

the exit points to Germany of 47 percent. Thus, there is sufficient free capacity in both

directions between the two countries, which theoretically allows a high integration of the gas

markets.

For security of supply considerations, it is, however, also important to consider crisis

scenarios. In order to do so, we consider the Russian-Ukrainian gas conflict of January 2009.

During these 13 days, imports into the Czech Republic via Slovakia came to a complete

15 Improved security of supply, which can be achieved through increasing market integration, is one of the prerequisites for exemptions from third party access under Article 22 of the Second EU Gas Directive. 16 The analyses in this section are mainly based on published capacity data. Only the reference to the development of gas flows from Germany to the Czech Republic stems from the EWI (2008) study.


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standstill. Nevertheless, natural gas supply to consumers in the Czech Republic was

maintained as imports from the west, i.e. Germany, and withdrawals from natural gas storages

were sufficient to meet demand.17

On a relatively cold winter day, Czech natural gas consumption is about 53 million cubic

meters18. Hence, total consumption can theoretically be imported via the existing 60 million

cubic meter per day entry capacities from Germany. Furthermore, on such a high demand day,

about 27 million cubic meters would be supplied from Czech gas storages anyway. Hence, the

import requirements from the west amount to less than 50 percent of existing capacity, even

on a high demand day with supply from the east being disrupted.19

Applying the (N-1)-Criterion20, even if the entry points from Germany with the largest

capacity should not be available, entry capacity at the other two would still be at least 39

million cubic meters per day (see Table 4). Hence, natural gas demand in the Czech Republic

could still be met by domestic storage withdrawals and imports at two of the three entry

points from Germany if supply from the east is disrupted and one of the German

interconnection points is not available.

As Czech natural gas consumption may not increase by more than 15 percent on the peak

demand day over the next decade21, this existing import capacity from the west will still be

more than sufficient to meet import requirements if supply from the east is disrupted.

Furthermore, due to the high integration of the Czech and German gas markets, there will also

be entry capacity available from Germany to transit gas via the Czech Republic on to

Slovakia in such a scenario. Again, this is what happened in January 2009 (RWE Transgas,

2009), and there were still capacities available for additional imports from Germany.

Hence, it can be concluded that a lack of market integration or import capacity from the west

will not be the problem in the case of supply route disruptions in the east.

17 For an extensive account of the crisis and countermeasures to maintain natural gas supply, see Pirani et al. (2009). 18 Data from January 2006 (according to IEA, 2008) which was the month with the highest natural gas demand in the Czech Republic since data is available (1995). 19 This is confirmed by the actual data. According to RWE Transgas (2009b), the maximum utilization of the Waidhaus interconnection point did not exceed 30 percent on a daily level, even though natural gas was actually exported from the Czech Republic to Slovakia at the time. 20 A principle from electricity market operation stating that system stability needs to be ensured even if the lar-gest power station has to shut down unannounced and only (N-1) out of N power stations are available. Transfer-red to the considerations regarding Czech import capacity from west, it implies that supplying the Czech market should still be possible even if only two out of three entry points from Germany are operational at the time. 21 In Scenario (A) without the OPAL and GAZELLE pipelines, flows from Germany to the Czech Republic do not increase (see EWI, 2008).


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6 Conclusions Slovakia

1. The construction of Nord Stream in general cannibalizes transit volumes on the route

through Slovakia. The impact of the Nord Stream onshore connections, however, is

limited – although, between the scenarios, there are significant temporary difference

and smaller lasting ones for transit volumes in Slovakia.

2. Also, transits via Slovakia to Austria (and Italy) are not affected by either the

construction of Nord Stream or the choice of onshore connections. Hence, any change

in physical transit flows between the scenarios translates to different flow scenarios

for the Czech Republic.

3. Over time, demand and import requirements in central and western Europe increase

further and eliminate the cannibalization effect of one Nord Stream line on the Slovak

transit system. By 2018, utilization in the transit system would rise to above pre-Nord

Stream levels in such a scenario.

