1 - prepared by the Energy Community Secretariat - RECENT DEVELOPMENTS IN THE ENERGY COMMUNITY GAS STATUS as of October 2008 GIE – ANNUAL CONFERENCE 23rd – 24th October 2008, Bucharest

2 - prepared by the Energy Community Secretariat - The European Community TREATY ESTABLISHING THE ENERGY COMMUNITY The Republic of Albania The Republic of Bulgaria Bosnia and Herzegovina The Republic of Croatia The former Yugoslav Republic of Macedonia The Republic of Montenegro Romania The Republic of Serbia The United Nations Interim Administration Mission in Kosovo THE ENERGY POLICY IN EUROPE Generally, approach towards common principles (security of supply, competition, environment); Currently in SEE: mostly bilateral relations; Necessity for a common framework: THE TREATY ESTABLISHING THE ENERGY COMMUNITY

3 - prepared by the Energy Community Secretariat - THE TREATY AS A FRAMEWORK FRAMEWORK It does not establish principles but a concrete framework, which is part of the Acquis Communautaire; minimum soft law obligations. THE MAIN OBJECTIVES  Create a single and stable regulatory space and stable market framework  Enhance the security of supply of the single regulatory space  Develop network energy market competition on a broader geographic scale  Via application of the EU Acquis Communautaire : o Acquis on Energy o Acquis on Competition o Acquis on Environment o Acquis on Renewables

4 - prepared by the Energy Community Secretariat - INVESTORS SITUATION - FRAMEWORK OF THE TREATY  From the investors perspective the Regional Approach offers the advantages of: o Possibility of improved utilization of new infrastructure thus generating more revenues and decreasing operational risks in terms of revenue losses o Shaving peaks of capacity needs compared to the coverage of these needs by each CP thus entailing a higher base load factor and subsequently the efficiency o Harmonised legislation

5 - prepared by the Energy Community Secretariat - REGIONAL APPROACH – INSTRUMENTS IN TREATY  Implementation of a harmonised (not unified) legislative basis, incl. market rules, (mostly acquis on energy) which considers in particular the regional approach like follows: For new infrastructure Art. 22 of Dir. 2003/55/EC Regulation 1775/2005/EC o Mutual Recognition of licenses (Art. 34 of the Treaty) o Adoption of Generally Applicable Standards o Application of common Safeguard Measures o Common rules with regard to Mutual Assistance in the Event of o Disruptions  The elaboration and implementation of the legislation will be done within a common, contractually agreed timeframe;

6 - prepared by the Energy Community Secretariat - REGIONAL APPROACH – INSTITUTIONS/PROCESS  Monitoring of the development and implementation of the legislation, thus ensuring a harmonised approach in terms of substance and time schedule, hence an easement for the investors;  Establishment of the Energy Community Regulatory Board (ECRB) which supports in particular cross border trade/transport and also cooperates in the assessment of the application for exemptions for new infrastructure  Establishment of: o Fora (electricity and gas) o Investment Conferences where investors/associations present their projects, provide significant input to the process as such but also deposit their concerns – if any – publicly in a transparent manner;

7 - prepared by the Energy Community Secretariat - SUMMARY INFORMATION ON IMPLEMENTATION OF TITLE II OF THE TREATY (ELECTRICITY AND GAS)  Unbundling of networks operators and third-party access are generally well advanced  Customer protection and the appointment of a supplier of last resort need to be further addressed  Switching of the supplier should be further implemented both through the regulations and in practice  One of the difficult issues is the facilitation of cross-border electricity trade (although being gradually dealt with in more concrete terms)  The development of the gas related framework should be further encouraged and supported, although not all CPs have functional gas market  Secondary legislation needs further improvements and progress  Effective market opening remains crucial target  Implementation of Directives 2005/89/EC and 2004/67/EC till the end of 2009

8 - prepared by the Energy Community Secretariat - REGIONAL APPROACH – KEY REMAINING ISSUES BY THE END OF 2008  Introduction of marked based mechanisms for capacity allocation to all interconnections  Abandon capacity priorities due to Public Service Obligation  Increasing transparency on TSOs and Regulators websites  Introduction of secondary markets for the capacity rights  The Regulators competences in the cross-border issues, including their role in the procedure of exemption for the new electricity interconnection lines as well as for the main new gas infrastructure, have to be brought in compliance with the requirements of the Treaty  Enforce penalties for infringements of the Regulation (EC) 1228/2003  Implementation of the Regulation (EC) 1775/2005

9 - prepared by the Energy Community Secretariat - FINDINGS NATIONAL LEVEL with regard to the Directive 2003/55/EC BottlenecksSome provisions are available Some provisions are missing All provisions are available

10 - prepared by the Energy Community Secretariat - FINDINGS NATIONAL LEVEL with regard to Regulation 1775/2005/EC BottlenecksSome provisions are available Some provisions are missing All provisions are available

