1. GSE - Gas Storage Europe1 GSE Investment Workshop “ Role of gas storage in the market place” Brussels, 24 May 2007

2. GSE - Gas Storage Europe2 Agenda Introduction – The traditional roles of gas storage Commercial storage Strategic storage ?

3. GSE - Gas Storage Europe3 The traditional roles of gas storage Securing gas supply in case of interferences in production, transport or supply Enhancing Cost effectiveness of gas transport Balancing Seasonal variations in consumption Covering demand peaks Security Of Supply

4. GSE - Gas Storage Europe4 Agenda Introduction – The traditional roles of gas storage Commercial storage Strategic Storage ?

5. GSE - Gas Storage Europe5 Commercial storage Matching Supply & Demand J F M A MJJ A S OND Daily demand Demand Fluctuations on various time scales (hourly up to annually) Supply Indigenous Long distance pipeline import LNG Inject excess gas Produce gas High demand Low demand ‘Constant’ supply

6. GSE - Gas Storage Europe6 Commercial storage Flexibility patterns Flexibility InstrumentAnnuallySeasonalWeeklyDailyHourly Long distance production flexibilityYes No Short distance production flexibilityYes No Underground storage (fields & aquifers) NoYes Underground storage (caverns)No Yes Interruptible contractsNo Yes LNG storage (peak shaving)No Yes Small scale local compressed gasNo Yes Line packNo Yes

7. GSE - Gas Storage Europe7 Commercial storage Value and flexibility needs Commercial gas storage value can be distinguished in:  Intrinsic value: price spreads in the forward market –Long duration (seasonal) Increase capital efficiency of long distance import systems Contribute to security of supply  Extrinsic value: volatility in spot and forward markets –Short duration (hours/days / weeks) Trading activities and portfolio optimization Balancing the transmission systems

8. GSE - Gas Storage Europe8 Commercial storage Extrinsic value Intrinsic Rolling intrinsic Optimal, no hedging Optimal, dynamically hedged value Increased trading activity, increased value potential, increased complexity and risk intrinsic extrinsic

9. GSE - Gas Storage Europe9 Commercial storage Significance of forward price curves? Permits, Design & Construction Lead time: 5 – 8 years Commercial operations Generating income 2012 2013 2014 2015 2016 2017 2018 …..

10. GSE - Gas Storage Europe10 Agenda Introduction – The traditional roles of gas storage Commercial storage Strategic Storage ?

11. GSE - Gas Storage Europe11 Strategic Storage ? What does strategic storage cost? Who will bear the costs? Do alternatives exist to ensure supply security? Will the investment climate be affected? How will commercial storage be influenced? When will strategic capacity be released?

12. GSE - Gas Storage Europe12 Strategic Storage ? The European Parliament “agrees with the Commission's assessment that, in relation to gas, considering the present technology, it is better to diversify supply routes and technologies, such as degasification plants and LNG terminals, than to create massive gas stocks as this option is too expensive, could be used to influence market prices and its use is less flexible than oil stocks”. European Parliament Working Document, 16 April 2007

13. GSE - Gas Storage Europe13 Strategic Storage ?

14. GSE - Gas Storage Europe14 Thank you for your attention!