regulatory and market approach to gas storage

StogitStogitStogitStogit

Regulatory and market approach to gas storage

Andrea StegherHead of Planning and Business Development

AIGET-EFET-Allen&Overy, Milan, 17th November 2008

StogitStogitStogitStogit

17th November 2008

A consolidated experience in the storage activity

Stogit future developments

The Italian regulatory framework

2

1

3

Agenda

2Stogit


The Italian market evolution drivers

4

Conclusions

5

17th November 2008

A consolidated experience in the storage activity

1

Agenda

3Stogit

17th November 2008

Stogit is a storage company 100% owned by Eni

Eni was one of the first upstream company in Europe exploiting storage activities in

terms of security of supply and flexibility

The first storage field was put on stream in 1964

1 Stogit, an overview

4Stogit

Stogit was created in 2001 following the implementation of 98/30/CE Directive and is

functionally unbundled according to Delibera 11/07 of the Authority for electricity and

gas

17th November 2008

In Italy, storage is a regulated activity for tariffs, access and investments

Storage contracts are based on Storage Code approved by Regulator

Almost 50 clients served

Unbundled capacity trading and gas trading are allowed

Stogit is fully compliant with GGPSSO provisions

Stogit is certified:

1 Stogit, an overview

5Stogit

Stogit is certified:

UNI EN ISO 14001 for the environmental part of HSE management system

UNI EN ISO 9001 for the activities of "design and provision of natural gas metering

services"

17th November 2008Stogit, a complete integrated system

8 storage depleted gas fields

13.8 Bcm working gas (including 5.1 Bcm strategic reserve)

265 Mcm/d maximum and 150 Mcm/d minimum withdrawal peak

130 Mcm/d injection capacity

Operative headquarters in Crema :

1

6Stogit

Operative headquarters in Crema :

the integrated management of the assets is granted by the remote control system of all the storage plants

From a commercial point of view :

one single virtual point on the transportation network

17th November 2008

5,0

6,0

7,0

8,0

9,0

Dai

ly g

as s

tock

(B

cm)

Shipper’s gas stock at the end of winter was equals to more or less 3 Bcm

In addition there is strategic

2007-2008 Thermal Year performance

Cumulative daily gas stock of clients

1

7Stogit

0,0

1,0

2,0

3,0

4,0

01 A

pril 2

007

01 M

ay 2

007

01 Ju

ne 2

007

01 Ju

ly 20

0701

Aug

ust 2

007

01 S

epte

mbe

r 200

701

Octo

ber 2

007

01 N

ovem

ber 2

007

01 D

ecem

ber 2

007

01 Ja

nuar

y 200

801

Feb

ruar

y 200

801

Mar

ch 2

008

Days

Dai

ly g

as s

tock

(B

cm)

In addition there is strategic reserve equals to 5.1 Bcm

3,03,0

17th November 20082008-2009: record available capacity1

8Stogit

17th November 2008Stogit Web Portal1

9Stogit

Stogit is committed to give complete, timely and ac curate information to market players

17th November 2008

Operator (country)

Stogit (I)

Gaz de France (F)

E.ON Gas Storage GmbH (D)

Capacity (Bcm)

13,7*

9,7

5,44

Legally unbundled

√√√√

√√√√

Access

rTPA

nTPA

nTPA

Number of clients

46

14

<3

Major European players reference 1

10Stogit

NAM (NL)

Wingas (D)

Centrica Storage (UK)

4,5**

4,6

3,3

* Including 5,1 for strategic storage** 4,33 on exemption

√√√√

nTPA

nTPA

market

rTPA: regulated accessnTPA:negotiated access

39

5

>3

Stogit is the European leader in terms of capacity, number of clients served

17th November 2008Gas Storage Europe1

GSE RECENT INITIATIVES

Aggregated Gas Storage Inventory

www.gie.eu.com

11Stogit

Aggregated Gas Storage Inventory

Storage Investment Database

Position paper on strategic storage

Observations on GGPSSO implementation

Position paper on CAM&CMP

Nomination of managers in charge of the relationships with:

European institutions (ITRE Commission, DG

TREN…)

Customer associations (EFET…)

Regulators (ERGEG)

Other associations (EASEE Gas…)

17th November 2008


2

Agenda

12Stogit

17th November 2008

SERGNANO


Stogit is committed to a challenging

investment plan of 2 billion euros

The target is to reach almost 18 Bcm

working gas and 320 Mcm/d

maximum withdrawal peak

Most relevant projects are:

SETTALA

RIPALTA

BORDOLANO

FIUME TRESTE DEE0

UNDER DEVELOPMENT

2

13Stogit

Most relevant projects are:

Development of Bordolano

Expansion of Fiume Treste

Over pressure on existing fields

Stogit is the first European operator in terms of i nvestments

UNDER DEVELOPMENT

17th November 2008Stogit future developmentsW

orki

ng g

as (

Bcm

)

10

15

2

14Stogit

Wor

king

gas

(B

cm)

0

5

2001 2003 2005 2007 2009 2011

17th November 2008


3

Agenda

15Stogit


17th November 2008The Italian Storage regulation framework

The “Letta Decree” (2000) sets regulated access to upstream, modulation, strategic storage services

The Italian Authority for electricity and gas set criteria for access, tariffs and storage code

Access priority to storage capacity is for residential needs

Non regulated services to increase flexibility can’t be provided (at present) to clients

Contracts duration is limited to 1 year

Regulatory mechanism: allowed revenues

3

16Stogit

Regulatory mechanism: allowed revenues

1. Cushion gas valued at about 8c€/cm

2. Modulation Service: about 2c€/cmWG

3. WACC real pre tax: 7.1% on exisiting asset

4. additional 4% for new developments investments (8-16 years)

17th November 2008Major European players remuneration reference

Operator (country)

Stogit (I)

E.ON Gas Storage GmbH (D)

Centrica Storage (UK)

Capacity (Bcm)

13,8

5,44

3,3

Gross Revenues (million of €)

500*

670

307

Revenues/Capacity (c€/cmWG)

15

12,3

2,2

3

17Stogit

Source: annual financial performance available on website

* Figures converted from £ in € (1.24)

Centrica Storage (UK) 3,3 500* 15

17th November 2008The regulation “trilemma”3

CompetitionCompetition

18Stogit

Security ofsupply

SustainabilitySecurity ofsupply

Sustainability

17th November 2008Agenda

19Stogit

The Italian market evolution drivers

4

17th November 2008The Italian market evolution drivers

Obligation for storage operators to make available capacity for security needs

(strategic storage)

Increasing demand from power generation and commercial needs related to new LNG

regassification terminals and pipes

Decreasing national production

European gas and electricity markets integration

Increasing number of players

4

20Stogit

Increasing number of players

Future developments of gas exchange

INCREASED NEED FOR STORAGE AS A TOOL FOR SECURITY O F SUPPLY

AND FLEXIBILITY ENERGY NEEDS

17th November 2008Agenda

21Stogit

Conclusions

5

17th November 2008Conclusions

Beginning in the 1960s, Eni has developed a storage system in line with the

significant increase in imports and the development of demand for residential and

industrial purposes, always satisfying a the country gas needs

Stogit is committed to implement the most relevant investment plan in Europe

Storage use for commercial purpose is already possible with a correct and dynamic

5

22Stogit

evaluation of residential needs

A regulated system could foster a liberalisation process but the current remuneration

system could jeopardise “true” market development

regulatory and market approach to gas storage

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