11 - prepared by the Energy Community Secretariat - Caspian or Russian gas via Greece (TGI or TAP or South Stream/’Sud’) LNG? Mix of gas via Croatia Offshore? Russian gas via Hungary and Serbia or Croatia Caspian gas via Romania (Nabucco) Caspian gas via Romania (White Stream & PEGP) Russian gas via Bulgaria (Blue Stream or South Stream/ ’Nord’) LNG? INVESTMENTS SOURCE : ECA, SEE Regional Gasification Study World Bank and KfW Gas via Germany/ Austria

12 - prepared by the Energy Community Secretariat - BOSNIA AND HERZEGOVINA – NATIONAL PLANS SOURCE : Bosnia and Herzegovina and Energy Community Ring; 2nd Gas Forum, Maribor

13 - prepared by the Energy Community Secretariat - PLANED AND POTENTIONAL DEVELOPMENT CROATIA Underground gas storage Beničanci Possible capacity of storage 400 million - 2 billion m 3 Volume of storage insure possibility of regional storage LNG terminal Development of projects is in 5 to 7 years. CROATIA new supply of natural gas on level of up to 15,0 billion m 3 per year ŽUPANJA SISAK SLUNJ GOSPIĆ GRAČAC ZADAR SPLIT METKOVIĆ KNIN RIJEKA PAZIN VINKOVCI VIROVITICA ZAGREB VARAŽDIN IVANIĆ GRAD SLOVENIA HUNGARY KUTINA SLAVONSKI BROD D. MIHOLJAC VUKOVAR OSIJEK VRBOVSKO OGULIN OTOČAC DELNICE PULA PLOČE DUBROVNIK ÐURÐEVAC BJELOVAR BOSNIA AND HERZEGOVINA ZABOK NOVSKA KARLOVAC ITALY ROGATEC B. MANASTIR M. SREDIŠÆE UMAG PSP OKOLI 1 i 2 ŠIBENIK BENKOVAC SINJ LNG LEGEND: GAS PIPELINES BAR 75 UNDERGROUND GAS STORAGE GAS PIPELINES BAR 50 PLANED GAS PIPELINES BAR 50 POTENTIAL GAS PIPELINES BAR 50 IAP Connection to TAP CROATIA, Montenegro, Albania Up to 5 billion m3 IAP SOURCE : PROGRESS OF INVESTMENT PROGRAMS IN CROATIAN GAS SECTOR; 3rd Gas Forum, Ljubljana

14 - prepared by the Energy Community Secretariat - INTERCONNECTIONS  Dravaszerdahely (Hungary) – Donji Miholjac (Croatia) oDonji Miholjac - Slobodnica oBasic design performed oEnviromental impact assessment performed oMain design in progress oAcquisition of pipelines and block valves is in progress oObtaining Location permit in progress  Ionic – Adriatic Pipeline oGas Transmission system Albania (Fier) – Croatia (Ploče) oPolitical declaration between Albania, Montenegro and Croatia signed 09/07 oMoU signed between Plinacro – EGL oTechnical pre-feasibility study performed oThe Feasibility study is under preparation oOther preparatory works are in progress SOURCE : PROGRESS OF INVESTMENT PROGRAMS IN CROATIAN GAS SECTOR; 3rd Gas Forum, Ljubljana

15 - prepared by the Energy Community Secretariat - THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA Total length: 48 km Diametar: DN400 Est. Cost: 10 mil € Preasure 54 bar An. cons. 350 mil. m 3 Level of doc. Projec idea Per. of constr. 18 mounth Total length: 25 km Diametar: DN720 Est. Cost: 15 mil € An. cons. 71 mil. m 3 Level of doc. Projec idea Per. of constr. 12 mounth Total length: 101 km Diametar: DN530 Est. Cost: 20 mil € Preasure 54 bar An. cons. 286 mil. m 3 TEC Negotino 286 mil. M3 Level of doc. Projec idea Per. of constr. 24 mounth SOURCE : Basic Characteristics and current development projects in the gas pipeline system; 2nd Gas Forum, Maribor

16 - prepared by the Energy Community Secretariat - SERBIA SOURCE : Republic of Serbia National Investment Programs–link to the Energy Community Ring; 3rd Gas Forum, Ljubljana

17 - prepared by the Energy Community Secretariat - Regional Gas Pipelines in the Region Kolubara and Macva SERBIA SOURCE : Republic of Serbia National Investment Programs–link to the Energy Community Ring; 2nd Gas Forum, Maribor

18 - prepared by the Energy Community Secretariat - Regional Gas Pipelines in the Region Branicevo SERBIA SOURCE : Republic of Serbia National Investment Programs–link to the Energy Community Ring; 2nd Gas Forum, Maribor

19 - prepared by the Energy Community Secretariat - NEXT STEPS FOCUS OF THE SECRETARIAT ASSISTANCE IN THE NEXT PERIOD Monitoring of the state of play and reporting to the PHLG and MC Assistance focussed on characteristic issues of implementation for each Contracting Party Assistance to the Contracting Parties in drafting their legal / regulatory acts through assessment, commenting and proposing (on request) Overall engagement in implementation of the cross-border issues, opening of the wholesale markets, attracting investments for the required infrastructure Engagement in dispute settlement cases pursuant to Article 90 of the Treaty and the corresponding Procedural Act

20 - prepared by the Energy Community Secretariat - THANK YOU FOR YOUR ATTENTION!