4. The magnitude of the largely temporary cannibalization effect will depend on the

onshore connections of Nord Stream. If Nord Stream gas volumes are routed towards

the import corridor served by the transit pipelines through Slovakia (OPAL +

GAZELLE pipelines), the temporary utilization decline will be about 6 percent

stronger relative to a scenario if the Nord Stream volumes are routed towards north-

western Germany and Europe (NORDAL and expansion of the pipeline to the west in

Germany (NETRA)).

Czech Republic 5. Physical gas flows through the Czech Republic’s pipeline transmission system are

significantly affected by both the construction of Nord Stream and the choice of the

onshore connection. The magnitude of the impact will, again, depend on which

onshore pipeline is built to connect Nord Stream to the existing grids.

6. If Nord Stream is mainly connected to north-western Germany and Europe (e.g.

NORDAL pipeline onshore connection plus expansion of the existing capacities on

NETRA), the impact on gas flows in the Czech Republic would be smallest.


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7. Furthermore, no new infrastructure investments in the Czech Republic would be

required. The utilization of the existing grid would decline temporarily by about 16

percent – as some of the transits to Germany through the Czech Republic are

cannibalized by Nord Stream imports. However, with increasing import demand over

time, transits towards Germany through the Czech Republic and, hence, the utilization

of the existing grid would rise again.

8. If Nord Stream’s onshore connection, however, connects the pipeline to the south,

volumes on Nord Stream would to a greater extent affect the Czech natural gas

transmission grid. Such a scenario would evolve if the OPAL pipeline to the German-

Czech border is the only connection.

9. Firstly, because natural gas from Nord Stream is transported into the import corridor

traditionally served by transits through Slovakia and the Czech Republic on OPAL,

the temporary decline of the utilization of the existing system would be much stronger.

(I.e. it would fall more than 50 percent in 2008 to about 28 percent in 2013.)

10. Secondly, investments in new pipeline infrastructure in the Czech Republic (the

GAZELLE pipeline connecting HSK and Waidhaus) would be required. This increase

in capacity reduces utilization of the total system which, in 2018, remains 7 percent

below the previously outlined scenario (where Nord Stream was connected to the

west).

11. If volumes on OPAL flowing to the Czech Republic are exempted from regulation in

Germany, even larger amounts of natural gas from Nord Stream would flow to the

Czech Republic and via GAZELLE on to Waidhaus. This would create a bottleneck

for natural gas transports in Waidhaus (capacity there will not be increased), as large

volumes from Nord Stream are not physically required there. This pushes transits via

Ukraine and Slovakia to Germany onto the Northern Route in the Czech Republic.

12. These natural gas flows would be partly oppositely directed to those on GAZELLE

and, hence, would inefficiently increase variable transport costs in the Czech pipeline

system. Distance-weighted natural gas transport volumes in the Czech Republic in

such a scenario would increase by more than 20 percent compared to a scenario

without OPAL and GAZELLE. Hence, variable transport costs in the Czech transit

system (and CO2 emissions from compressor stations) would rise.

13. The hypothesis that the Czech Republic’s security of supply situation would be greatly

enhanced by the additional import capacity with OPAL (and GAZELLE) has to be

rejected.


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14. On an annual level, the existing capacities between the two countries are less than 50

percent utilized in both directions. Thus, the markets are already highly integrated

physically with sufficient free capacities.

15. Even supply shortfalls from the east can be compensated by the existing import

capacity from the west, as happened during January 2009. In this case, the existing

daily import capacities in Waidhaus and HSK (without even taking into account

storage withdrawals in the Czech Republic) are sufficient to meet Czech consumption

on a cold winter day. Taking domestic storage withdrawals into account, supply

disruptions from the east could also be compensated without the German

interconnection point with the highest capacity ((N-1)-Criterion).

16. As there were still capacities available at those entry points, this situation may not

change over the next decade – even if demand in the Czech Republic rises.

Furthermore, taking into account storage withdrawals from Czech natural gas storages,

the existing infrastructure already allows transporting gas further to the east to other

affected countries (such as Slovakia). Additional import capacity in HSK created by

OPAL would, thus, not necessarily be required to ensure high market integration and

supplying the Czech Republic from the west in the case of supply shortfalls from the

east.


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